South Antrim Boiler Services L... v Construction Industry Training... [2009] NIIT 4044

THE INDUSTRIAL TRIBUNALS

CASE REF: 04044/09

APPELLANT: South Antrim Boiler Services Ltd

RESPONDENT: Construction Industry Training Board

DECISION

The unanimous decision of the tribunal is that in the circumstances of this case, a boiler is not part of a building and that the appellant is not an establishment engaged wholly or mainly in the construction industry. Accordingly the appeal is upheld.

Constitution of Tribunal:

Chairman: Mr S A Crothers

Panel Members: Mr John Lyttle

Mr Pearce McKenna

Appearances:

The appellant was represented by Mr M Wolfe, Barrister-at-Law, instructed by Harrisons, Solicitors.

The respondent was represented by Mr J Coyle, Barrister-at-Law, instructed by Cleaver Fulton Rankin, Solicitors.

1. The tribunal received a bundle of documents from the parties which included extracts from the relevant legislation together with case law and a number of Industrial Tribunal decisions. The tribunal also heard evidence from the appellant’s Administrative Director and Company Secretary, David Withers and from its Managing Director, Charles Kerr.

ISSUE BEFORE THE TRIBUNAL

2. The issue before the tribunal, as agreed by the parties, was as follows:-

s Whether the appellant is wholly or mainly engaged in the construction industry as defined by the relevant legislation.

FINDINGS OF FACT

3. Having considered the evidence insofar as same related to the issue before it, the tribunal made the following findings of fact on the balance of probabilities:-

(i) In order to contextualise the nature of the issue before the tribunal, the tribunal finds it helpful to set out in some detail extracts from the following documents introduced in the course of evidence:-

(a) The appellant’s replies to the respondent’s request for particulars comprised in correspondence dated 1 July 2009 state, inter alia:-

“1 Set out precisely all of your client’s operations

Our client’s operations include the following activities, sales and service; combustion engineering for oil, gas and tallow fuel systems, natural gas burner conversions, annual insurance survey of steam boilers, boiler and flue de-sooting, refractory Quarl manufacture, chemical de-scaling, hydraulic testing of steam boilers, valve machining and repair, ultrasonic preparation and testing of steam boilers, boiler re-tubing and repairs, plumbing and coded welding, training services.

2 Please furnish details of the duties of each member of your client’s staff and detail the number of staff employed by your client

See attached sheet.

3 Please furnish details of the duties of each subcontractor paid by your client under a contract for service, or paid otherwise than under a contract and detail the number and identity of such subcontractors

There are two sub-contractors, namely Comanda and Gas-line Services who each provide specialist pipeline services. Copies of sub-contractor invoices have been supplied.

4 Does your client or its subcontractors carry out operations in the construction, or repair of “pipelines”, defined by paragraph 3 of Schedule 1 of the Industrial Training (Construction Board) Order (Northern Ireland) 1964 as a “pipe or system of pipes (together with any apparatus or works associated therewith) for the conveyance of anything but does not include an pneumatic despatch tube”?

Yes.

5 Does your client or its subcontractors engage in operations in the provision or continued provision for any building or other construction with water, gas or heating, being operations undertaken in, upon, above or under a building or the close curtilege or precincts thereof?

Yes.

6 Does your client or its subcontractors engage in operations in the construction, alteration or repair of a building or any part of a building?

No.”

The reply to No. 5 was changed by agreement during the hearing from ‘No’ to ‘Yes’.

(b) The matrix prepared by the David Withers and relied on by him in the course of his evidence (“the matrix”) which is reproduced below:-

“SOUTH ANTRIM BOILER SERVICES LTD HOURS ANALYSIS 05-04-07 TO 04-04-08

HEAT V PROCESS

Grand Total 05-04-07 to 04-04-08 22033.50

___________________________________________________

Republic of Ireland – extended by agreement 1185.75

Net hours after ROI adjustment 20847.75

___________________________________________________

Hours booked on boilers used for heat 3788.38

Hours booked on boilers used for processes 10742.63

Admin proportion of hours on heat 455.00

Admin proportion of hours on process 1290.25

Non-productive proportion of hours on heat 1191.84

Non-productive proportion of hours on process 3379.66

___________________________________________________

% of hours booked on boilers used for processes 73.93%

% of hours booked on boilers used for heat 26.07%

___________________________________________________

Notes:

Work at hospital boiler equipment taken at 50% heat & 50% process (to allow for laundry & sterilisation processes).

