Judgment
As Approved by the Court
Crown copyright©
Kenneth Parker QC, Deputy High Court judge:
1. This is an appeal against the decision made on 28 June 2006 of an Employment Tribunal (“the Tribunal”) sitting at Liverpool, whereby the Tribunal dismissed the appeal of Daniel Contractors Limited (“DCL”) against a Levy Assessment Notice dated 5 November 2003 (“the Notice”). The Respondent to this appeal, the Construction Industry Training Board (“the Board”), provides training for the construction industry. In order to fund the provision of that training, it imposes a levy on employers in the industry.
2. The short issue raised on this appeal is whether the Tribunal erred in law in concluding that the water distribution network comprising water or distribution mains, on which DCL carried out most of its activities at the time relevant to the Notice, is a “pipe-line” for the purposes of paragraph 1 (a)(iii) of Schedule 1 to The Industrial Training (Construction Board) Order 1964 (Amendment) Order 1992 SI 1992 No.3048 (“the Order”).
Introduction
3. DCL is a service provider to the utilities industry. The main activity carried out by DCL at the time relevant to these proceedings was the rehabilitation of the water or distribution mains that make up the water distribution network. This work was carried out for water utilities companies such as United Utilities.
4. Water is transported from source to end user through a system of pipes. Water travels from source to the treatment works and from the treatment works to the service reservoir using large diameter bulk supply pipes feeding a single point with few if any branch connections. From the service reservoir water enters the water distribution network. This network is made up of water or distribution mains. These are small diameter pipes that form a reticulation system. The reticulation system typically has numerous branch connections. It was on this reticulation system that DCL carried out the relevant work.
The Statutory Framework
5. Article 2 of The Industrial Training Levy (Construction Board) Order 2003 SI 2003 No.286 defines the construction industry as follows:
“ ‘The construction industry’….means any one or more of the activities which, subject to the provisions of paragraph 2 of the Schedule to the [Order], are specified in paragraph 1 of that Schedule as the activities of the construction industry….”
6. The relevant paragraph of Schedule 1 to the Order is paragraph 1 (a)(iii), which it is convenient to set out in full:
“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 Great Britain:-
(a) all operations in –
(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, waterworks, 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 or gas treatment works, nuclear or thermal power station, hydro-electric station, electric line or any structure designed for its support, cable trench or duct, oil refinery, pipe-line or defence installation.”
7. Paragraph 3 of the Schedule provides that, unless the context otherwise requires:
“ ‘pipe-line’ does not include a pneumatic dispatch tube;”
The approach to construction
8. Authoritative guidance on the approach to construction of the Order was given by Lord Wilberforce in Engineering Industry Training Board v Foster Wheelers John Brown Boilers Limited [1970] 1 WLR 881 (CA). Lord Wilberforce’s observations were made in the context of the Industrial Training (Engineering Board) Order 1968, but it is common ground that they apply with equal force to the Order. Lord Wilberforce said this:
“This instrument….., like others in the same field, raises questions of construction of a special and difficult character. It endeavours to bring within general expressions and definitions, which are rather fluid and loose in texture, types of industry and industrial activity of a varied and complex character which can seldom be accurately brought within any of them. In this respect it rather resembles legislation concerning the selective employment tax. The great variety of combinations which are dealt with can be seen by a glance at the Order itself and its various paragraphs and the tables, and I need not expand upon them. So when one is trying to interpret an order like this the processes of strict analysis are seldom conclusive and indeed they often lead to confusion, The answer tends to depend much more on what one may call impression – certainly a cultivated and experienced impression; but still impression; and that is why they are committed in the first instance to an industrial tribunal; and that is why respect has to be paid to the findings of this body.” (886A-C, emphasis added; see also Phillimore LJ at 888E-F).
9. The foregoing guidance from such an eminent authority requires only one rider. The levy is in the nature of a tax. The levy, therefore, should not be imposed unless that was the clear and unequivocal effect of the statutory provision, and any ambiguity should be resolved in favour of the company upon whom the levy is imposed: see Gibbon Equipment Hire Ltd v CITB [2001] EWHC Admin 954, by Keith J, at paragraph 10, citing Evans LJ in Ingram v Inland Revenue Commissioners [1997] 4 All ER 395 at page 414e.
The Tribunal’s Decision
10. The nub of the Tribunal’s decision is contained at paragraphs 43, 45 and 46. In summary, the Tribunal reasoned as follows:
(1) The Shorter Oxford English Dictionary (“the OED”) defines “pipe-line” very broadly as “a continuous line of pipes, a conduit of iron pipes for conveying petroleum from oil well to market or refinery, or supplying water to a town or district.”
(2) There was no reason to believe that the Order adopted other than an equally broad definition of “pipe-line”. On the contrary, the express and very limited exclusion of a “pneumatic dispatch tube” from the statutory scope of the term strongly suggested that a very broad meaning was intended.
