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You are here: BAILII >> Databases >> England and Wales High Court (Queen's Bench Division) Decisions >> RWE Npower Plc v Alstom Power Ltd [2009] EWHC 1192 (QB) (23 December 2009) URL: http://www.bailii.org/ew/cases/EWHC/QB/2009/1192.html Cite as: [2009] EWHC B40 (TCC), [2010] CILL 2835, [2009] EWHC 1192 (QB) |
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QUEEN'S BENCH DIVISION
BRISTOL DISTRICT REGISTRY
TECHNOLOGY AND CONSTRUCTION COURT
B e f o r e :
____________________
RWE NPOWER PLC |
Claimant |
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- and - |
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ALSTOM POWER LIMITED |
Defendant |
____________________
Sean Brannigan QC (instructed by Hammonds LLP) for the defendant
____________________
Crown Copyright ©
"29 Extension of Time
(i) If, after the date of the Contract, the Contractor shall have been delayed or impeded by any act or omission of the Owner, a direction by the Engineer under clause 12 (Variations), industrial dispute, or any circumstances beyond the reasonable control of the Contractor, whether such delay or impediment occur before or after the time (if any) or extended time fixed for the taking over of the Works, or any section thereof, the Engineer shall, subject to the provisions of subclauses (ii) and (iii) of this clause grant the Contractor from time to time in writing either prospectively or retrospectively such extension of the time fixed for the taking over of the Works or any section or portion thereof as may be reasonable.
(ii) If the Contractor shall have reason to believe that he is being delayed or will be delayed as aforesaid, he shall forthwith apply for an extension of time, informing the Engineer in writing of the circumstances which in his opinion will cause such delay and of the extent of the actual or estimated delay.
(iii) The Engineer shall without delay investigate the said circumstances and the Contractor shall consult with the Engineer in order to determine the steps (if any) which can be taken to overcome or minimise the actual or anticipated delay. The Contractor shall thereafter without delay comply with all reasonable instructions which the Engineer shall give in order to overcome or minimise the said delay.
33. Recovery of Extra Costs
(i) All reasonable extra costs incurred by the Contractor:-
....(c) As the result of the granting under Clause 29 (Extension of Time) of an extension of time fixed for the taking over of the Works or any section or portion thereof in consequence of a variation made under the provisions of Clause 12 (Variations)shall be added to the Contract Price, provided that no such addition shall be made unless the Contractor has complied with the requirements of Clause 34 (Notification of Claims) and furnished full particulars of any benefits whether direct or indirect, which shall have accrued or may be expected to accrue to the Contractor and the said benefits shall be taken into account in determining the amount of the addition to the Contract Price. ...
34. Notification of Claims
(i) In every case where by virtue of these Conditions circumstances arise which entitle the Contractor to claim extra costs the following provisions shall take effect:
(a) Within 90 days of the date of issue of the notice, instruction, approval or other communication in writing relevant to the case the Contractor shall, if he intends to make any claim for payment of such extra costs give to the Engineer notice in writing of his intention to make a claim and shall state the reasons by virtue of which he considers that he is entitled to additional payment.(b) If the clause under which the Contractor is entitled to claim extra costs does not provide for the issue of a notice, instruction, approval or other communication in writing the period of 90 days mentioned in (a) above shall commence from the date of issue to the Contractor of the Engineer's confirmation in writing of the action which the Contractor proposes to take.(c) As soon as reasonably practicable after the date of the notice given by the Contractor of his intention to make a claim for extra costs and not later than the expiry of the last defects liability period the Contractor shall submit to the Engineer (with copies for transmission to the Owner) full particulars and the actual amount of his claim. The Contractor shall thereafter promptly submit such further particulars as the Engineer may reasonably require to assess the value, if any, of the claim.
(ii) Notwithstanding anything in these Conditions contained the Owner shall not be liable to make any payment in respect of any extra costs incurred as aforesaid, unless and until the Contractor has complied with the requirements of this clause.
....
37. Interim and Final Certificates
(i) The Contractor may at the times and in the manner following apply for interim and final certificates, as referred to in clause 41 (Terms of Payment)....(ii) Applications for interim certificates may be made to the Engineer from time to time during the progress of the Works.....
39. Payments due from the Contractor
Without prejudice to any other remedy which the Owner may have he shall be entitled to deduct from any monies due, or becoming due to the Contractor under the Contract, all costs, damages or expenses for which under the Contract the Contractor is liable to the Owner.
....