Proportion of hours in Admin & Non-Productive allocated to heat defined as:

total hours booked on heat divided by (total hours booked on heat + total hours booked on process)

Proportion of hours in Admin & Non-Productive allocated to process defined as:

total hours booked on process divided by (total hours booked on heat + total hours booked on process)

See Hours Data worksheet for “raw” data relating to above summary.”

(ii) The relevant period for consideration in respect of which the respondent sought to impose a levy is the year commencing 6 April 2007 (“the base period”). The appellant appealed against the assessment by the respondent on 30 March 2009 in the following terms:-

“WE SOUTH ANTRIM BOILER SERVICES LIMITED, 43-45 SEYMOUR STREET, LISBURN, COUNTY ANTRIM BT27 4SY hereby give notice that WE appeal to an appeal tribunal under the Industrial Training (Northern Ireland) Order 1984, articles 24 and 30, against the assessment to the levy made by the above-mentioned industrial training board on the 2^nd FEBRUARY 2009 being the assessment numbered CIS84248.

GROUNDS OF APPEAL The grounds of my/our appeal are as follows:

The Company is not engaged in the “Construction Industry” as defined in the Order. The levy, as assessed, is therefore not payable in part or at all by the Company.”

(iii) The tribunal is satisfied that the appellant’s core business during the base period was related to servicing (which included repair and/or maintenance) of boilers and accepts the evidence relating to the percentage of hours booked on boilers used for processes and heat as referred to in the matrix. This analysis was derived from worksheets and formatted on an Excel database. The term “processes” refers to steam boilers which are used for various processes within industry. Steam is used in the dairy industry and in hospitals for sterilisation. It is also used for laundry processes in hospitals.

(iv) The appellant provided the respondent with invoices from which the respondent produced a detailed analysis. It is recorded by the respondent in this analysis that -

“All invoices examined would appear to be for the provision or continued provision of gas, heating”.

The tribunal accepts, however, that this should properly be a reference to the ignition of the boilers which could be fired by oil or gas, and does not refer to boilers providing heat to buildings. At the same time the appellant was not concerned about what the boilers were used for at the end of the day - whether for processes or heat.

(v) The tribunal accepts the appellant’s evidence that boilers could be housed for health and safety purposes away from main office blocks and administrative areas and that, in some instances, involving the Fruit of the Loom factory, Desmonds, and Coca Cola, such boilers were removed from premises and located elsewhere. Mr Kerr acknowledged under cross-examination that if the boiler were to be in a separate boiler house it was an essential component to the functioning of that boiler house and was thus part of it.

(vi) The boilers, which can last for between 25 and 30 years, are self supporting and weigh between 8 and 40 tonnes. They sit on the floor of the building in which they are placed (whether a boiler house or in the main building where the manufacturing process is being conducted), and have services piped to them. The burners attached to the boiler, which are supplied and serviced by the appellant, are fired by oil or gas. The boiler is connected to the equipment used in the process of manufacturing. There was no evidence before the tribunal of instances where boilers used for processes in manufacturing were used for heating offices or other buildings. Two boilers were supplied by the appellant during the base year. These were supplied in completed form to the appellant and put in place by the appellant on site. There was no construction of the boiler on site.

(vii) During the base period the appellant had 19 employees, equating to 12 full-time equivalent employees. 10 full-time employees were service engineers, two of whom were Corgi registered and paid more highly than the rest.

