Equitix ESI CHP (Wrexham) Ltd v Bester Generacion UK Ltd, Court of Appeal - Technology and Construction Court, February 08, 2018, [2018] EWHC 177 (TCC)

Resolution Date:February 08, 2018
Issuing Organization:Technology and Construction Court
Actores:Equitix ESI CHP (Wrexham) Ltd v Bester Generacion UK Ltd
 
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Case No: HT-2017-000373

Neutral Citation Number: [2018] EWHC 177 (TCC)

IN THE HIGH COURT OF JUSTICE

QUEEN'S BENCH DIVISION

BUSINESS AND PROPERTY COURTS OF ENGLAND AND WALES

TECHNOLOGY AND CONSTRUCTION COURT

Royal Courts of Justice

Rolls Building, Fetter Lane, London, EC4A 1NL

Date: 8 February 2018

Before :

THE HON MR JUSTICE COULSON

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Between :

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Mr Luke Wygas

(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

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JudgmentThe Hon. Mr Justice Coulson :

  1. INTRODUCTION

  2. Pursuant to a contract dated 29 April 2016, the claimant engaged the defendant to design and build the Wrexham Biomass Fired Energy Generating Plant (``the Project''). The claimant is a SPV created specifically for the Project. The defendant is a contractor specialising in renewable energies.

  3. Initial progress on the Project was slow. On 23 February 2017, the claimant issued a notice of adjudication seeking a declaration that the defendant was not entitled to an extension of time. The adjudicator was Mr Michael Blackburne. By a decision dated 16 June 2017, he concluded that the defendant had no entitlement to an extension of time. On that basis, the defendant was therefore to blame for the delays which had accrued.

  4. At midnight on 17 July 2017, the claimant terminated the contract. On 28 July, the claimant notified the defendant that it had elected not to continue with the Project.

  5. On 16 August 2017, the claimant issued an Interim Account under the relevant clause of the contract dealing with the situation after termination, requiring the defendant to pay £11,592,733.67 by 5 September 2017. This amount was made up of around £8 million, which were the sums previously paid by the claimant to the defendant, and which the claimant now sought to be repaid; and about £3 million in respect of other claims.

  6. There was a dispute about the validity of the claimant's termination and the basis/accuracy of the Interim Account. The claimant referred that dispute to adjudication by way of a notice dated 13 October 2017. Mr Blackburne was again appointed the adjudicator. By a decision dated 22 November 2017, he ordered that the defendant pay to the claimant the sum of £9,805,032.27, with a further sum of £4,948.45 per day by way of interest.

  7. The claimant now seeks to enforce the adjudicator's second decision. That is resisted by the defendant on two grounds. The first is the contention that the contract included for works which were expressly excluded from the Housing Grants (Construction and Regeneration) Act 1996 (``the 1996 Act'') and that therefore the adjudicator had no jurisdiction to decide the second adjudication, so that his decision was invalid. The second ground relates to the first: it is whether the defendant properly reserved its right to argue the jurisdiction point and/or whether the defendant conferred ad hoc jurisdiction on the adjudicator. If the defendant is wrong to resist enforcement on both these grounds, there is a third issue relating to the stay of execution sought by the defendant. I am very grateful to both counsel for their faultless written and oral submissions.

  8. THE CHRONOLOGY

  9. There are two aspects of the contract to which reference should be made. The first concerns the provision that applied where the claimant elected not to continue with the Project after termination (clause 15.7), and the second concerns the adjudication (and related) provisions (clauses 20.4-20.7).

  10. Clause 15.7 deals with the calculation of loss in circumstances where, following the claimant's termination of the contract, the claimant decides not to continue with the Project. It is prolix, but needs to be set out in full:

    ``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

    Where:

    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.''

  11. In short, the final accounting between the parties, in circumstances where the defendant's contract has been terminated and the Project has come to an end, is achieved by way of the Net Loss Statement. The contract gives no timeframe for the calculations and discussions necessary for the completion of the Net Loss...

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