41. Terms of Payment
(i) The Owner shall pay to the Contractor in the following manner the Contract Price adjusted to give effect to such additions thereto and such deductions therefrom as are provided for in these Conditions:
(a) within 14 days from the presentation of each interim certificate a sum equal to 90% of the net value certified therein. ..."
"5. The rights of any Party arising by virtue of any failure by the other Party to comply with any obligations arising by virtue of this Deed are hereby expressly preserved.
6. This Deed amends and supplements the Contracts and in the event of any conflict between this Deed and the Contracts this Deed shall prevail. For the avoidance of doubt the Contracts shall, subject to the amendments herein and provisions hereof, remain in full force and effect and the Parties shall continue to comply with the provisions of the Contracts.
"11. The Parties hereby agree to amend the terms of Clause 45 of the Contracts as follows:
(i) Re-number existing Clause 45(ii) as 45 (iii) and insert "or adjudication" after "arbitration" in lines 1 and 4.
and
(ii) Insert a new clause 45(ii) as follows:
"If at any time any dispute or difference shall arise under or in connection with the Contract between the Owner or the Engineer or the Contractor, then any party may refer such dispute or difference to adjudication in accordance with Part 1 of the Schedule to the Scheme for Construction Contracts (England and Wales) Regulations 1998."
"Further to our notice on 25 October 2007 of our notification of claims, we herewith enclose two copies of Claim No. 1 Extension of Time Unit 7 and Unit 9 Boilers.
This document sets out our position with respect to entitlement to Extensions of Time, together with our position with respect to the deduction of Liquidated Damages.
We trust that you will review this in accordance with the contract, and we look forward to discussing this with you in the near future.
We are currently completing details of Claim No. 2 for Additional Payments, including Prolongation and other Associated Costs and this will follow in due course."
"Further to our notice on 25 October 2007 of our notification of claims, and our letter of 8 May 2008 (sic) which enclosed Claim No. 1, we herewith enclose two copies of Claim No 2 Additional Payment of Unit 7 and Unit 9 boilers.
This document sets out our position with respect to our entitlement to sums considered due in terms of the Contract for Prolongation and other Associated Costs.
We trust that you will review this accordance with the Contract, and we look forward to discussing this with you in the near future."
"Aberthaw Power Station Boiler Overhaul Works - Contract reference AB 76948 Feed System Works - Contract Reference AB 76949
Without Prejudice
I refer to your letters dated 8 May 2008, 30 May 2008 and 9 June 2008 my initial comments on which are as follows:
Unit 7 Interim 2007
Further to your request with respect to extension of time and associated costs I am disappointed that Alstom have not considered previous discussions and meetings between RWE and Alstom (agreed position 24/04/2008 – Robert Bramhill and Robert Hayes). A variance to establishment costs in relation to the extended interim outage period was agreed and finally settled on 28/08/2008 (Robert Bramhill and Paul Haslewood). RWE's view is that there is no validity to your claim.
Unit 9 Major 2007RWE has no evidence that Alstom have met contractual obligations to notify the Engineer of an extension of time and associated costs.However, without prejudice to our position, RWE have reviewed Alstom documents in detail and potentially there are areas that RWE could consider, currently no greater than a 17 day extension of time and we are currently reviewing associated costs, if any.The claim items rejected are:Work instruction issueThe presented data in the claim is incorrect. Work instruction issue was in line with the known workscope and promptly following identification of emergent works.Variation of Works from Budget sheetsWorkscopes for the outage were issued to Alstom on several occasions:
- March 2006 - an overview scope of works (2007/2008/2009)
- November 2006 - indicative work list for 2007
- 30 January 2007 - budget sheets issued along with additional work items still to be priced by Alstom (for example the top dead space pressurisation). Several projects required price confirmation and tender appraisal by Alstom. These values form part of the planned budgeted scope. The outage then had an acceptable level of emergent work.
Emergent WorkLate access to areas for inspection under Alstom control resulted in late identification/initiation of emergent work.Areas of consideration by RWE are:
- Mobilisation disruption
- The disruption
RWE has stated that our position on the application of Damages remains flexible."
"2.2 ... Alstom has submitted a detailed claim for additional payments (including prolongation and disruption costs) to RWE which, to date, RWE has failed formally to respond to.
2.3 The substance of that claim for additional payments, however, falls outside the scope of this present reference. That said, in order that the Adjudicator can understand Alstom's logic in bringing this current reference, the background to this claim is relevant although it should be noted that the present reference extends solely to the question of the applicability of liquidated damages to the contractual framework and the consequent effect (or rather lack of effect) and thereby the re-payment to Alstom of sums improperly withheld."