(viii) The tribunal is satisfied, on the evidence, and after careful consideration of the relevant invoices that some construction and repair of pipelines did take place through the services of sub-contractors but this formed a very low percentage of the appellant’s overall activities. The activities of the appellant had not changed for around 20 years. During Mr Withers time with the appellant company the respondent had visited the premises for assessment purposes on two occasions prior to the base period and had informed the appellant that at best it was on the periphery of the legislation for levy purposes. The appellant also used the Engineering Training Council through Engineering Training Services (Northern Ireland) for training purposes as the amounts provided for training by the respondent were considered inadequate.

THE LAW

4. (1) The relevant legislative provisions insofar as they are related to the issue before the tribunal are as follows:-

(i) Schedule 1 to The Industrial (Construction Board) Order (NI) 1964, as amended (“Schedule 1”) states as follows:-

“Schedule 1

The Construction Industry

1. Subject to the provisions of this Schedule, the activities of the construction industry are the following activities in so far as they are carried out in Northern Ireland:-

(a) all operations in:-

(i) the … repair … of a building; …

(iii) the … repair .. of any .. pipeline ..; ..

(vi) the provision or continued provision for any building or other construction or work above mentioned of water, gas, .. heating .., being operations undertaken in, upon, above, or under the building or the close, curtilege or precincts thereof, or such construction of work, or any site above-mentioned; ..

(g) when carried out in association with or in conjunction with any of the foregoing activities, any of the following activities, that is to say:-

(i) research, development, design or drawing;

(ii) operations in connection with sale, packing, warehousing, distribution or transport;

(iii) work done at any office or laboratory, at any store, warehouse, or similar place or at a garage;

(h) any other activity of industry or commerce carried out at or from an establishment engaged mainly in one or more of the foregoing activities.

3. (1) In this Schedule:-

(a) “building” includes any structure or erection (other than a tent or caravan) and any part of a building as so defined; ..

(f) “pipe-line” means a pipe or system of pipes (together with any apparatus or works associated therewith) for the conveyance of anything but does not include a pneumatic despatch tube; ..

(h) “repair” in relation to a building includes maintenance, re-pointing, re-decoration and external cleaning; ..

2. For the purpose of this Schedule, an activity shall not be deemed to

be carried out in conjunction with any other activity unless such activities are carried out by the same employer, or by a holding company and another company which is a subsidiary of the holding company, or by companies which are subsidiaries of the same holding company.”

(ii) Article 1(1) of the Industrial Training Levy (Construction Industry) Order (Northern Ireland) 2008 provides as follows:-

“construction establishment” means an establishment in Northern

Ireland engaged wholly or mainly in the construction industry for a total of twenty-seven or more weeks in the forty-fourth base period, or being an establishment that commenced to carry out business in the forty-fourth base period, for a total number of weeks exceeding one half of the number of weeks in the part of the said period commencing with the day on which business was commenced and ending on the last day thereof; or where an election is made, in any part of the alternative forty-fourth base period;

“construction industry” means any one or more of the activities

which, subject to the provisions of paragraph 2 of Schedule 1 to the Construction Board Order are specified in paragraph 1 of that Schedule as the activities of the construction industry; …

“forty-fourth base period” means the year that commenced on 6 April 2007 ..”.

(2) The tribunal also considered the cases referred to by both parties and counsel’s analysis of the relevant legislation together with the principles they sought to derive from the case law and various tribunal decisions, which, although helpful in some respects, do not bind this tribunal.

In the unreported Northern Ireland Court of Appeal decision in FM Windows Ltd v Construction Industry Trading Board and Discount Window Systems Ltd v Construction Industry Training Board Hutton LCJ (as he then was) stated at page 5 of his judgment as follows:-

“I think it is clear that a window is a part of a building. Accordingly I think it is clear that the taking out of a window consisting of a single sheet of glass and its replacement by a double glazed or double sheet window is an alteration of that window and is therefore an alteration of a part of a building”.

Although this case has to do primarily with alterations, the tribunal derived some guidance in relation to the definition of “any part of a building”.

