QUEEN'S BENCH DIVISION
BUSINESS AND PROPERTY COURTS OF ENGLAND AND WALES
TECHNOLOGY AND CONSTRUCTION COURT
Rolls Building, Fetter Lane, London, EC4A 1NL
B e f o r e :
| Equitix ESI CHP (Wrexham) Limited
|- and -
|Bester Generacion UK Limited
(instructed by CMS Cameron McKenna Nabarro Olswang LLP) for the Claimant
Mr Tom Owen (instructed by Decimus Fearon LLP) for the Defendant
Hearing date: 29 January 2018
Crown Copyright ©
The Hon. Mr Justice Coulson :
2. THE CHRONOLOGY
"15.7 Actual Net Loss
In circumstances where the Employer elects not to continue with the Works following termination of the Contract, the Employer shall prepare a net loss statement (and the Parties agree that the Employer may delay preparing such statement until all amounts to be comprised in such statement can be finally determined) which will calculate the amount of compensation and damages the Contractor shall pay to the Employer (the "Net Loss Statement"). The amount shall be calculated as follows:
Actual Net Loss = F + G + H + I – J + K
F is the total amount of any monies previously paid to the Contractor by the Employer pursuant this Contract;
G is the amount calculated as ten percent (10%) per annum (pro rata for part thereof) on the full amount of the Contract Price from the date of signature of this Contract until the date that full and final payment is made under this Clause by way of compensation for the Employer's committed costs of capital;
H (subject to Clause 15.7A (Decommissioning on Termination) below), is the costs incurred by the Employer in decommissioning the Works (to the extent that the Employer undertakes any decommissioning Works in accordance with Clause 15.7A (Decommissioning on Termination));
I is the additional costs and expenses (if any) actually incurred by the Employer after the date of termination of this Contract in determining the Actual Net Loss;
J is the amounts previously paid to or recovered by the Employer on an interim basis pursuant to Clause 15.7(b); and
K is the amount of any liability of the Employer in respect of third party claims (including claims under the Lease, the Power Purchase Agreement Management Services Agreement, the Fuel Supply Agreement and the Project Development Agreement) arising from the termination of the Project;
in each case without double counting. Such Actual Net Loss shall become due for payment (the "Due Date") to or by the Employer from or to the Contractor upon the date of the Net Loss Statement setting out the Actual Net Loss and the Employer shall promptly provide the Contractor with such supporting breakdowns, calculations and documentation as the Contractor may reasonably require to satisfy itself as to the basis for such calculation. The final date for payment shall be twenty (20) days after the Due Date. If the Contractor wishes to dispute the amounts set out in the Net Loss Statement the Contractor shall give written notice to the Employer within ten (10) days of receipt of the Net Loss Statement and the matter shall be referred for determination pursuant to Clause 20.2 (Referral to Adjudication). The amount determined by the adjudicator as payable in relation to the Net Loss Statement shall be payable ten (10) days after such determination, Either Party shall be entitled to refer the matter for further determination pursuant to Clauses 20.5 (Notice of Dissatisfaction) and 20.7 (Courts).
(a) The Employer shall be entitled to certify an on account payment (the "Interim Account") calculated in accordance with Clause 15.7 (Actual Net Loss) Such Interim Account shall be calculated by the Employer within thirty (30) days of the date of termination of this Contract as follows:
Interim Account F + G + H + I + L
F, G, H and I are as specified in Clause 15.7(a) above; and
L is the forecast amount of any liability of the Employer in respect of third party claims (including claims under the Lease, the Power Purchase Agreement Management Services Agreement, the Fuel Supply Agreement and the Project Development Agreement) arising from the termination of the Project.
