Mitsui Babcock Energy Services Limited

The assembling on site of equipment and piping and their installation into two boilers on a site within a petrochemical complex were exempt operations under section 105(2)(c)(ii) of the Construction Act 1996
 
The site was located on two vacant pieces of land within a petrochemical complex. The employer was the tenant of the site. The contractor's work involved the assembling on site of equipment and piping into two mechanically complete boiler plants. The supplier was required to deliver to site the prefabricated equipment and piping and to intall them into the boilers. The supply contract defined the 'site? as being the site for the boiler plant. A payment dispute arose which the contractor referred to adjudication. The supplier contended that its work was an ?exempt? operation under section 105(2)(c)(ii) of the Construction Act 1996. This section provided that ?exempt? operations included the assembly and installation of plant or machinery on a site where the primary activity included the production etc of chemicals and oil etc. The contractor contended that the definition of the 'site? in the contract should be given significant weight. Also other matters such as the existence of the lease between the employer and the owner of the petrochemical complex and the separate contractual arrangements between the employer and the complex owner whereby the employer owned and operated the boilers and sold the steam to the owner confirmed that the construction site should be treated as a separate entity from the complex. Lord Hardie rejected the contractor's contention. The employer's regulations made it clear that although the two boilers were to be constructed on separate sites, the sites were located on land owned by the owner of the complex as part of the petrochemical complex on the basis that the sites were leased to the employer. Section 105(2) when compared with section 105(1) showed that it was Parliament's intention that exemptions to the operation of the Act should be determined by applying the test of whether the object of the ?construction operation? was to further the activities described in section 105(2)(c). It was clear that the installation of the boilers was to further the primary activity of the processing of chemicals and oil at the petrochemical complex. Advice Note The courts will look to whether the purpose of the construction operation under the contract in question was to further the ?exempted? activities under section 105(2) of the Construction Act. If it was, then it is likely that the operation will be ?exempted? and the contract therefore will not be subject to the Act.
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