Industrial Tribunals Northern Ireland Decisions

THE INDUSTRIAL TRIBUNALS

 

                                                                                                                   CASE REF:  7287/17

 

APPELLANT:                      Trunk Flooring Limited

 

 

RESPONDENT:                  Construction Industry Training Board NI

                       

 

DECISION

 

 

The unanimous decision of the tribunal is that the appellant is liable to pay the construction industry training levy in respect of its production operations and ancillary activities within Northern Ireland.

 

 

 

Constitution of Tribunal:

 

Employment Judge:          Employment Judge Turkington

 

Members:                             Mr I Atcheson

                                                Mr R McKnight

 

 

Appearances:

 

The appellant appeared and was assisted at the hearing by Mr Duncan, lay representative. 

 

The respondent appeared and was represented at the hearing by Mr J Coyle, Barrister-at-Law, instructed by Babington & Croasdaile, solicitors.

 

 

The Appeal

 

1.            This was an appeal under the Industrial Training (Northern Ireland) Order 1984 (“the 1984 Order”) articles 24 and 30, against the assessment to the levy made by the respondent (CITB NI) on 19 September and 2 October 2017.

             

The Issue

 

2.            The issue to be determined by the tribunal was whether the appellant’s business fell within the scope of Schedule 1 of the Construction Board Order 1964 (the Schedule) and hence whether the appellant was properly subject to the construction industry training levy.

 

 

Sources of Evidence

 

3.                        The tribunal heard oral evidence from Ivan Clarke, Adrian Rea and Derek Duncan on behalf of the appellant and from Barry Neilson, Lesley Longstaff, Gayle Beckett and Ciaran Brolly on behalf of CITB NI and the tribunal also considered a number of documents in the hearing bundle(s).

 

Contentions of the Parties

 

4.            Both parties had prepared outline written submissions for the tribunal.  The appellant stressed in its submission that it manufactures and retails wood overlay flooring.  The company considers that it is not part of the construction industry in anyway.  The appellant’s products are floor coverings similar to carpets in that they can be removed or replaced and overlay flooring can be fitted after a building has been completed.  It was further submitted that the flooring is a decoration akin to carpeting, curtains, wallpaper etc.  It was strenuously denied that the appellant’s wooden boards could be used as “curtain walling” which is something entirely different from wood panelling fixed to walls.  The appellant contended that CITB NI had failed to indicate what benefits it could provide to the company and CITB NI had failed to demonstrate any tangible link between the flooring produced by the appellant and the construction of any building.

 

5.            Counsel for the respondent submitted that CITB NI was obliged by law to levy an employer who carries out the activities of the construction industry (as defined) in Northern Ireland and it has no choice in that regard.  Counsel contended that the question whether an employer is in scope is determined by the Schedule which must be seen as interlocking with the Industrial Training (NI) Order 1984.  The respondent submitted that the appellant falls within the categories set out in para 1 (a) (i), 1 (c) and/or 3 (c) of the Schedule (see below) and that other activities of the appellant are also within scope as they are caught by the definition of supporting activities.  In relation to the issue of “alteration of a building”, Counsel relied on the decisions of the Court of Appeal in the case of FM Windows and Discount Windows.  It was submitted that the evidence in the case supports the view that the installation of wooden floors on a semi-permanent basis is an alteration of the building in which they are installed.  Further, or in the alternative, it was contended that the processing carried out by the appellant constituted manufacture including assembly of the wooden flooring. 

 

Facts of the Case

 

6.            Having considered all the evidence in the case, the tribunal found the following relevant facts proven on the balance of probabilities:-

 

(1)          The appellant is a company registered in Northern Ireland.  It has been trading for more than 20 years.  Its main base is at Kesh, County Fermanagh where it has a manufacturing facility and showroom.  It also has showrooms in London, Dublin and San Francisco.

 

(2)          The appellant sells wooden products, mostly bespoke wooden overlay flooring.  Its products also include bespoke wooden cladding for staircases and wood panelling for walls to match the appellant’s bespoke wooden floors.  The appellant imports pre-cut wooden boards which it finishes at its premises in Kesh to produce wooden flooring.  This finishing process involves colouring and oiling the wooden boards to the customer’s desired colour and finish.  Previously, these boards were imported from China, but more recently, the boards have been imported from Europe.  This makes up some 90% of the appellant’s business. 

 

(3)          The other 10% approximately of the company’s business is made up of importing raw wood, cutting and sawing it to the required size, planning it and so on before colouring and oiling the boards as per the finishing process described in the previous paragraph. 