(3) Furthermore, trade dictionaries and relevant trade literature both adopted a very broad meaning for “pipe-line”. For example, the Dictionary of Civil Engineering defined “pipe-line” as “a long pipe carrying e.g. water, gas, oil.” The Dictionary of Building defined a “pipe-line” as “many lengths of pipe joined together.” Consistently with this broad approach to the meaning of “pipe-line”, internet sites of a number of water utilities treated a water main as a type of pipe. For example, Scottish Water referred to water mains as “a network of pipes” and United Utilities referred to “mains pipes.” The Civil Engineering Specification for the Water Industry, 6th edition, referred to both “pipe-lines” and “branch outlets” in addition to “water mains”. All this evidence showed that for industrial purposes the terms “pipes”, “pipe-lines” and “water mains” were interchangeable.
(4) In short, water mains are a kind of pipe-line, and it makes no difference that these particular “pipe-lines” have smaller pipes branching off them.
11. At first sight this reasoning would seem impeccable. The Tribunal had, on the basis of the evidence before it, formed a “cultivated and experienced impression” (see paragraph 8 above) that the relevant assets fell within the statutory concept of “pipe-line”. The Tribunal had no real doubt that the intended meaning was a broad one and that it captured the relevant assets. There was, therefore, no genuine ambiguity that might work in favour of a narrower interpretation.
12. However, in this appeal Mr Tatton Brown, who appeared on behalf of DCL, submitted that there is real doubt, or ambiguity, about the meaning of “pipe-line” in the Order, and that the Tribunal erred in law in not recognising the putative ambiguity and in not adopting a more restricted meaning that would have worked to the advantage of DCL. I should say at the outset that, although Mr Tatton Brown skilfully deployed his arguments, they have not persuaded me. I shall consider each in turn.
DCL’s Submissions
13. First, Mr Tatton Brown attacks the starting point of the Tribunal’s reasoning, as I have set it out above: the OED definition. He argues that the OED definition refers to the supply of water to a town or district: the water distribution network that is here in issue supplies water to individual streets or properties. In my view, this reading distorts the entry in the OED. The OED first refers to a “pipe-line” as “a continuous line of pipes”. The Tribunal correctly treated this as a very broad dictionary definition that would plainly encompass the relevant assets referred to at paragraph 4 above: a network of pipes is no more than a number of “pipe-lines” connected to each other. This broad dictionary definition does seem to me to accord with everyday usage. The following words in the OED definition which include reference to a conduit of iron pipes for supplying water to a town or district are clearly intended to do no more than illustrate the broad concept of a “pipe-line”: the words are not meant to limit the concept to the specific examples given.
14. Furthermore, I am very doubtful whether the further words which I have just quoted from the OED entry should be read as if they were themselves a statutory definition and as therefore arguably excluding a conduit supplying water to individual streets or properties. This seems to me to be over-refined. In the context of an illustrative dictionary entry, it seems to me that the supply “to a town or district” can quite sensibly be read as including a supply to individual streets or properties.
15. In any event, it is important to remember that the Tribunal did not rely exclusively on the OED definition. That definition was a starting point, but the Tribunal went on to consider specific trade dictionaries and literature (see paragraph 10 (2) above). That material confirmed the view that “pipe-line” in the present context had a broad meaning capturing the assets here in issue.
16. Secondly, Mr Tatton Brown argues that the assets in paragraph 1 (a) (iii) of the Schedule are grouped by reference to different functional categories. “Pipe-line” does not appear with the water-based assets, such as “reservoir”, “waterworks” etc. This may well be correct, but it does not in itself help his case. Indeed it could be more plausibly argued that “pipe-line” has been specifically separated from water-based assets because the concept should be given the widest meaning, and the word was, therefore, not placed in the list at a point that might suggest that it was limited to a conduit of water only.
17. Thirdly, and related to the second argument, Mr Tatton Brown argues that the position of “pipe-line” in the list shows that the term was intended to refer exclusively to a conduit for supplying oil and indeed was intended to refer to the definition of “pipe-line” contained in section 65(1) of the Pipelines Act 1962 (“the 1962 Act”).
18. In fact, in my view, the positioning of the term “pipeline” tends to show the very opposite. If it had been intended that “pipe-line” should be restricted to a pipe-line conveying oil, the most obvious ways of demonstrating that intention would have been to specify in paragraph 1 (a)(iii) either the words “oil refinery and oil pipe-line”, or the words “oil refinery, oil pipe-line”. However, the term “pipe-line” has both been deliberately separated from the term “oil refinery” and has also been conjoined with a wholly different asset, namely, “defence installation”. This indicates that “pipe-line” was not intended to refer only to a conduit for oil. Indeed if it had been intended to be so limited, the draftsman could hardly have selected a more confusing technique for achieving that objective.