in each case without double counting. Such Interim Account shall become due for payment (the "Due Date") to or by the Employer from or to the Contractor upon the date of the Interim Account setting out the Actual Net Loss and the Employer shall promptly provide the Contractor with such supporting breakdowns, calculations and documentation as the Contractor may reasonably require to satisfy itself as to the basis for such calculation. The final date for payment shall be twenty (20) days after the Due Date. If the Contractor wishes to dispute the amounts set out in an Interim Account the Contractor shall give written notice to the Employer within ten (10) days of receipt of the Interim Account and the matter shall be referred for determination pursuant to Clauses 20.2 (Referral to Adjudication). The amount determined by the adjudicator as payable in relation to the Interim Account shall be payable ten (10) days after such determination. The decision of the adjudicator shall be final and binding for the purposes of the Interim Account and shall not be referable by either Party for further determination pursuant to Clauses 20.5 (Notice of Dissatisfaction) or 20.7 (Courts) or otherwise.
15.7A Decommissioning on Termination
In circumstances where Clause 15.5(b) (Compensation on Termination) applies, the Contractor shall fully decommission the Works at its own cost within a reasonable period following termination of this Contract and in any case in accordance with any obligations of the Employer in relation to timing of any such decommissioned Works. The Parties agree that if the Contractor fails to decommission the Works in accordance with this Contract the Employer may carry out the decommissioning work itself or by others at the Contractor's cost and the Contractor shall (pursuant to Clause 15.7 (Actual Net Loss) be liable to the Employer for the costs incurred by the Employer in decommissioning the Works.
15.7B Title to any decommissioned items shall pass to the Contractor only once the Contractor has fully and finally settled all liabilities due under this Contract."
"20.4 Procedure for Adjudicator's Determination
The referring Party shall, not later than seven (7) days after the date of service of the notice referred to in Clause 20.2 (Referral to Adjudication), refer the dispute in writing to adjudication.
The seat, or legal place of the adjudication, including all hearings and meetings, shall be London.
The Nominating Body shall be the Technology and Construction Solicitors' association.
The Parties shall promptly make available to the adjudicator all information, access to the Site, and appropriate facilities, as the adjudicator may require for the purposes of making a decision on such dispute.
The adjudicator shall act impartially in carrying out his duties and avoid incurring unnecessary expense and may take the initiative in ascertaining the facts and the law necessary to determine the dispute.
Each Party shall be responsible for the adjudicator's costs arising out of a reference to the adjudicator pursuant to this Clause as determined by the adjudicator.
The adjudicator shall not be deemed to be an arbitrator but shall render his decision as an expert, and the provisions of the Arbitration Act 1996 and the law relating to arbitration shall not apply to the adjudicator or his determination or the procedure by which he reached his determination.
(a) twenty-eight (28) (or, where the referring Party so consents, forty-two (42)) days after service of the notice referred to in Clause 20.2 (Referral to Adjudication); or
(b) such period exceeding twenty-eight (28) days after service of the notice referred to in Clause 20.2 (Referral to Adjudication) as may be agreed by the relevant Parties after the dispute has been referred to adjudication,
the adjudicator shall give his decision, which shall be reasoned and shall state that it is given under this Clause. The decision shall be binding on the Parties, who shall promptly give effect to it unless and until it shall be revised, cancelled or varied in an amicable settlement or is finally determined by legal proceedings.
Neither the adjudicator nor any employee or agent of the adjudicator shall be liable for anything done or omitted in the discharge or purported discharge of the functions of the adjudicator.
20.5 Notice of Dissatisfaction
If a Party is dissatisfied with the adjudicator's decision, that Party may, within twenty-eight (28) days after receiving the decision, give notice to the other Party of its dissatisfaction and intention to refer a decision of the adjudicator to the High Court. If the adjudicator fails to give his decision within the relevant period referred to in Clause 20.4 (Procedure for Adjudicator's Determination) above, then any relevant Party may, within twenty-eight (28) days after this period has expired, give notice to the other Party of his dissatisfaction.
In either event, this notice of dissatisfaction shall state that it is given under this Clause, and shall set out the matter in dispute and the reason(s) for dissatisfaction.
If the adjudicator has given his decision as to a matter in dispute to the both Parties, and no notice of dissatisfaction has been given by either Party within twenty-eight (28) days after it received the adjudicator's decision, then the decision shall become final and binding upon both Parties.
