Severfield (UK) Ltd v Duro Felguera UK Ltd (No 2) (TCC - 24.11.2015)

Severfield (UK) Ltd v Duro Felguera UK Ltd (No 2) (TCC - 24.11.2015)

The difficulties stemming from section 105 of the Construction Act and the legislature's desire to exclude certain industries from adjudication.

Whilst this is not an adjudication enforcement case, Coulson J noted that it raised a number of issues, some of them novel, concerning the Construction. In particular, it highlighted the potential difficulty of payment provisions under a contract concerned with both construction operations and operations which were excluded by section 105(2) (sometimes referred to as a hybrid contract), the particular consequences for such a contract of the notice provisions in sections 110, 110A, 110B and 111 and the recent line of authority spelling out the consequences for an employer of failing to serve the notices required by those provisions.


Coulson J went on to state that there is a wide definition of construction contracts in section 104(1) and (2) which is then the subject of detailed exposition at section 105(1) before becoming the subject of a number of equally wide exceptions under section 105(2). If the contract is a hybrid contract, because it includes for both included and excluded operations, the inevitable result is a muddle. It was difficult not to feel instinctive sympathy with those who pointed out during the Parliamentary debates that these definitions were likely to lead to just the sort of disputes that the Act itself was designed to avoid. This case was a good example of such a dispute.


Coulson J concluded that the debates in Hansard reveal that Parliament was aware of the difficulties that the exceptions in section 105 would cause but justified them on the underlying assumptions that (i) Adjudication was some form of 'punishment' for the construction industry but (ii) Power generation and some other industries should be exempt from adjudication because 'they had managed their affairs reasonably well in the past'. These underlying assumptions were and remained misconceived. Adjudication, both as proposed in the Construction Bill and as something that has now been in operation for almost 20 years, is an effective and efficient dispute resolution process. Far from being a 'punishment', adjudication has been generally regarded as a blessing by the construction industry. Adjudication is a blessing which needed then, and certainly needs now, to be conferred on all those industries (such as power generation) which are currently exempt and would benefit from the clarity and certainty brought by the Construction Act (as the instant case demonstrated only too clearly).