Severfield (UK) Ltd v Duro Felguera UK Ltd (TCC - 25.6.2015)
SEVERFIELD (UK) LTD V DURO FELGUERA UK LTD
TECHNOLOGY AND CONSTRUCTION COURT
25TH JUNE 2015
The sub-contract was for the design, supply and erection of steelwork as part of the construction of a power station on a site whose primary activity was power generation. There was a dispute as to the sub-contractor’s payment entitlement with regard to interim application 15 which it referred to adjudication. Whilst the sub-contractor did not include some work elements and variations in application 15 in its referral because they were clearly excluded from being construction operations by section 105(2)(c) of the Construction Act, it included in the referral (i) All fabrication and delivery elements of the works and (ii) The erection element of the works carried out in and to the turbine halls and the electrical modules, including variations to that element. Application 15 included aggregated sums that did not discriminate between non-excluded fabrication and delivery and potentially excluded steelwork erection. For the purpose of the referral to adjudication, the sub-contractor (i) calculated the proportion that erection bore to the aggregated sum for fabrication, delivery and erection in the sub-contract sums and (ii) applied that proportion to the aggregated sum in application 15 for variations. The adjudicator awarded sums claimed for the contested works which the contractor did not pay.
The sub-contractor issued enforcement proceedings and applied for summary judgment. The contractor contended that the adjudicator's award included works which were excluded by section 105(2)(c). The contractor’s quantity surveyor (i) accepted in principle that the adoption of a percentage based approach might be appropriate when seeking to separate out amounts for individual components from within an all-in rate but (ii) concluded that the percentages adopted by the sub-contractor did not provide a reasonable estimation of the actual cost.
Stuart-Smith J declined to order summary judgment. He held that the contractor had reasonable prospects of establishing at trial that substantial steelwork items erected by the sub-contractor in the power station, whose value was included in interim payment application 15 and in the claims referred to adjudication fell within the meaning of section 105(2)(c) and were therefore excluded from being treated as “construction operations”. He also held that the contractor’s contention that the sub-contractor over-claimed in respect of variations by adopting too high a percentage proportion between non-excluded fabrication and delivery and excluded erection had force because (i) Whilst the sub-contractor applied the same percentage to an aggregate sum for variations as it did in relation to its contract works, there was no reason to assume that the same proportion of cost attributable to variations would be spent on erection as opposed to fabrication and delivery as would apply to its contract works and (ii) The contractor’s quantity surveyor’s report raised what was clearly a triable issue of whether the sum claimed in relation to variations bore any relation to a division between fabrication and delivery on the one hand and erection on the other. It was not open to the court in these circumstances to sever part of the adjudicator's award or to sustain the adjudicator's decision based on that apportionment.