19. Furthermore, if it had been intended, as it is argued, that “pipe-line” be limited to oil pipe-lines, the draftsman could reasonably have been expected to say so in the plainest terms, by explicitly incorporating into Schedule 1 to the Order the definition contained in section 65 of the 1962 Act. However, the only reference to the 1962 Act in Schedule 1 to the Order is the exclusion of “a pneumatic dispatch-tube” from the statutory meaning of “pipe-line”: this item is also excluded, by section 65 (1)(f), from the meaning of “pipeline” in section 65 of the 1962 Act. However, the bare repetition in Schedule 1 to the Order of one excluded item in the full definition of pipe-line in the 1962 Act does not manifest an intent that the full definition in that Act be imported into Schedule 1 to the Order.
20. It is in any event interesting to note the very wide opening words of the definition of “pipe-line” in section 65 of the 1962 Act: “a pipe (together with any apparatus and works associated therewith), or system of pipes (together with any apparatus and works associated therewith), for the conveyance of any thing…..” (my emphasis). If the draftsman of Schedule 1 to the Order had section 65 of the 1962 Act in mind, it seems to me much more plausible that he was intending to refer to the very wide opening words just quoted than that he was intending to restrict the meaning to an oil pipe-line as defined in the 1962 Act. The 1962 Act would, therefore, reinforce the conclusion of the Tribunal rather than detract from it.
21. Fourthly, Mr Tatton Brown argues that the terms in paragraph 1(a) (iii) of Schedule 1 are narrow and specific. For example, harbour, pier, quay and wharf are individually mentioned. However, this simply means that where a menu of terms was open to the draftsman he has chosen to run through the menu to ensure that every related item was covered. It is impermissible to conclude from that technique that an item such as “pipe-line” must be given a narrow meaning. On the contrary, it seems to me that the draftsman either did not believe that a similar menu approach was feasible for a concept such as “pipe-line”, or, even if it was, he concluded that such an approach was unnecessary or inappropriate because of the wide ambit of the term itself.
22. A related point made by Mr Tatton Brown was that, in relation to electricity based assets, paragraph 1 (a)(iii) of Schedule 1 to the Order specifically includes assets used in distribution to the end user (cable trenches and ducts). In contrast, the water-based assets do not expressly include the obvious analogous asset, namely, a water main. The answer to this point is that, given the wide ambit of “pipe-line”, there was no need separately to mention a water main. Furthermore, it is not clear to me what legislative policy would be promoted in the present context by including within the scope of the Order assets used for the distribution of electricity to end users but excluding assets used for the distribution of water to end users. However, that difference in treatment would be the outcome if this argument were correct.
23. Fifthly, Mr Tatton Brown points to the definition of “pipe-line” made by the British Standards Institute (“the BSI”): “a line of pipes having an appreciable length; it may have branch lines, but these would not normally be numerous. It does not include distribution and service mains which are characterised by numerous branch connections.”
24. It is unclear why the BSI has defined pipe-line in the foregoing terms and, in particular, why it has chosen to exclude distribution and service mains. Without a full explanation of the background to, and purposes of, the BSI definition, it seems to me to be of limited value in the present statutory context. It must be remembered that the experienced and expert Tribunal considered trade definitions and literature, and heard evidence, over a three-day hearing. The Tribunal weighed that evidence and came to a firm conclusion about it (see paragraph 10 (2) above).
25. The same can be said about the evidence of Philip Cisham, a Chartered Engineer experienced in project management, design and construction management in the water industry. He gave evidence that the activities carried out on the water distribution mains involve different plant and equipment; different health and safety hazards and considerations; different techniques and different professions. However, the Tribunal was required to decide the meaning of “pipe-line” as it would apply in a multiplicity of industrial contexts, not just in the water industry. The Tribunal, for the reasons that it gave, had no doubt that across industry as a whole the Schedule to the Order was intended to give a wide meaning to “pipe-line”. In my view, those reasons were sound, and the narrow approach put forward by certain witnesses from the water industry was not sufficient to cast real doubt on the general wide interpretation. However, I note in passing that the definition of a “water main” in the Water Industry Act 1991 makes specific reference to “any pipe” which is used “for the purpose of making a general supply of water available to customers or potential customers”. This definition appears to me to be entirely consistent with the approach taken by the Tribunal to the meaning of “pipe-line” in the Schedule to the Order.
26. I, therefore, reject the specific arguments made by Mr Tatton Brown with which he seeks to undermine the Tribunal’s decision. However, standing back from these specific arguments, I am not at all persuaded by Mr Tatton Brown’s basic position: that is, that pipe-line in Schedule 1 to the Order should be understood to exclude “ a network of pipes, with numerous branch connections, distributing water through a reticulation system to multiple end users” (Appellant’s Skeleton Argument, paragraph 30). Such a construction would, in my view, be inconsistent with the ordinary understanding of “pipe-line”, and would necessitate a very substantial gloss on the unqualified expression in Schedule 1 to the Order, for which there would be no justification in the plain language or layout of paragraph 1 (a)(iii), or in any relevant legislative policy.
Conclusion
27. For the reasons set out above, the Tribunal, in my judgment, adopted the correct legal approach to the relevant issue before it, and reached a conclusion about the meaning of “pipe-line” in Schedule 1 to the Order that was not only legally flawless but was entirely correct.
28. Accordingly, I dismiss this appeal.
