Crystal Electronics Ltd v Digital Mobile Spectrum Ltd
[2023] EWHC 2243 (TCC)
DMSL was set up in 2012 as a joint venture to carry out remedial works to digital terrestrial television. DMSL engaged Crystal as a contractor for an area covering the East Midlands and parts of Wales. However, DMSL terminated the agreement by notice with effect from 15 February 2023. On 10 February 2023, Crystal raised an invoice for £550k plus VAT for unpaid charges. DMSL disputed liability and, on 29 March 2023,Crystal sent to DMSL a notice of adjudication.
The question for Keyser J was whether or not the contracts were contracts for construction operations as defined by section 105 of the HGCRA as amended. If they were not, the adjudicator did not have jurisdiction. DMSL said that none of the works were construction operations and, alternatively, that, if some of the works were construction operations, others were not, then the contract was just a hybrid contract. Crystal submitted that, if any part of the works were construction operations, the adjudicator’s jurisdiction was limited to awarding payment of the notified sum; any issue of severance or apportionment would be a matter for the court on an application for enforcement. The adjudicator accepted this submission and did not consider the “construction operations” issue any further.
The adjudicator went on to decide in favour of Crystal for the entire claim, plus interest and their fee. DMSL did not pay. Crystal commenced enforcement proceedings. DMSL resisted the application, which accordingly proceeded to a hearing. Before the hearing for summary judgment, Crystal referred a second adjudication to the same adjudicator. Again, Crystal was successful although the adjudicator ordered Crystal to pay their fees and DMSL to reimburse Crystal in that sum.
The Judge refused Crystal’s application for summary judgment and gave directions for an expedited trial. In considering “hybrid contracts”, the Judge noted that following cases such as Severfield (UK) Ltd v Duro Felguera UK Ltd [Dispatch Issue 186], a claimant who seeks to enforce an adjudication award must satisfy the court that all matters included in the award (save for what can properly be considered de minimis matters) were “construction operations.” A decision that includes other matters will be completely unenforceable, unless the part of the decision relating to such matters can be severed. No question of severance arose here.
Here, Crystal said that all the work it did under its contract with DMSL was either actual construction operations, within the scope of section 105(1), or a form of surveying work and engineering advice in relation to construction operations, within the scope of section 104(2). Crystal submitted that section 105(1)(b) of the 1996 Act, read with the relevant provisions of the Communications Act 2003, made clear that work on apparatus for use in connection with a digital television network was deliberately brought within the potential scope of construction operations. The Judge agreed. However, the Judge did not agree that this meant that all Crystal’s work fell within that potential scope.
In summary, the Judge said that the position was as follows. On every job, Crystal’s installers carried out a basic visual inspection of the exterior of the property and its environs, identified the receiving equipment inside the property and took signal readings at the location of the receiving equipment. Sometimes, nothing more would be required than to retune the television set or other equipment, or to fit a set-back filter. Sometimes, other work would be required: this could involve taking signal readings in the loft or on the roof, installing an internal amplifier, fitting a filter to an aerial, fitting a mast head amplifier adjacent to the aerial, or realigning, moving, or installing an aerial.
The critical question under section 105(1) was whether the structures or other apparatus on which the works were undertaken form, or were to form, part of the land. The description of Crystal’s work at viewers’ households made it clear that a substantial proportion of the work was not on structures or works forming part of the land and, therefore, did not constitute construction operations. The clearest examples of this were the fitting of set-back filters to television sets and the retuning of television sets and other devices.
Television sets, recording devices and amplifiers “obviously” do not form part of the land, though sockets and face plates may do so. In the parliamentary debate on the 1996 HGCRA, at bill stage, with regard to the meaning of the phrase “fittings forming part of the land,” Lord Lucas had said: “The dividing line between things which are fixed and not fixed might be the telephone on one’s desk, which is not fixed to the land, and the socket in the wall, which is.” The evidence showed that, at the very least, a substantial proportion of the works to which the adjudication decisions related comprised operations that were not construction operations. The decision was not enforced.
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