THE INDUSTRIAL TRIBUNALS 

CASE REF:	2991/04

APPELLANT:		Eastonville Traders Ltd

RESPONDENT:		Construction Industry Training Board	

			 
DECISION ON APPEAL AGAINST ASSESSMENT OF CONSTRUCTION INDUSTRY TRAINING BOARD

The unanimous decision of the tribunal is that the appeal is dismissed.

Constitution for Tribunal:

Chairman:		Mr I Wimpress
Panel Members:	Mr E O’Neill
			Mrs F M Reid

Appearances:

The appellant was represented by Mr L Brown of Elliott Duffy Garrett, Solicitors.
 
The respondent was represented by Mr J Coyle, Barrister-at-Law, instructed by Messrs Babington & Croasdaile, Solicitors.

1.	The tribunal received a bundle of documents from the appellant. The respondent provided a booklet of authorities.  The tribunal also heard evidence from Mr Alan McMullen on behalf of the respondent in relation to the composition of the Construction Industry Training Board.

2.	The appellant company sought to appeal against a levy imposed by the respondent under the Industrial Training (Northern Ireland) Order 1984.  The respondent contended that the levy as assessed was properly due.

3.	The matter proceeded before us on the basis of an agreed statement of facts, which were as follows: -
 
The appellant company is primarily engaged in land brokerage, that is to say, acquiring control over lands and then licensing those lands to independent developers upon site, fine arrangements which entail the independent developer developing the site, and when an individual property is ready for disposal requesting the appellant company to transfer that property directly to the end user in exchange for which the appellant company maintains a Site Fine Payment for the portion of land involved.  Such arrangements were entered into by the appellant company in the cases of the Demesne, Downpatrick, Shimna Mile, Newcastle, Lord Wardens Wood, Bangor and Horizon Mews, Newtownabbey.  Generally in those instances the architect, professional team and building contractor will all be retained by the licensee and not the appellant company.

The documentation demonstrates that in the cases of Chippendale, Ava Farm and Kings Road, the appellant company entered into an at arms length contract with an independent contractor for the construction of dwellings on those properties and the appellant company then retained an estate agent and dealt directly with the purchasers of those dwellings.  The appellant did not engage in any construction operations and nor did its staff. Any construction operations were conducted either by or on behalf of the licensee of the relevant sites or by the independent contractor.  The licensee staff or contractor or the independent contractor (as the case may be) dealt with the construction operations rather than the staff of the appellant company.  The staff are as follows: -

David W Chick	 - Director of the appellant company and property 
		   developer.

            Jim Davis                 - Director of the appellant company and property
			   developer.

Shauna Comiskey	 - Secretary in the appellant company’s office.

Sam Allen         	- Publican and runs Allen’s Bar in Bangor which is
	  owned by the appellant company.

		Roy Irwin 		- Manager of a jewellery insurance claims handling
					  service in which the appellant company has an interest.

		Agnes Davis 		- Wife of Jim Davis and provides a secretarial back up.

A substantial amount of the sum upon which the levy has been raised consists of bonus payments made to the shareholders of the appellant company, namely David Chick and Jim Davis in lieu of dividends from the company and upon which PAYE and National Insurance has already been paid. 

4.	The issue for the tribunal to determine was whether the appellant’s activities were such as to render it liable to pay the levy imposed by the respondent.

5.	The Construction Industry Training Board was set up under a statutory scheme to provide training in the construction industry. The Ministry of Labour and National Insurance was empowered by section 1(1) of the Industrial Training Act (Northern Ireland) 1964 to make Orders establishing industrial training boards.  The Industrial Training (Construction) Board Order (Northern Ireland) 1964 established the Construction Industry Training Board.  In the same year a similar order was made establishing the Engineering Industry Training Board.  Each board was empowered to exercise the functions conferred on training boards by the 1964 Act in relation to the activities of the respective industries as defined by the relevant Order. 

6.	The main function of boards is self evidently to provide training for employees engaged in the relevant industry and in order to finance the training and other expenses incurred by boards provision was made in section 4 of the 1964 Act for a levy to be raised on employers in the industry.
 
7.	The 1964 Act was replaced by the Industrial Training (Northern Ireland) Order 1984.  Article 15(1) of the1984 Order states that the general purpose of an industrial training board is “to encourage adequate training of persons employed or intending to be employed in the industry.”  Specific provision for levies is made in Article 23(1) of the 1984 Order as: -

“An Industrial Training Board may submit to the Department for the Department’s approval proposals … for the raising and collection of a levy to be imposed for the purpose of raising money towards meeting the Board’s expenses”.