2.4 To be clear, Alstom takes the view that either time was at large or else Alstom was entitled to a substantial extension of time in relation to the works undertaken in 2007. To that end, Alstom has also submitted a claim which includes a request for a substantial extension of time. That second claim (for an extension of time) has been compiled for the purposes of the overall prolongation and disruption claim and, again, falls outside the scope of this present reference. In this reference, Alstom sets out its case in relation to the wrongful levying of liquidated damages, and pleads the same without prejudice to its other claims."
"Thank you of your e-mail dated 27 January 2009. We cannot record that the claim to which you refer was ever formally submitted in accordance with the contract. This accounts for the lack of response. We remind you that if you wish to exercise any contractual rights under the contract then you must do so strictly in accordance with the provisions of the contract and within the time limits stipulated therein."
The second was a letter marked "Without prejudice" which said:
"We refer to our letter of 2 February 2009 reference AB76948/SFH01. The letter is an open letter but refers to without prejudice submission. For your records I attach a copy of the letter submitting your Claim No. 2 which clearly shows it marked "Without Prejudice" and as such it cannot be relied on. We do not consent to this document being relied on and will not do so. Should you consider you have any rights under the Contract to make claims of this nature then you must strictly observe the procedures and timescales set out in the Contract. Only once you have demonstrated that you have done so will RWE assess whether any entitlement exists.
For the avoidance of doubt nothing said or done by RWE should waive their rights or the timescales stated in the Contract. Please note that should you seek to rely on documents which are without prejudice and/or privileged then we will bring this letter and the appropriate clauses of the Contract to the attention of the parties you disclose this material to."
"4.1 The dispute referred to adjudication relates to the failure, by RWE, to reimburse or make payment to Alstom in relation to generally disrupted and prolonged works carried out in accordance with the contract during the 2007 period (the "Dispute").
4.3 In overview, during the period of 1 January continuing to 31 December 2007, pursuant to the Contract, Alstom undertook general maintenance and repair works at RWE's Aberthaw power station. Included within the scope of those works was a substantial amount of work undertaken in relation to the boilers and ancillary equipment during outages for Units 7 and 9 at the power station.
4.4 In carrying out these works, and as a result of a disrupted work scope and/or general prolongation of parts of the works, Alstom incurred substantial additional costs both as a result of sub-contracted works (such as scaffolding and insulation) and as a result of varied work instructed by, or on behalf of RWE, for which RWE has failed to make payment.
4.5 Over and above this, but in relation to the works carried out during the
period, Alstom submitted, in May 2008, a claim for additional payments which remains unanswered by RWE. That claim, in part, encompasses the issues which will be raised in this reference, but in no way represents the totality of Alstom's entitlements under the Contract.
4.6 Alstom has provided, on an entirely voluntary basis, further substantiation to RWE in relation to those additional costs. Alstom provided such information, in spite of RWE's failure to reply to numerous requests from Alstom to state whether RWE required clarification of any head of claim.
4.7 In the circumstances, given the passage of time and the fact that RWE has neither agreed to reimburse nor pay Alstom those additional costs, and given that RWE has failed to reply to requests and offers from Alstom to clarify any matters, Alstom has decided to refer the Dispute to adjudication.
4.8 Broadly speaking, the dispute referred herein relates to only part of the additional costs to which Alstom claims it is entitled and in relation to such additional costs as are not referred in this reference, Alstom reserves its rights absolutely. Specifically, the additional costs claimed in this reference will relate to:
(a) Met Memos; and
(b) Valves; and
(c) Under-recovered Scaffolding Works; and
(d) Additional Insulation Works.
4.9 The terms referred to immediately above replicate headings set out in documentary information provided to RWE over a period from May and will be expanded upon in Alstom's referral."
"(d) There is no dispute. No submission of claim was ever made by Alstom in respect of the matters on which it seeks decisions. The only submissions made were clearly marked "without prejudice" and were part of a series of settlement discussions which, as such, cannot be relied on by Alstom; and
(e) Alstom has sought to rely on without prejudice submissions to advance its claims thereby breaching the requirements of natural justice; and
(f) Many of the sums claimed in the referral are sums arising out of an entirely separate contract for the Feed System (the "Feed System Contract")."