 

(4)          The appellant company does not employ qualified joiners in its business.  Staff are trained “on the job”.  No particular qualifications or experience are required for roles in the manufacturing facility.  The job titles in the business include “factory worker”, “workshop/fitting”, “workshop/fitting/delivery”, “maintenance” and “admin”.  In an email to the respondent, the appellant described the tasks carried out by these staff groups as follows:-

 

“Factory worker – working machines, handling timber, filling boards, oiling boards to produce Engineered wood flooring

 

Workshop – bespoke products we make such as herringbone, chevron, wood panels, steps

 

Fitting – some bespoke products may have to be fitted on site Delivery – delivering goods in van and lorry

 

Maintenance – maintaining and smooth operations of wood machinery Admin – Accounts, sales, orders, despatch”.

 

(5)          Most of the appellant’s products are sold on a supply only basis, that is the customer arranges for fitting of the flooring or other products.  The flooring fits together using tongue and groove.

 

(6)          The appellant’s wooden floors are often fitted in what can be described as a “floating” manner.  They do not form the structural floor of the building.  The structural floor of the building is usually made of concrete or some other material.  A “quilt” made of rubber, silicone or other material is laid on top of the concrete floor to deaden the sound and then the appellant’s wooden flooring is laid on top, usually without being permanently attached to the underlying structural floor.  The skirting board is normally placed on top of the wooden overlay flooring and assists in retaining the floor in place. 

 

(7)          It is possible to lift and remove the appellant’s flooring from a room without removing the skirting boards.  It is also possible to lift the floor and re-lay it elsewhere, although this is very rarely done in practice.

 

(8)          The appellant advertises its products in interior design type magazines and publications such as House & Garden.  It does not advertise in construction industry publications.

 

(9)          The vast majority of the company’s sales are to customers outside of Northern Ireland, mainly in England, the Republic of Ireland and the United States.

 

(10)       The appellant’s website advertises expertise in wood and stone, although currently the appellant sells a limited amount of stone products.  Illustrations on the website show wood used in different rooms within the house.

 

(11)       The appellant company does not participate in the HMRC scheme for the construction industry.  For business rates purposes, it is classified as a manufacturer. 

 

(12)       In 2015, the respondent had identified the appellant company as (potentially) falling within the scope of the Construction Industry Training Levy.  The respondent then entered into correspondence with the appellant company seeking information to allow the respondent to assess the appellant’s liability to pay the levy.

 

(13)       Ms Beckett of the respondent carried out a visit to the appellant’s premises in Kesh in May 2016 to assist in determining the sums due from the appellant pursuant to the levy.  During this visit, she was told that the company manufacture flooring and occasional pieces of bespoke furniture and staircases.  Following the visit, the respondent confirmed their view that the appellant’s activities were within scope for the construction industry training levy. 

 

(14)       The appellant company then challenged this position by raising a Scope Query.  This was initially considered at an Internal Scope Panel of the respondent which upheld the original decision, that is that the appellant was within the scope of the levy.  The respondent considered that the activities of the appellant fell within the scope of two clauses in the Schedule, namely:-

 

“1(a) (i) the construction, alteration, repair and demolition of a building

 

1 (c) (iii) all operations in the manufacture of … “other joinery””

 

(15)       There was then a further internal review by the respondent’s Board Review Committee.  Mr Ivan Clarke founder and chief officer of the appellant company attended the review meeting to give evidence to the committee.  The Chief Executive of the respondent made a submission on behalf of the respondent.  The Chairman of the Committee indicated to the Chief Executive that Mr Clarke had told the committee that the appellant does not manufacture staircases but only supplies wooden cladding for staircases.  The Chief Executive advised that using timber products within a building is alteration/repair and is a permanent addition to a building.  The Chairman also noted that Mr Clarke had advised the committee that the appellant’s workshop colours and finishes the wood it buys in.  The Chief Executive suggested this had not been mentioned to the respondent’s staff previously.  The committee unanimously agreed to uphold the decision of the Internal Scope Panel, that is that the appellant company was within the scope of the Respondent’s training levy. 

 

(16)       The appellant was notified of this decision by letter dated 8 August 2017.  The appellant was informed of its right to appeal this decision to the Industrial Tribunal within 30 days of this date. 

