Adjudication offers advantages to court proceedings in that they are speedier, cost less, and provide the parties with greater control.

The case of Crystal Electronics Limited v Digital Mobile Spectrum Limited (Crystal v DMSL) brings into focus the types of works that qualify as construction contracts and, therefore, viable for dispute resolution through adjudication.

Under the Housing Grants, Construction and Regeneration Act 1996 (the 1996 Act), parties have a statutory right to refer any dispute under a Construction Contract for adjudication. For a Construction Contract to fall under the purview of the 1996 Act, it must involve Construction Operations. The 1996 Act defines Construction Operations quite broadly and includes the following:

a)  construction, alteration, repair, maintenance, extension, demolition or dismantling of buildings, or structures forming, or to form, part of the land (whether permanent or not);

b)  construction, alteration, repair, maintenance, extension, demolition or dismantling of any works forming, or to form, part of the land, including (without prejudice to the foregoing) walls, roadworks, power-lines, electronic communications apparatus, aircraft runways, docks and harbours, railways, inland waterways, pipe-lines, reservoirs, water-mains, wells, sewers, industrial plant and installations for purposes of land drainage, coast protection or defence;

c)  installation in any building or structure of fittings forming part of the land, including (without prejudice to the foregoing) systems of heating, lighting, air-conditioning, ventilation, power supply, drainage, sanitation, water supply or fire protection, or security or communications systems;

d)  external or internal cleaning of buildings and structures, so far as carried out in the course of their construction, alteration, repair, extension or restoration;

e)  operations which form an integral part of, or are preparatory to, or are for rendering complete, such operations as are previously described in this subsection, including site clearance, earth-moving, excavation, tunnelling and boring, laying of foundations, erection, maintenance or dismantling of scaffolding, site restoration, landscaping and the provision of roadways and other access works;

f)   painting or decorating the internal or external surfaces of any building or structure. (s105(1) 1996 Act)

Where a construction contract involves works which are not exclusively Construction Operations, also known as a hybrid contract, a party seeking to enforce an adjudicator’s decision in Court must show that the elements that are not construction operations are de minimis (C Spencer Ltd v M W High Tech Projects UK Ltd [2020] EWCA Civ 331, [2020] BLR 334) or that the part of the decision relating to such matters can be severed (Cleveland Bridge (UK) Ltd v Whessoe-Volker Stevin Joint Venture [2010] 1076 (TCC)).

The Facts

Briefly, DMSL contracted with Crystal to help address potential adverse effects on television services during the rollout of 4G mobile broadband services. The work involved Crystal attending the homes of those affected to:

  • Conduct a visual survey of the property to determine any factors that may be affecting transmission
  • Taking signal readings at various parts of the apparatus and connection points
  • Work to the aerial at roof level, including realigning and replacing it
  • Perform remedial works on the television itself, including installation of filters
  • Perform other remedial works.

The issue arose in adjudication, as to whether the works constituted Construction Operations.

Crystal submitted that if any part of the works were Construction Operations, the adjudicator could award the notified sum and any issue of severance could be considered by the court on an enforcement application. The adjudicator accepted the Claimant’s submission and issued adjudication decisions in the Crystal’s favour.

The Court’s Approach

The Court considered the following to determine the enforceability of the adjudicator’s decision:

  1. Were the works Construction Operations under the 1996 Act?
  2. Did works which were not Construction Operations form more than a de minimis part of the works in respect of which the Adjudicators Decision was made?
  3. If it did form more than a de minimis part, was the adjudicator’s decision is unenforceable?

Although, the 1996 Act expressly includes works to an electronic communication apparatus as a Construction Operation, the judge noted that an important phrase within the definition is whether the works performed on something that forms part of the land.

The Court considered all the activities performed by Crystal and determined that:

  1. A significant portion of the works undertaken by Crystal are not Construction Operations;
  2. Aerials (even at roof level) are not structures which form part of the land. Rather they are pieces of replaceable equipment that can be easily removed and were not integrated into the building.
  3. Works on television sets did not constitute Construction Operations.
  4. The works which were not Construction Operations exceeded the de minimis test.

Further, conducting a visual survey of the aerials did not come under the definition of Surveying Work; which is an activity included in the definition of Construction Operations. Therefore, the parties did not have a Construction Contract entitled to adjudication as defined under the 1996 Act.

For the above reasons, the court refused to enforce the adjudicator’s decision. This case highlights the need for parties consider whether works are Construction Operations prior to adjudicating.

This article was co-written by Sarah Wilson, Partner and Karan Mehta, Trainee Solicitor.

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