"With regards to the exchange of correspondence, last week, dealing with the issue of an extension of time for the publication of your Decision, Alstom has now had the opportunity to fully consider the contents of the Response served on behalf of RWE. Upon reviewing the contents, it now becomes clear that a serious matter has arisen which clearly goes to the heart of this reference.
In relation to the claim referred to as Valves, it appears to be RWE's primary defence that each and every one of the items claimed under this head relates to a different (sister) contract - the Feed Systems Contract. On making a detailed analysis of this submission, Alstom finds that RWE's argument is correct. That is to say, that each of the items claimed under this head do, indeed, relate to a different contract and it would therefore follow that you unfortunately lack jurisdiction to consider that part of the present reference.
With regard to Alstom's claims under the heading of Met Memos, it would appear that the position is almost identical to that for Valves. That is to say that (as RWE correctly identifies) only 15 of the 62 items claimed actually relate to the boiler contract. Whilst the remaining 15 items are clearly in contention between the parties, the overall cost of considering the same, preparing a Reply and having the Adjudicator consider the same, would be entirely disproportionate to any recovery made.
On the basis of the foregoing, and in order to avoid the Adjudicator wasting further time, Alstom hereby retracts those parts of its referred case in relation to Valves, Met Memos, and any interest payable thereon."
The preliminary issues
Is the decision enforceable?
More than one dispute
(1) A referring party is only permitted to refer to adjudication one dispute under one contract (see paragraphs 1(1) and (2) and 8(1) and (2) of the Scheme).
(2) The jurisdiction of the adjudicator and the extent or scope of the dispute referred to him is determined by reference to the Notice of Intention to Refer. The Referral Notice or submissions subsequently served by the parties cannot enlarge or cut down the jurisdiction of the adjudicator unless they contain the clear agreement of the parties that this should happen.
(3) A Notice of Intention to Refer which refers more than one dispute is invalid and "... the appointment of an adjudicator in consequence of it is similarly invalid, unless the other party has nonetheless clearly and knowingly accepted the notice or the appointment as valid so that there is consent for the purposes of paragraph 8(1) of the Scheme" (see HH Judge Humphrey Lloyd QC in David Maclean Contractors Ltd v Swansea Housing Association Ltd [2001] Adj. LR 076/27 at para. 12).
(4) If an adjudicator adjudicates upon more than one dispute without the consent of the parties, he exceeds his jurisdiction and his decision as a whole is unenforceable.
"During the course of a construction contract, many claims, heads of claim, issues, contentions and causes of action will arise. Many of these will be, collectively and individually, disputed. When a dispute arises, it may cover one, several or many of one, some or all of these matters. At any particular moment in time, it will be a question of fact what is in dispute. That is the "dispute" which may be referred to adjudication is all or part of whatever is in dispute at the moment that the referring party first intimates an adjudication reference. In other words, the "dispute" is whatever claims, heads of claim, issues, contentions or causes of action that are then in dispute which the referring party has chosen to crystallise into an adjudication reference."
"It would appear ... that a party refers a single dispute to adjudication if it can be demonstrated that his claim, which may be made up of several different elements, can be fairly described as a single, disputed claim for a sum due (or some other relief, like an extension of time) under the contract. In those circumstances, it is always important to ensure that the notice of adjudication is carefully drafted and does not refer to disputes in the plural. If a contractor or a sub-contractor is making a claim pursuant to the payment provisions of the contract then, provided that such a claim can legitimately include a wide range of different elements, such a claim is likely to give rise to a single dispute. It is thought that it will be rare for the court to decide that a claim in relation to one contract and one site gives rise to more than one dispute, unless the referring party is making to different and unrelated claims (such as occurred in Bothma), or seeking two different declarations as to its contractual entitlement which involve entirely different aspects of the contract."
Without prejudice
Set-off
"39. Without prejudice to any other remedy which [RWE] may have [RWE] shall be entitled to deduct from any moneys due, or becoming due to [Alstom] under the Contract, all costs, damages or expenses for which under the Contract [Alstom] is liable to [RWE].
....
5. The rights of any Party arising by virtue of any failure by the other Party to comply with any obligations arising by virtue of this deed are hereby expressly preserved.
....
6. This Deed amends and supplements the Contracts and in the event of any conflict between this Deed and the Contracts this Deed shall prevail. For the avoidance of doubt the Contracts shall, subject to the amendments herein and provisions hereof, remain in full force and effect and the parties shall continue to comply with the provisions of the Contracts."