 

(17)       The appellant’s appeal was lodged with the respondent on 19 October 2017.  In its Notice of Appeal, the appellant argued that the levy should not be imposed on them as they are retailers/manufacturers of wood overlay flooring. 

 

Statement of Law

 

7.            By article 23 of the 1984 Order, 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.  For the periods in dispute, namely 2015, 2016 and 2017, the Department made Orders (“the Levy Orders”) imposing a levy on the construction establishments of employers at the rate set out in the respective Orders.

 

8.            A “construction establishment” is defined in the Levy Orders as an establishment in Northern Ireland engaged wholly or mainly in the construction industry for twenty seven or more weeks within the relevant period.  In turn, the “construction industry” is defined as any one or more of the activities which, subject to the provisions of paragraph 2 of the Schedule are specified in paragraph 1 of the Schedule as the activities of the construction industry.

 

9.            By paragraph 1 of the Schedule, the activities of the construction industry include the following activities in so far as they are carried out in Northern Ireland:-

 

“(a)      all operations in:-

 

(i)        The construction, alteration, repair or demolition of a building” Paragraph 3 (1) states that in the Schedule, “building” includes “any structure or erection (other than a tent or caravan) and any part of a building so defined; (emphasis added) “repair” includes “in relation to a building includes maintenance, re-pointing, re-decoration and external cleaning:

 

…

 

(c)       all operations in the manufacture of:-

 

(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 (emphasis added) 3 (1) (e) “manufacture” includes assembly or any process or operation incidental or appertaining to manufacture or assembly;

 

…

 

(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:-

 

…

 

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

 

(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.”

 

10.      The question of whether a business or employer falls within the scope of the Schedule and hence liable for payment of the levy has been considered by tribunals and courts in Northern Ireland on a number of occasions.  In particular, in the conjoined appeals by F M Windows Ltd and Discount Window Systems Ltd v Construction Industry Training Board, the Schedule was considered in some detail by the then Lord Chief Justice Lord Hutton.  The appellants in this case were essentially sellers of double glazed window units which were manufactured by other suppliers and fitted by sub-contractors.  The argument in the case was largely focused on the scope and meaning of paragraph 3 (1) (a) of the Schedule and, in particular, the meaning of “alteration or repair” of a building.  In the course of his judgment with which Kelly LJ agreed, Hutton LCJ said the following:-

 

“I consider that at the outset it is important to note two points.  First, in paragraph 3 (1) (a) “building” is stated to include “any part of a building”.  Secondly, “repair” is given a very wide meaning and paragraph 3 (1) (h) provides that “repair” in relation to a building includes “maintenance, re-pointing, re-decoration and external cleaning.”

 

Therefore the question for decision is not just whether the installation of PVC double glazed window units in a house constitutes “the alteration of a building” but whether it constitutes “the alteration of any part of a building”.

 

…

 

The respondent is entitled to succeed if the installation of a replacement window is an “alteration” of any part of a house.

 

I think it is clear that a window is 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 the building.”

 

11.      In another section of his judgment, the Lord Chief Justice noted that senior counsel for the appellants had submitted that the alteration was required to be structural in nature which was not the case with the replacement of a window.  The Judge went on to determine that the broadening of the meaning of building to include part of a building meant that there was no requirement for the alteration to be structural in effect.  Therefore, Hutton LCJ held that the appellants’ double glazing business fell squarely within the scope of construction activities as defined within the Schedule. 

 

12.      In a separate judgment in which he agreed with the conclusions reached by the Lord Chief Justice, Pringle J noted that in the sub-paragraph in the Schedule which states that building can relate to part of a building, “as there are no limiting words in the definition that part may be a small part”. 

 

13.      He further noted that the Schedule “gives no definition of “alteration” which usually connotes a change of some description.  But to be described as an alteration, a change does not need to be extensive or apparent; … The fitting of double glazed windows with plastic frames in place of single glazed windows with wooden frames is without doubt a change;”

 

14.       Pringle J continued:

 

“However, regard must be had to two factors.  Firstly, the definition of “building” as including any part of a building.  I consider that even in respect of a single window the installation of double glazing would not in ordinary usage be described as an alteration.  Secondly, the definition of “repair” in very wide terms.  Repair as so defined could be intended merely to cover a wide range of activities not covered by “alteration” as normally understood in relation to buildings, but I consider that this wide definition of repair and the definition of a building as including part of a building show a legislative intention in sub-paragraph (a) (i) to cover all, or nearly all, work done in relation to a building.  Accordingly, taking the sub-paragraph as I find it, I am of the opinion that the work of each appellant in installing double glazed windows is an operation within the ambit of the sub-paragraph.”