20.6 Adjudication Time Periods
For the purposes of Clause 20.4 (Procedure for Adjudicator's Determination) and 20.5 (Notice of Dissatisfaction) only, where a period of time would include Christmas day, Good Friday or a day which under the English legislation, the Banking and Financial Dealings Act 1971 is a bank holiday in England that day shall be excluded from the reckoning of the period of time.
Failing a resolution under Clauses 20.1 – 20.5 (Disputes), the Parties agree that all disputes shall be tried by a judge sitting as such in the High Courts of the Justice in London. The Parties further agree that, where the nature of the dispute so allows, the dispute shall be tried by a Judge of the Technology and Construction Court."
2. The Responding Party respectfully reserves its position regarding your jurisdiction and is proceeding on that express basis.
3. The parties agreed to refer a dispute to adjudication. Unwittingly, the Responding Party may have been lured into an ambush. The Referring Party did not share its evidence, in particular Ms McGahey's Programming Report, with the Responding Party before the Referral.
4. The Responding Party therefore has concerns about whether all the new information can be addressed fairly within the normal timeframe of an adjudication. To that end, we have written to CMS Cameron McKenna with a proposed procedure to fairly and economically dispose of the issues and we have invited the Referring Party's agreement to this.
5. You accepted your appointment before you could have been aware that the evidence upon which the Referral is based would be new to the Responding Party. While it is not the case that such a claim cannot be addressed properly within an adjudication, if the Referring Party does not agree with the proposal set out in our letter to CMS Cameron McKenna, you may wish to reconsider your appointment and, if you think it impractical to deal with what is essentially a new claim within the statutory timeframe, decline to proceed.
6. We hope that the Referring Party will adopt a pragmatic approach and that this will not be necessary."
"Thank you for your email confirming that you have accepted the appointment to adjudicate. I have added the words 'Adjudication 2' to the subject above in case it helps distinguish between adjudications.
I attach a copy of the terms of appointment you issued for Adjudication 1, to which the Responding Party is happy to consent. If of course there had been any modifications to your terms since then, please let us know."
It was subsequently confirmed that there were no such modifications and Mr Blackburne was appointed by agreement of both parties.
3. ISSUE 1: CONSTRUCTION OPERATIONS
"assembly, installation or demolition of plant or machinery, or erection or demolition of steelwork for the purposes of supporting or providing access to plant or machinery, on a site where the primary activity is -
(i) …power generation…"
"I do not consider that it was the intention of the Act for there to be a minute analysis to find an item which arguably was a construction operation or was within the exclusion, so as to defeat the purpose of giving or excluding the rights of the Act to what on a straightforward and commonsense analysis is a contract for construction operations within s.105(1) or excluded operations under s.101(2)."
4. ISSUE 2: RESERVATION OF POSITION / WAIVER
"Dacy's argument is founded on two things: firstly, that IDM Properties agreed to the nomination of Mr Eyre not only once but twice and, secondly, that once they had agreed to his nomination, it was too late to challenge his jurisdiction. It seems to me that these are really one point, namely that that if a party agrees the nomination of a particular adjudicator it cannot then object to his jurisdiction. Although there may well be circumstances in which that was the case, I cannot see that the mere agreement to the nomination of an adjudicator can have that effect. Parties may often want to agree the identity of a putative adjudicator rather than leave it in the lap of a nominating body but something more would be needed for that to amount to agreement to his appointment with jurisdiction over a particular dispute."
I note that, in that case, the defendant maintained throughout that there was no contract between the parties and that this point had been taken, fairly and squarely. In those circumstances, on the defendant's case, there could be no dispute which was capable of being referred to adjudication in any event.
"Moreover, the Responding Party's time to respond should not be artificially curtailed on such a slim pretext as the Referring Party's say so and its rigid insistence on the statutory timeframe that only applies because of an express contractual provision rather than because the contract is one for 'construction operations'. The Contract would, of course, ordinarily be excluded from the scope of statutory adjudication under section 105(2)(c)(i) of the Act."
