When will a machine ‘form part of the land’ so that it is a construction operation under the Construction Act?

Fahstone Limited v Biesse Group UK Limited [2015] EWHC 3650 (TCC)

Fahstone Limited (Fahstone) contracted with Biesse Group UK Limited (Biesse) for Biesse to supply and install a woodworking machine (the Uniwin). Fahstone subsequently commenced adjudication due to delays in commissioning the Uniwin, and defects with the machine and its software.

Fahstone were awarded £125,000 in respect of defects in the software, and £14,000 for delay. Biesse paid the £14,000 for delay but refused to pay any more. Fahstone issued court proceedings to seek enforcement of the Adjudicator’s decision.

One of the arguments raised by Fahstone in order to resist enforcement was that the Adjudicator did not have jurisdiction on the basis that the contract was not a “construction contract” under Construction Act 1996.
What is a Construction Contract?

The Construction Act applies to ‘construction contracts’. Construction contracts are those concerned with the carrying out of ‘construction operations’. The Construction Act contains a detailed list of those activities which amount to ‘construction operations’. The supply and installation of machinery will only amount to construction operations if that machinery ‘forms part of the land.’

The key issue to be decided by the court in this case was whether the Uniwin formed part of the land.
What does ‘forms part of the land’ mean?

The judge set out the following guidelines to identify if an object forms part of the land for the purposes of the Construction Act:

The object must be built or constructed as part of the relevant work – as opposed to being delivered ready-made. It must be intended to remain permanently in one place, (although it does not matter if it has movable parts) and it must be reasonably substantial (not easily moved).
Fixtures will usually form part of the land, however there is a distinction between fixtures that are annexed or affixed to the land and building itself, and those that are attached to or within the building. An example was given of a washing machine that can be installed into a building however this is not a fixture and does not form part of the land. Nevertheless, an object which rests on the land under its own weight can still form part of the land.
It is important to assess the purpose of the object or installation being on the land or building. This is an objective test, identifying the nature and type of the object or installation and how it would be intended to be used. If the purpose is to increase the value and utility of the premises then the object likely forms part of the land.
Fixing with bolts to or within a building or structure is a strong indicator to the object becoming a fixture, but it is not determinative. If the object cannot easily be removed save by destroying or seriously damaging it, it likely forms part of the land. However, if the purpose of the screwing or bolting down is for the better use or enjoyment of the object (an example was given of screwing a cupboard to the wall to prevent it falling) this suggests that it does not form part of the land.

The burden of proving that an object forms part of the land will fall on the party seeking to enforce an adjudicator’s decision. If sufficient proof is not provided, then the decision will not be enforced.
Factors suggesting that the Uniwin did form part of the land

The judge thought it important that the Uniwin was of substantial size and weight, and had its main structure bolted to the floor with 54 bolts that were resin grouted into the concrete. It took over one week to install the machine, and it was installed on a specially constructed floor.
Factors suggesting that the Uniwin did not form part of the land

The bolts were mainly in place to prevent the machine from moving or becoming out of level, and the bolts were not bonded to the machine in any way.
It was possible for the machine to be moved without having to cut any bolts and, although in practice the bolts would be cut for convenience and to put the concrete floor back into its original state, the Uniwin could be removed without having any damage caused to it. This suggested that the bolts were for the better use of the object, rather than to form part of the land.
The Uniwin could be bought on a hire purchase agreement, meaning that the machine could be redelivered at the expiry date.
There existed a second hand market for these machines, which strongly suggested that they could be removed and installed more than once without damage.

Decision

The judge concluded that the Uniwin was not a structure, and did not form part of the land. As such the contract was not a construction contract under the Construction Act. This meant there was no statutory right to adjudicate under the contract and the Adjudicator did not have jurisdiction to determine the dispute between the parties. The court therefore declined to enforce the Adjudicator’s decision.
Comment

Whether something forms part of the land is ultimately a question of fact and degree. Although there are general principles to provide guidance, if there is uncertainty as to whether the Construction Act will apply, parties could consider expressly providing for a right to adjudicate under the contract. This will avoid time and cost being wasted in determining whether or not the Construction Act applies.

This article was written and published on the internet by Walker Morris in April 2016.

This article is intended to provide general information about legal topics. Nothing in this article or in the documents available through it, is intended to provide legal advice. You should not rely on any information contained in this article, or in the documents available through it, as if it were legal advice.

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