The right to adjudicate – Interpretation of ‘excluded operations’


Author: Oliver Tobin


The Housing Grants, Construction and Regeneration Act 1996 (Act) grants the right to refer disputes relating to construction operations to adjudication.  However, a number of operations under section 105(2) of the Act are excluded from this right. The recent decision of the Technology and Construction Court (TCC) in Equitix v Bester[1] offers helpful guidance on how excluded operations should be interpreted.

Facts

Bester was engaged by Equitix to design and build an energy generating plant (Project).  The Project fell into delay, prompting Equitix to commence adjudication proceedings seeking a declaration that Bester was not entitled to an extension of time.  Bester notified the adjudicator in writing that it was reserving its position as to the adjudicator’s jurisdiction. The adjudicator determined that Bester had no entitlement to an extension of time.  Subsequently, Equitix terminated the contract and issued an interim account of almost £11.6 million, around 80% relating to repayment of fees paid to Bester. Thereafter, Equitix referred a further dispute to adjudication relating to the validity of its termination and the basis of its interim account.  Bester was ordered to pay Equitix £9.8 million plus interest, a decision that Equitix subsequently sought to enforce.

In response, Bester argued that the adjudicator did not have jurisdiction to order the payment, as its scope of work included operations expressly excluded by section 105(2) of the Act.  Bester’s primary argument was that section 105(2)(c) excluded the “assembly, installation or demolition of plant or machinery… on a site where the primary activity is… power generation”.

Judgment and analysis

The TCC decided that at the date of termination, the works performed by Bester were not excluded operations and were preliminary and preparatory in their nature.  In the court’s view, “it would make a nonsense of the Act” if such works were adjudged to be excluded operations.

Ruling that the adjudicator had jurisdiction to order Bester to make payment, the court acknowledged that the Act envisages hybrid contracts and circumstances where construction work can comprise both construction operations and excluded operations.  Therefore, when determining an adjudicator’s jurisdiction, the dispute subject matter, and not the entire scope of construction work, should be considered.

Further, the TCC found that Bester had failed to sufficiently reserve its position as to jurisdiction in the second adjudication.  The adjudications were not linked closely enough to be regarded as part of the same process.

This case clarifies that the list of excluded operations under section 105(2) of the Act is to be interpreted narrowly when considering an adjudicator’s jurisdiction.  It is essential that the works at the heart of the dispute are considered, not the overall contract work scope itself.  Only specific works will be excluded.  The case also highlights that work scopes will often include both construction operations and excluded operations, and confirms the importance of parties clearly reserving their position as to jurisdiction for each successive adjudication.


[1]Equitix ESI CHP (Wrexham) Limited v Bester Generacion UK Limited [2018] EWHC 177 (TCC)

 

Oliver Tobin, Associate, Fladgate LLP (otobin@fladgate.com)

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