5. ISSUE 3: STAY OF EXECUTION
"26. In a number of the authorities which I have cited above the point has been made that each case must turn on its own facts. Whilst I respectfully agree with that, it does seem to me that there are a number of clear principles which should always govern the exercise of the court's discretion when it is considering a stay of execution in adjudication enforcement proceedings. Those principles can be set out as follows:
a) Adjudication (whether pursuant to the 1996 Act or the consequential amendments to the standard forms of building and engineering contracts) is designed to be a quick and inexpensive method of arriving at a temporary result in a construction dispute.
b) In consequence, adjudicators' decisions are intended to be enforced summarily and the claimant (being the successful party in the adjudication) should not generally be kept out of its money.
c) In an application to stay the execution of summary judgment arising out of an Adjudicator's decision, the Court must exercise its discretion under Order 47 with considerations a) and b) firmly in mind (see AWG).
d) The probable inability of the claimant to repay the judgment sum (awarded by the Adjudicator and enforced by way of summary judgment) at the end of the substantive trial, or arbitration hearing, may constitute special circumstances within the meaning of Order 47 rule 1(1)(a) rendering it appropriate to grant a stay (see Herschell).
e) If the claimant is in insolvent liquidation, or there is no dispute on the evidence that the claimant is insolvent, then a stay of execution will usually be granted (see Bouygues and Rainford House).
f) Even if the evidence of the claimant's present financial position suggested that it is probable that it would be unable to repay the judgment sum when it fell due, that would not usually justify the grant of a stay if:
(i) the claimant's financial position is the same or similar to its financial position at the time that the relevant contract was made (see Herschell); or
(ii) The claimant's financial position is due, either wholly, or in significant part, to the defendant's failure to pay those sums which were awarded by the adjudicator (see Absolute Rentals)."
"I am not satisfied that LXB has been shown to be in a worse financial position or that it is a worse financial risk for Squibb than it was when the parties contracted in July 2014. When all is said and done it was and is an SPV with limited assets. Whether Squibb appreciated that at the time of contracting is a moot point, but it is not remotely unusual for substantial construction projects to be carried out by SPVs in this way."
The claimant says that precisely the same situation applies here.
(a) Accounts should have been filed on 11 November 2017. They are therefore overdue. That is a breach of the claimant's statutory obligations.
(b) There is no explanation for this breach. Given that the defendant's solicitors sought the information as to their accounts on 16 January 2018, it is unsatisfactory that this request was ignored by the claimant's solicitors until the day of the hearing, when an internal email was provided. Even that email failed to give a proper explanation of why the accounts had not been filed.
(c) The basis of the claimant's case, that their financial position is no different to that which it was when the contract was agreed, comes from information which Mr Steensma said in his statement was provided to him "by Equitix's directors". That is not good enough. The identification of a source of information in a witness statement, for what is otherwise hearsay evidence, needs to be precise, in order that it can if necessary be checked. His failure to identify the particular director(s) to whom he spoke is a breach of the CPR.
(d) It appears that the claimant has a parent company and there are references to the provision by the parent of a "loan facility". Details of that loan facility have been sought but they have not been provided. In my view they should have been.
(e) Moreover, the basis on which the documents relevant to this facility (to which the claimant's solicitor has expressly referred in correspondence) has not been disclosed is said to be:"It is insufficient that there is a reference to a transaction which is alleged on the balance of probabilities to have been affected by a document for which inspection is sought: see White Book paragraph 31.14.2 and the authorities there cited."This is difficult to follow and appears to misunderstand the basis of the request. There is no question of 'the balance of probabilities': the facility is a document to which Mr Steensma himself has referred.
Note 1 The reasons for this were and remain obscure. The distinction creates major practical difficulties for all of us involved in the implementation of the 1996 Act. [Back]
Note 1 The reasons for this were and remain obscure. The distinction creates major practical difficulties for all of us involved in the implementation of the 1996 Act. [Back]