 

Pringle J therefore agreed with the Lord Chief Justice that the appeals should be dismissed. 

 

15.      Questions relating to the scope of the construction industry training levy also came before the High Court by way of Judicial Review in the Matter of an Application by HSS Hire Service Group PLC for Judicial Review.  The application was dismissed by the Court and, in the course of his judgment, Kerr J (as he then was) outlined the statutory framework of the construction industry levy scheme.  The applicant (HSS) sought to argue that its business fell out with the scope of the construction industry levy.  The company further sought to argue that even if they fell within the scope of the levy, it did not follow that they had to be made subject to the levy.  Kerr J rejected both arguments.  He concluded that the business of HSS in hiring out equipment for use in the construction industry was clearly within scope.  In relation to the second argument, Kerr J agreed with senior counsel for the CITB NI that it had no discretion whether to require the levy to be paid.  He considered it was fixed with a statutory obligation to collect the levy from those who are liable to pay it.  The application was judicial review of CITB NI’s decision to impose the levy was rejected.

 

 Conclusions

 

16.      Having applied the relevant law to the findings of fact, the tribunal reached the following conclusions.

 

17.      The tribunal considered firstly whether the appellant’s wooden overlay flooring fell within the scope of “all operations in the … alteration of a building (or part of a building)”.  In its considerations, the tribunal was of the view that there were a number of ways in which the drafters of this longstanding legislation sought to broaden out its scope and application.  Firstly, the phrase “all operations in …” at the outset of the relevant paragraph has a widening impact.  Secondly, the tribunal considered that the inclusion of “any part of a building” within the definition of a building was of particular relevance in the context of “alterations”.  This can be seen in the case of FM Windows and Discount Windows referred to at paragraph 8 above.  It is clear from the judgements in this case that windows or, according to Pringle J, even a single window, can be considered a part of a building.  Thirdly, the term “alteration” connotes a change of some description, but it is clear from the same case that the alteration does not need to be particularly extensive.

 

18.      Taking account of all of these points, the tribunal had little hesitation in concluding that the fitting of wooden overlay flooring brings about the alteration of a part of a building, namely the floor.  Therefore, the appellant’s operations in the production and supply of this wooden flooring does fall within the very wide scope of “all operations in the … alteration of a (part of) a building”. 

 

19.      Similarly, the tribunal considered whether the appellant’s activities fell within the scope of “all operations in the … repair … of a building (or part of a building)”.  As outlined above, for the purposes of the Schedule, “repair” includes “in relation to a building (or part of a building) includes maintenance … re-decoration …”.  During the hearing, it was argued on behalf of the appellant that their wooden overlay flooring was decorative in nature.  The tribunal agrees that the flooring is more decorative than structural.  Certainly, the installation of the appellant’s flooring enhances and updates the appearance of the flooring in one or more rooms of a building.  The tribunal considers that the laying of the wooden overlay flooring is an example of re-decoration.  Re-decoration of (a part of) a building, in this case the flooring, is included in the relevant statutory definition of repair.  Since the installation of the flooring amounts to re-decoration, the tribunal reached the conclusion that the production of the wooden overlay flooring is an operation in the repair of the flooring. 

 

20.      Accordingly, on the basis that its operations fall within the scope of the terms “alteration” and “repair” in para 1 (a) (i) of the Schedule, the tribunal has determined that the appellant is liable to pay the construction industry training levy in respect of its production operations and ancillary activities within Northern Ireland at its premises in Kesh, County Fermanagh.

 

21.      In light of the tribunal’s conclusions in relation to para 1 (a) (i), it was unnecessary for the tribunal to make a determination in respect of whether the Appellant’s operation were caught by para 1 (c) (iii) of the Schedule “all operations in the manufacture of … other joinery”.

 

Concluding Remarks  

  

22.      The tribunal would like to put on record its view that the relevant legislation, in particular the Schedule, which was drafted more than 50 years ago, requires review.  It is clear that the language used in the Schedule is antiquated and in some areas opaque and has not kept pace with technological and other developments in the construction industry.  The tribunal would strongly urge those responsible to undertake any necessary review and consultation to ensure the ongoing fitness for purpose of this statutory scheme.

           

 

Employment Judge:

 

 

Date and place of hearing: 25 October and 28 November 2018, Belfast.

           

 

Date decision recorded in register and issued to parties: