Engie Fabricom (UK) Ltd v MW High Tech Projects UK Ltd
| Jurisdiction | England & Wales |
| Judge | Mrs Justice O'Farrell |
| Judgment Date | 25 June 2020 |
| Neutral Citation | [2020] EWHC 1626 (TCC) |
| Docket Number | Case No: HT-2019-000149 |
| Court | Queen's Bench Division (Technology and Construction Court) |
| Date | 25 June 2020 |
[2020] EWHC 1626 (TCC)
IN THE HIGH COURT OF JUSTICE
BUSINESS AND PROPERTY COURTS OF ENGLAND AND WALES
TECHNOLOGY AND CONSTRUCTION COURT (QBD)
Rolls Building
London, EC4A 1NL
Mrs Justice O'Farrell DBE
Case No: HT-2019-000149
Case No: HT-2019-000269
Lynne McCafferty QC (instructed by Freeths LLP) for the Claimant
Simon Hargreaves QC & Tom Owen (instructed by Clyde & Co LLP) for the Defendant
Hearing dates: 10 th, 11 th & 12 th December 2019
Additional evidence submitted by the Defendant on 17 th January 2020
Letter in response from Claimant dated 20 January 2020
Approved Judgment
I direct that pursuant to CPR PD 39A para 6.1 no official shorthand note shall be taken of this Judgment and that copies of this version as handed down may be treated as authentic.
This is the trial of consolidated claims by the claimant (“Fabricom”) against the defendant (“MW”) for £367,723.85 plus VAT to enforce two adjudication decisions.
The issue raised in these proceedings is whether the primary activity at an energy from waste plant is power generation or waste treatment.
The claims arise out of the installation of a fluidised bed gasification plant at Cleveland Street, Kingston Upon Hull (“Energy Works Hull”). MW was engaged by Energy Works (Hull) Ltd (“EWHL”) to carry out the design and manufacture of the plant. Fabricom was engaged by MW as a sub-contractor to carry out the installation of the plant (“the Sub-contract”). Disputes arose between the parties as to payments due under the Sub-contract. Those disputes were referred to adjudication and Fabricom obtained awards in its favour.
MW disputes the claims on the grounds that the adjudicator lacked jurisdiction. Its case is that the Sub-contract was for the installation of plant on a site where the primary activity is power generation. Section 105(2)(c) of the Housing Grants, Construction and Regeneration Act 1996 as amended (“the 1996 Act”) provides that such works are not construction operations for the purposes of the 1996 Act. Therefore, there was no statutory or contractual right to refer the disputes to adjudication.
Fabricom's case is that the Sub-contract was for the installation of plant on a site where the primary activity is the disposal and thermal treatment of waste. Electricity is generated from the thermal treatment of the processed waste but that is ancillary to the main activity of waste treatment. Therefore, the works comprise the execution of construction operations within the ambit of the 1996 Act and there was a valid contractual provision for adjudication.
The plant
The Energy Works Hull facility is located on three adjacent parcels of land at Cleveland Street and Dalton Street, Kingston upon Hull.
The facility is a fluidised bed gasification facility. The gasification or incineration process uses refuse derived fuel (“RDF”) to produce steam.
RDF is produced from waste. The waste comprises municipal solid waste (household waste and similar waste from offices and hotels), and commercial / industrial waste (generated from facilities including manufacturing, industrial processes and service-based enterprises). Recyclable materials, such as paper, metals and plastics, are extracted from the waste and separated manually or through a materials recovery facility (“MRF”). Organics, such as food and garden waste, are extracted for treatment in an anaerobic digestion (“AD”) facility or compost plant. The non-recycled, residual waste is incinerated, buried in landfill or processed further through a MRF to remove more recyclable materials and produce RDF.
An accepted definition of RDF is that published by the Department for Environment, Food and Rural Affairs:
“Refuse derived fuel (RDF) consists of residual waste that is subject to a contract with an end-user for use as a fuel in an energy from waste facility. The contract must include the end-user's technical specifications relating as a minimum to the calorific value, the moisture content, the form and quantity of the RDF.”
The steam produced by gasification of the RDF and combustion of the resulting syngas propels steam turbines to produce electricity for export to the National Grid. The plant is a baseload power plant, that is power is made available by the energy producer to meet power demands by consumers.
The operator of the plant receives income from three sources: (i) gate fees for the RDF paid by the suppliers; (ii) payments for the export of electricity to the National Grid; and (iii) various grants and subsidies. The level of the gate fees for the RDF is fixed by reference to factors such as contract duration, spot prices, quality and calorific value. The plant was awarded a Contract for Difference (“CfD”), an agreement pursuant to which a subsidy is provided for renewable energy. The plant was also awarded a grant under the European Regional Development Fund (“ERDF”) for renewable energy.
The EPC Contract
By a contract dated 20 November 2015 MW was engaged by EWHL as the contractor under an EPC Contract to carry out the design, manufacture, supply, installation, taking over and completion of a fluidised bed gasification power plant, capable of processing RDF produced by commercial, industrial and municipal solid waste (“the EPC Contract”).
A general description of the EPC Contract works is set out in paragraph 1.1 of Schedule 1:
“The Contractor shall provide a complete gasification facility receiving RDF prepared by others from waste. The scope of Works shall include all Site infrastructure, buildings, roads, services, offices, amenities, workshops, stores, plant, equipment, landscaping, security fencing and all associated amenities and facilities. This Schedule must be read in conjunction with all parts of Schedule 22.
The Site is located at Cleveland Street and Dalton Street, Hull, HU8 8AD, as more particularly defined by the areas shown on the Site drawings included in Appendix B to this Schedule 1 (Description of the Works).
The Works shall comply in every respect with the conditions attached to the Planning Consent and the Environmental Permit and any separate undertakings made within the Environmental Application, provided such undertakings do not contradict or conflict with the Environmental Permit. The contractor accepts responsibility for satisfying the Environment Agency with regard to the applicable criteria in the Environmental Permit.
The Site Layout shown in Schedule 22E reflects the project as presented to the planning committee and was granted consent to be built.
The Contractor shall be responsible for ensuring compliance with those conditions of the Planning Consent, which are stated as being the responsibility of the Contractor as identified in the planning responsibility matrix contained in Schedule 22F…”
Paragraph 1.2 of Schedule 1 states:
“The Contractor shall assist the Purchaser with the interfaces with the following third parties and authorities, including but not limited to:
(1) Environment Agency;
(2) Planning Authority and building control department;
(3) local electricity distribution network operator (DNO);
(4) Low Carbon Contract Company (LCCC);
(5) Ofgem and/or other agencies in charge of managing the Contract for Difference requirements …”
Paragraph 1.3 states:
“The Works or parts thereof shall comply in all respects with all the relevant legislation including the health & safety regulations, the CDM Regulations and all relevant Environment Agency guidance as may need to be satisfied in accordance with the Environmental Permit or other express requirements of the Environment Agency specific to the Works…
The contractor shall include in his Contract Price all design submissions, reports, adaptations, connections, calibrations and any other requirements needed for testing to satisfy the Environment Agency that the Plant complies with the requirements of the IED and its Environmental Permit.”
Schedule 16 sets out the performance tests and procedures required to achieve the Performance Test Certificate and the Acceptance Certificate for the plant. Paragraph 16.3 specifies the requirements for the reliability test to demonstrate that the plant is capable of sustained operation, with the specified maximum continuous rating (“MCR”), in a manner that meets the performance guarantees.
MCR is defined by paragraph 16.4.11 as:
“the maximum mass flow rate of steam in tonnes per hour from the final superheater delivery connection, at the guaranteed delivery conditions of pressure and temperature, which the boiler is capable of maintaining between plant shutdowns without use of the auxiliary burners.”
The provisions at paragraph 16.3 include:
“During the Reliability Test the Works shall at all times run in compliance with each of the following:
• this Contract;
• the Industrial Emission Directive;
• the Planning Consent;
• the Environmental Permit; and
• all other Applicable Regulations.”
The Reliability Test Criteria include demonstration that the plant is “Available”, defined in paragraph 16.3.1.1 as:
“For the purposes of the Reliability Test, the Plant shall be considered “Available” if:
(1) the net electrical export exceeds 90% of the guaranteed net electrical export as per the Guaranteed Performance Level (Performance Acceptance Criteria) specified in Schedule 17 (Performance guarantees and damages for failure); and
(2) the monthly average syngas GCV [Gross Calorific Value] is minimum 2.0 MJ/m 3 in each month or part thereof at the reference conditions of...
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