The tribunal also considered the judicial review decision in the case of HSS Hire Service Group Plc (“the HSS decision”) (delivered 6 July 2001) where Kerr J (as he then was) stated at page 5 of his judgment as follows:-

“A construction establishment is therefore one where one or more of the specified activities are carried on for most of the time”.

Later at page 12 of his judgment and dealing with the same issue he states:-

“All the available evidence points strongly – indeed, irresistibly – to the conclusion that HSS is principally involved in the hire of plant and equipment to the construction industry”.

The tribunal also considered the following Industrial Tribunal decisions insofar as relevant;-

Sermet NI Ltd v Construction Industry Training Board (Case Ref: 186/03, Eastonville Traders Ltd v Construction Industry Training Board (Case Ref: 2991/04), HR Holfeld (Belfast) Ltd v Construction Industry Training Board (Case Ref: 783/08), Woodburn Engineering Ltd v Construction Industry Training Board (Case Ref: 324/05), and Manor Mouldings Ltd v Construction Industry Training Board (Case Ref: 377/04).

SUBMISSIONS

5. The tribunal received considerable assistance from the helpful submissions of Mr Wolfe and Mr Coyle.

Mr Wolfe’s Submissions

Mr Wolfe had prepared written submissions in advance of the hearing which are appended to this decision. He submitted that the appellant had been performing the same activities for a considerable time and had not been assessed for a levy. He further submitted that the boilers with which the case is primarily concerned are process boilers which do not heat a building or provide water for any building. Such boilers, he submitted, were part of the industrial process which generated steam to be used as part of that process. The respondent had been wrong, therefore, in making the assumption in their analysis of the invoices that they were concerned with the provision of gas or heating. Every boiler had to be fired by fuel or gas but this did not amount to a provision or a continual provision of gas for a building. He further submitted that the fact that steam was generated did not amount to a provision for that building of water, as the water was already there. Steam merely assisted in the industrial process. Furthermore, unlike the Sermet case where more than 50% of the boilers were constructed on site and installed for producing heat for a building, (and therefore were the subject of a levy assessment), in this case the appellant was not concerned with the construction of boilers on site or the repair or construction of boilers for heat. Instead, he submitted that in this case 75% of the appellant’s activities were part and parcel of the industrial and manufacturing process. He drew an analogy between the boilers and a conveyor belt or a knitting machine or industrial oven or mixing equipment for food, all of which were plant situated within the premises and nailed down. He referred to Mr Kerr’s evidence in this respect and submitted that a boiler could not constitute part of a building.

Reflecting upon a question raised in cross-examination by the respondent’s counsel to the effect that a building cannot function without a boiler (as it would be non-sensical to have a building without a process within it), he referred to examples given by Mr Kerr in his evidence regarding boiler equipment being transported abroad from the Fruit of the Loom factory and Desmonds of Londonderry. In these instances the process may have gone but the building continued to function. Furthermore, boilers could be put up for sale as plant and machinery. The building was still the same building without the process boiler. He posed the question, if the respondent’s contention is correct, - can part of a building be shipped off, as in the case of Desmonds, to Sri Lanka? Again he reverted to the Sermet decision and the factors which distinguished it from the instant case namely that over 50% of the boilers were concerned with the provision of heat and that the boilers were constructed on site. Mr Wolfe also submitted that the appellant’s evidence had been uncontradicted as the respondent had not called any evidence. He questioned why this had been the case in light of the fact that the company had been trading for so long without being assessed for a levy. Moreover, he submitted that Mr Withers’ evidence showed that pipeline work constituted less than 5% of the appellant’s activities, a position backed up by Mr Kerr in his evidence. Again, he stressed the importance of the words “wholly or mainly”. He also submitted that it was not correct for the respondent’s counsel to state that there had been no evidence given as to how boilers were supplied on site. Mr Withers had given evidence of two boilers being supplied during the base year. These had already been built by the supplier.

Mr Wolfe also referred to the respondent’s counsel’s contention that the distinction made between heat and process by the appellant was not a valid distinction in light of the respondent’s counsel repeating that the process is an integral part of the building. He submitted therefore that process is not the building but it is something which is carried on within the building. Plant does not form part of a building but assists or advances the process. Such plant can be sold off as indicated by Mr Kerr in his evidence when he gave three examples of same. Therefore, he submitted that a boiler is totally separate from a building. He also referred to the replies to Particulars (supra) and submitted that reply No. 5 did not mean that the appellant was conceding the case, as the words “wholly or mainly” were still an issue. In other respects, he relied on the written submissions attached to this decision.

Mr Coyle’s Submissions

In his submissions to the tribunal Mr Coyle commented on the failure by the appellant’s counsel in his submissions to deal with the words “all operations” referred to in Schedule 1. Furthermore, he submitted that Mr Withers had not addressed this issue. Focusing on the replies to particulars set out earlier in this decision, Mr Coyle pointed out that “repair” includes maintenance and that a boiler was part of a building. He submitted that it was a “sleight of hand” to submit that simply because a portion of a building can be removed it is not part of the building. He referred to the example of removing Bangor Blue slates from a roof and the FM Windows case referred to previously to contend that simply because a component part of a building can be removed and replaced does not mean that through its life span it is not part of a building. Referring to the example given regarding Fruit of the Loom, he submitted that boilers are part of a building and not extraneous luxuries. He also referred to the Manor Mouldings case in this regard. The tribunal also carefully considered Mr Coyle’s submissions in relation to the remainder of the cases and decisions referred to in the foregoing section of this decision. It was agreed between counsel (based on the HSS decision) that once the activities come within scope the respondent has no discretion other than to make a levy assessment. He submitted that the fact that the appellant participated in some employer led scheme for training was a matter for the appellant. He again drew the tribunal’s attention to his submission that the distinction between process and heat is a distinction without differences, a red herring, and meaningless when properly analysed. He referred in particular to the statutory wording “all operations in the provision or continued provision …” Mr Coyle further submitted that the provision of steam was within the definition of Schedule 1 at (vi) and the fact that a boiler may be some distance from a building did not alter the fact that there was still a “provision”. He referred to Mr Withers’ evidence that the appellant did not care what use the boilers were put to to substantiate his submission that there was no valid distinction between process and heat in the appellant’s case. He also asserted that there was no evidence laid to create the distinction being made between the facts in the Sermet case and the instant case. Mr Coyle also stated, in connection with the words “wholly or mainly”, that his submission in that regard hinged on the distinction between process and heat. He posed the question, - what does a boiler do? It provides water for heat or gas for processes within a building as an integral part of that building. Finally, the respondent’s counsel submitted that it was common case that sub-paragraphs (g) and (h) of Schedule 1 only become activities if they are substantial activities. The activities in relation to the Republic of Ireland were not, by agreement, construction activities and sub-paragraphs (g) and (h), were not triggered in this respect. He had also contended in his opening of the hearing that the percentage of 26.07 in the matrix was not de minimis.

CONCLUSIONS

6. The tribunal, having analysed the evidence before it in relation to the foregoing issue and having carefully considered the submissions by both parties together with the findings of fact, the relevant legislation, case law, and tribunal decisions, finds itself persuaded by the appellant’s case and concludes that in the circumstances of this case, a boiler is not part of a building and that the appellant is not an establishment engaged wholly or mainly in the construction industry. The appeal is therefore upheld.

Chairman:

Date and place of hearing: 11 August 2009, Belfast.

Date decision recorded in register and issued to parties:

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	Industrial Tribunals Northern Ireland Decisions
You are here: BAILII >> Databases >> Industrial Tribunals Northern Ireland Decisions >> South Antrim Boiler Services L... v Construction Industry Training... [2009] NIIT 4044_09IT (28 August 2009) URL: http://www.bailii.org/nie/cases/NIIT/2009/4044_09IT.html Cite as: [2009] NIIT 4044_9IT, [2009] NIIT 4044_09IT

Industrial Tribunals Northern Ireland Decisions