"27g. The decision of the Adjudicator shall be complied with forthwith upon receipt.
27h (i) The decision of the Adjudicator shall be final and binding."
However the sub-contract also contained the following clause:
"31. Nothing contained in this Deed whether expressly or by incorporation or by implication shall in any way restrict [Purac's] equitable or common law rights of set off. Without prejudice to the generality of the foregoing, [Purac] shall have the right to set off against any sum due to [Parsons] whether hereunder or otherwise a fair and reasonable sum in respect of or on account of any claim or claims that have been made or which are to be made against [Purac] by the Purchaser the subject matter of which touches or concerns the Sub-Contract Works."
"38.7 Subject to the proviso to clause 38B.1, the decision of the adjudicator is binding until the dispute is finally determined by arbitration or agreement, ...
38.B.1 [Allowing for a reference to arbitration] Provided always, that where any dispute, difference or question has been referred to an adjudicator under Clause 38A and the adjudicator has issued his decision thereon, a Party shall not be entitled to refer such dispute, difference or question to arbitration, and the adjudicator's decision thereon shall become unchallengeable, unless that party serves the above notice within 42 days of receipt of notification of the adjudicator's decision; and, for the avoidance of doubt, this proviso shall apply whether or not the adjudicator has notified his decision within the time limit specified in Clause 38A.5. ...
38A.9 Notwithstanding clause 38B, the Contractor and the Sub-contractor shall comply forthwith with any decision of the adjudicator, and shall submit to summary judgment/decree and enforcement in respect of all such decisions."
"The parties have thus agreed not merely that the adjudication is to be binding but also that they will comply with the adjudication notwithstanding the arbitration clause. For good measure, they have agreed they will submit to applications for summary judgment. If Ferson had a genuine point, there would then be a dispute which would have to be referred to arbitration but the parties have expressly agreed that course is not open to them once an adjudication has occurred. The clause thus prevents the party who has lost the adjudication from applying for a stay and, for good measure, requires him to submit to applications for summary judgment. The point of that must be not that the court should hear argument, at the stage of the application for summary judgment, about matters which (apart from the adjudication provision) should be referred to arbitration, but rather that summary judgment should be given without further ado."
"(1) Where it follows logically from an adjudicator's decision that the employer is entitled to recover a specific sum by way of liquidated and ascertained damages, then the employer may set off that sum against monies payable to the contractor pursuant to the adjudicator's decision, provided that the employer has given proper notice (in so far as required).
(2) Where the entitlement to liquidated and ascertained damages has not been determined either expressly or impliedly by the adjudicator's decision, then the question whether the employer is entitled to set off liquidated and ascertained damages against sums awarded by the adjudicator will depend upon the terms of the contract and the circumstances of the case."
"10. The decision of the adjudicator shall be binding upon the parties, who shall forthwith give effect to the decision, unless and until the dispute is finally determined by the court or otherwise resolved by agreement between the parties
13. The parties shall be entitled to the relief and remedies set out in the decision and to seek summary enforcement thereof subject to review by the courts. ..."
"9A. 7.1 The decision of an Adjudicator shall be binding on the Parties until the dispute or difference is finally determined by arbitration or by legal proceedings or by an agreement in writing between the Parties made after the decision of the Adjudicator has been given.
9A. 7.2 The Parties shall, without prejudice to their other rights under this Contract, comply with the decision of the Adjudicator; and the Employer and the Contractor shall ensure that the decision of the Adjudicator is given effect.
9A. 7.3 If either Party does not comply with the decision of the Adjudicator, the other Party shall be entitled to take legal proceedings to secure such compliance pending any final determination of the referred dispute or difference pursuant to clause 9A.7.1."
"Effect of Adjudicator's decision
D7.1 The decision of the Adjudicator shall be binding on the parties until the dispute or difference is finally determined by arbitration or by legal proceedings or by an agreement in writing between the parties made after the decision of the adjudicator has been given.
D7.2 The parties shall, without prejudice to their other rights under this agreement, comply with the decision of the Adjudicator; and the Employer and the Contractor shall ensure that the decision of the adjudicator is given effect.
D7.3 If either party does not comply with the decision of the adjudicator the other party shall be entitled to take legal proceedings to secure such compliance pending any final determination of the referred dispute or difference pursuant to clause D7.1."
"... in summary judgment, or adjudication proceedings not subject to the HGCRA, a cross-claim may be put up against a claim on interim certificates unless the contract also contains withholding notice provisions which have not been operated."
Conclusion