Secretary of State for Employment v The Mitchell Construction Company Limited

Industrial classification headings are given the meaning attributed to them in the relevant trade, rather than necessarily their legal or dictionary meaning. [1970] 5 I.T.R. 270 An appellate court should respect an industrial tribunal’s decision unless no reasonable tribunal could have reached it or the tribunal has materially misdirected itself. (1969) 2 A.C. 346

Where work appears to fall under competing headings, the most specific or otherwise most apt heading governs. Specially designed foundations which fix machinery, contain essential ducts and integrate an automated manufacturing process may form part of the plant, even though they can also be described generally as construction. The tribunal’s contrary approach was a manifest misdirection. The appeal was dismissed.

Mitchell Construction Company Ltd designed and constructed an automated steel tube plant for Stewarts and Lloyds Ltd at Greatham. Its site establishment carried out specialised civil engineering works, including reinforced-concrete foundations, ducts and channels for essential supplies, and furnaces and flues.

The company sought repayment of selective employment tax and associated bonuses under the Selective Employment Payments Act 1966. The issue was whether the work was the making of metal manufacturing plant under minimum-list heading 341(2), or construction under heading 500. An industrial tribunal majority found for the Department, but its chairman dissented. The Divisional Court allowed Mitchells’ appeal, with the Lord Chief Justice dissenting. The Secretary of State appealed to the Court of Appeal.

Disposition

The appeal was dismissed unanimously by Salmon L.J., Edmund Davies L.J. and Stamp L.J., with costs. Leave to appeal to the House of Lords was refused.

1. Meaning and appellate review. Minimum-list headings are construed according to the meaning attributed to them by persons in the relevant trade. The court must respect the industrial tribunal’s expertise, but may intervene where no reasonable tribunal could have reached the decision or where there has been a manifest misdirection. This approach was supported by Central Press Photos Ltd v Department of Employment and Productivity [1970] 5 I.T.R. 270 and C. Maurice & Co. Ltd. v Minister of Labour (1969) 2 A.C. 346.
2. Competing headings. The work should be allocated to the single description which is most specific or otherwise most apt. A specific description prevails over a general description into which the work could also be fitted. The court left open whether a taxpayer would succeed where an activity fell equally well under two headings.
3. Plant and machinery. The relevant question was whether the foundations were part of the plant, not whether they were an integral part of the machinery. Plant is a composite entity which ordinarily embraces machinery. The specialised foundations were an elaborate complex of concrete, ducts and cavities designed to fix the machinery’s positions and supply essential power, water and compressed air. They therefore formed part of the metal manufacturing plant.
4. Application. Although the work could also fall within the general language of heading 500, heading 341(2) was the more specific and apt description. The tribunal majority had misdirected themselves by treating plant as machinery alone and by failing to address the functional integration of the foundations. The decision was therefore open to appellate correction. The result was consistent with the reasoning in Shellabear Price Contractors Ltd and the industry indications discussed in Taylor Woodrow Construction Ltd.

• Court of Appeal (Civil Division) — The Secretary of State’s appeal was dismissed with costs. Leave to appeal to the House of Lords was refused: [1971] EWCA Civ 3 .
• Divisional Court — Mitchells’ appeal from the industrial tribunal was allowed, with the Lord Chief Justice dissenting.
• Industrial tribunal — The majority decided for the Department; the chairman, Sir John Clayden, dissented.