Article 23(2) of the same Order empowers the Department to: -

“Make an order imposing a levy … giving effect to levy proposals approved … and providing for the levy to be imposed on employers in the industry”.  

The industry is defined in Article 2 as: -

“The activities in relation to which the Board exercises its functions”.

8.	Article 24(4) of the Order provides that a person assessed to levy may appeal to an Industrial Tribunal and Article 24(5) enables the Tribunal to either rescind, reduce or confirm the assessment or increase the assessment if it appears to the tribunal that the appellant company ought to have been assessed to the levy in a larger amount.

9.	Pursuant to Article 23(1) of the 1984 Order, the Industrial Training Levy (Construction Industry) Order (Northern Ireland) 2003 came into force on 31 August 2003.  The preamble to the 2003 Order contains the following passage:

“And whereas the Department estimates that the amount which will be payable by any employer in the construction industry by virtue of this Order does not exceed an amount which the Department estimates is equal to one per cent of all relevant earnings being the aggregate of the earnings and payments intended to be disbursed as earnings which have been paid or are payable by any such employer to or in respect of persons employed in the industry, in respect of the period specified, in the levy proposals as relevant…..”

10.	Article 2 of the Order provides: -

“(1)	The levy to be imposed on employers shall be assessed in accordance with the provisions of this Article.

       (2)	The levy shall be assessed by the Board separately in respect of each
construction establishment of employer, but in agreement with the employer one assessment may be made in respect of any number of such establishments in which case those establishments shall be deemed for the purposes of that assessment to constitute one establishment.

(3)	Subject to the provisions of this Article, the amount of the levy imposed on the employer in respect of a construction establishment shall be equal to 0.75% of the relevant earnings paid and payable to or in respect of all persons employed by the employer at or from that establishment …
	and no remission of the levy shall be given to an employer”.

Earnings are defined by reference to Schedule E of the Income and Corporation
Taxes Act 1988.

11.	Article 1(2) of the 2003 Order defines a construction establishment as meaning: -

“An establishment in Northern Ireland engaged wholly or mainly in the construction industry for a total of 27 or more weeks in the 39th base period, or being an establishment that commenced to carry out business in 39th 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 in which business was commenced and ending on the last day thereof; or where an election is made, in any part of the alternative 39th base period”.

12.	Article 1(2) of the 2003 Order defines “construction industry” as “any one or more of the activities which, subject to the provisions of Paragraph 2 of Schedule 1 to the [1964] Construction Board Order are specified in paragraph 1 of that Schedule as the activities of the construction industry”.

13.	Paragraph 1 of Schedule 1 to the 1964 Order sets out the activities that are to regarded as the activities of the construction industry as they are carried out in Northern Ireland and provides as follows: -

“(a) all operations in: -

(i)	the construction, alteration, repair or demolition of a building;
(ii)	the construction or demolition of a railway-line, siding or monorail;
(iii)	the construction, structural alteration, repair or demolition of any aerodrome, airport, bridge, road, viaduct, dock, harbour, pier, quay, wharf, coast protection, river or drainage work, aqueduct, canal, inland navigation, reservoir, water-works, bore-hole, well (other than an oil-well), filter bed, sewage works, sewer, cooling tower or pond, tunnel, heading, adit, chimney, furnace, carbonising or gas making plant, nuclear or thermal power station, hydro-electric station, cable trench or duct, oil refinery, pipe-line or defence installation;
(iv)	the preparation of the site or the laying down of a foundation or sub-structure in connection with any of the above-mentioned operations or with the construction of a furnace or with the erection of structural metal-work;
(v)	the construction of a swimming pool or other bathing place, or of a playing field or ground for sporting or recreational purposes, or the laying out of a cemetery;
(vi)	the provision or continued provision of any building or other construction or work above-mentioned of water, gas, lighting, heating or ventilation, being operations undertaken in, upon, above, or under the building or the close, curtilage or precincts thereof, or such construction or work, or any site above-mentioned;
(vii)	the erection or dismantling of fencing, hoarding or scaffolding;
(viii)	the erection of steel or other metal framework of buildings, or of structures made wholly or mainly of steel or other metal;

(b)	the preparation of stone for building purposes;

(c)	all operations in the manufacture of: -

(i)	a prefabricated building or section of a building, not being constructed wholly or mainly from metal or plastics material or from a combination of metal and plastics material;
(ii)	doors, window frames, stairs or curtain walling being in each case constructed wholly or mainly from wood; or
(iii)	bank, church, laboratory or other joinery;

(d)	the construction of shop, office or similar fittings on the premises on which they are to be installed; 

(e)	the erection or dismantling of exhibition stands;

(f)	the hiring out of contractors plant or scaffolding;

(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.”

Paragraph 2 then sets out a number of activities that are specifically excluded from the definition none of which are relevant for present purposes.  

Paragraph 3(2) provides as follows:

“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.” 

14.	The principle arguments advanced on behalf of the appellant company are set out in the skeleton argument appended hereto.  These may be summarised as follows: -

(i)	It was contended that the appellant is not a “construction establishment” within the meaning of Article 1(2) of the 2003 Order and it is not engaged “wholly or mainly in the construction industry”.  The business of the appellant is primarily property development and land brokerage.  

(ii)	It was contended that the appellant does not make any payments to or in respect of persons employed at or from a construction establishment within the meaning of Article 2(3) of the 2003 Order and accordingly there is no appropriate payment upon which a levy could be raised.  

(iii)	It was contended that the payments made by the appellant do not constitute “relevant earnings” paid and payable by an employer to or in respect of persons employed in the construction industry as referred to in the preamble to the 2003 Order.  

(iv)	The appellant contended that it did not employ any persons engaged in the construction industry nor was it engaged in the construction industry as defined by the 2003 Order.  The appellant company contended that it was not involved in any of the activities set out in paragraph 2 of Schedule 1 of the 1964 Order nor in operations in the construction, alteration, repair, demolition of a building, or any of the other operations listed in Schedule 1 paragraph 1(a).  

(v)	It was further contended that any operations in the construction industry that are incidental to the activities of the appellant are conducted by separate companies or individuals unconnected with the appellant on at arms length contracts and accordingly the appellant is entitled to rely upon the provisions of paragraph 3(2) of Schedule 1 to the 1964 Order.

(vi)	Finally, it was contended that personnel employed by independent contractors derived benefit from the Ievy rather than the personnel employed by the appellant and that if the levy was upheld it would constitute double taxation.

In oral argument, Mr Brown drew attention to a number of documents including a licence agreement for a housing development and a building contract which he contended were illustrative of the arms length manner in which the appellant conducted its business and the double taxation point.  Mr Brown also drew particular attention to the word “operation” which appears in paragraph 1(a) of Schedule 1 to the 1964 Order and he contended that this meant physical operations and the appellant company did not perform operations.  Mr Brown further contended that the type of activities set out in paragraph 1(g) of the same Schedule insofar as it covered office activities did not bring the appellant within the sphere of operations.  Mr Brown also drew attention to paragraph 2 of the Schedule and contended that the activities undertaken by the appellant company could not be said to be carried out in conjunction with other activities carried out by separate companies or other bodies.  Further Mr Brown contended the purpose of the legislation was to produce a levy for training purposes and this required physical or material activity to happen within the appellant’s organisation in order for it to be within the scope of the legislation.  In addition, he submitted that the appellant is not wholly or mainly engaged in the construction industry and that payments are not made to operatives but to the company directors and backup staff.  Accordingly, he submitted that none of the payments are relevant earnings.  Finally, Mr Brown contended that the construction work is carried out by bodies who themselves pay a levy and it is their personnel who thereby gain a benefit from the training that the levy is intended to confer.  The appellant contended that it does not derive any benefit from the levy but rather this is derived by independent contractors engaged from time to time as required.

15.	Mr Coyle for the respondent invited the tribunal to dismiss the appeal.  Mr Coyle drew attention to the purpose of the levy as set out in Article 15(1) of the 1984 Order namely to encourage adequate training persons employed or intending to be employed in the industry”.  Mr Coyle contended that the mischief at which the legislation was aimed was to ensure that those who engaged in hazardous work were given appropriate training and that those who partake in the benefits of this scheme should not be allowed to rely upon artificial distinctions in order to partake of profits but not in the burdens.  In this connection Mr Coyle drew attention to the exposition of the scheme as set out in the judgment of Mr Justice Kerr (as he then was) in the matter of an application by HSS Hire Service Group plc for judicial review.

16.	Mr Coyle urged the tribunal not to seek to distinguish construction work from the concept of land brokerage as expounded by Mr Brown as this was a distinction that was not recognised in law.  Mr Coyle contended that all that was required was for the appellant company to engage in some profitable activity of the nature set out in paragraphs 1(g) to (h).  Mr Coyle drew attention to the width of the phrase “in association with” that appears in paragraph 1(g), which did not suffer from the same trimming as the phrase “in conjunction with” as referred to in paragraph 2.  Mr Coyle contended that the appellant company was intimately involved in the matter throughout and effectively had hands on control without getting its hands dirty and was therefore acting “in association with” those who engage in construction activity.  On this basis Mr Coyle contended that the appellant company was engaged in the construction industry.

17.	In relation to the double taxation point relied upon by Mr Brown, Mr Coyle contended that it was both the appellant and the licensee in one of the examples given derived profits it was entirely proper that they should both be liable to the levy as they both benefited from the training.  Mr Coyle also drew attention to the width of the definition of earnings.  Finally, Mr Coyle drew attention to the appellant’s role and controlling thread from spotting a development opportunity through applying for planning permission to employing a building contractor.  

18.	There is little decided case law in this area.  In his judgment in the HSS case, Mr Justice Kerr had little difficulty in concluding on the basis of the evidence that HSS was principally involved in the hire of plant and equipment to the construction industry and therefore fell “within scope” of the legislation and that CITB’s conclusion that HSS was within scope was fully justified.  Similarly, the Court of Appeal in FM Windows Limited -v- Construction Industry Training Board and Discount Windows Systems Limited -v- Construction Industry Training Board held that the replacement of existing windows by PVC windows constituted an alteration of a building within the meaning of paragraph 1 of Schedule 1 of the 1964 Order and that the companies concerned were engaged wholly or mainly in the construction industry.  Both of these cases are however very different from the instant case in that they both clearly involve a degree a “hands on” construction work.

19.	The crux of the present case is whether or not the activities undertaken by the appellant fall within paragraph 1 (g) or (h).  It matters little what label is used to describe the appellant’s business.  What is important is to determine what the appellant actually does and from that deduce whether or not the appellant is within scope.  The tribunal has the benefit of an agreed Statement of Facts, which provides us with this vital information.  As appears from the Statement of Facts and the material provided by the appellant, in some instances the appellant acquires lands and then licenses those lands to independent developers who build dwellings on the site.  The appellant then transfers that property directly to the end user in exchange for which the appellant company receives payment in the form of a site fine which equates to a fixed percentage of the sale price of the dwelling. On other occasions, the appellant entered into contracts with independent contractors for the construction of dwellings, which were then sold through an estate agent.

20.	There is no suggestion that the appellant’s business falls directly within paragraph 1 (a) to (f).  The activities described in paragraph 1(g) (i), (ii) and (iii) may encompass the appellant, if carried out in association with or in conjunction with one or more of the activities set out in paragraph 1 (a) to (f).  While the trimming of the words “in conjunction with” appears to be aimed at confining activities undertaken in this manner to activities carried out by substantially the same business, it is significant that the phrase “in association with” does not suffer from this confinement.  However, its absence does not free such activities of all constraints and in particular these activities have to be tied in with construction activity of some description.  We are satisfied that the activities undertaken by the appellant fall within the scope of paragraph 1 (g) and are carried out in association with the activities described in paragraph 1 (a) (i) and (iv).  In particular we are satisfied that the appellant is engaged in activities that come within paragraph 1 (g) (iii) being work done in an office in association with the construction of a building and the preparatory work described in 1 (a) (iv).  There may well also be an element of research or development under sub paragraph (i) but the agreed Statement of Facts does not make this clear and we would not wish to base our decision on submissions by the respondent’s counsel to this effect. Paragraph 1 (g) (ii) can easily be ruled out as the appellant is clearly not involved in “sale, packing, warehousing, distribution or transport”.    

21.	We are also satisfied that the appellant’s activities fall within sub paragraph (h) and in particular within the sphere of commerce in the sense of making a profit from the activities undertaken under sub paragraph (g).

22.	In addition we are satisfied that the financial benefits derived by the appellant constitute relevant earnings and that there is no substance in the appellant’s double taxation point.

23.	It is undoubtedly true to say that the appellant and all of its staff to a greater or lesser extent benefit from the construction industry and it is our view that the appellant falls within scope of the legislation. The matters set out in Schedule 1 paragraph 1 cover a wide range of activities and we are satisfied that the work undertaken by the appellant falls within paragraph 1 (g) (iii) and (h).  The appeal is therefore allowed.  

Chairman:

Date and place of hearing:	4 October 2005, Belfast.	

Date decision recorded in register and issued to parties: