Equitix Esi Chp (Sheff) Ltd v Veolia Energy & Utility Services UK Plc
| Jurisdiction | England & Wales |
| Judge | Mrs Justice Jefford |
| Judgment Date | 13 March 2019 |
| Neutral Citation | [2019] EWHC 593 (TCC) |
| Date | 13 March 2019 |
| Court | Queen's Bench Division (Technology and Construction Court) |
| Docket Number | Case No: HT-2019-000020 |
[2019] EWHC 593 (TCC)
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
TECHNOLOGY AND CONSTRUCTION COURT
Royal Courts of Justice
Strand, London, WC2A 2LL
Mrs Justice Jefford DBE
Case No: HT-2019-000020
Rupert Choat (instructed by CMS Cameron McKenna Nabarro Olswang LLP) for the Claimant
Rachel Ansell QC (instructed by Stephenson Harwood LLP) for the Defendant
Hearing dates: 19 and 20 February 2019
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.
Introduction
These are Part 8 proceedings which have been listed urgently by the Court because of the applications for injunctions made by the Claimant. On 24 January 2019, Stuart-Smith J dismissed a limited interim injunction that had previously been granted and gave directions for this hearing. Amongst other things, he directed a Statement of Agreed Facts and what follows at paragraphs 2 to 10 is largely taken from that document.
This case concerns a biomass energy plant in Holbrook, Sheffield (“the Facility”). The claimant (“Equitix”) owns the Facility and is a special purpose vehicle set up for this project. On 17 June 2015, Equitix entered into an EPC Contract with Kantor Energy Limited (“Kantor”) for the design and construction of the Facility. On the same date, Equitix entered into a contract with the defendant (“Veolia”) for the operation and maintenance of the plant. Where I refer in this judgment to the contract without further specification, that is a reference to the O&M Contract.
The Taking Over Certificate under the EPC Contract was issued on 29 May 2018 which gives the Operational Start Date and the Actual Taking Over Date under the O&M Contract. Since then Veolia has notified 31 Alleged Defects (as defined) to Equitix.
Under the O&M contract there are requirements for service levels and provision for deduction of performance related damages. The detail of these provisions has not been relied upon and has not been before me and, other than as appears below, I need say no more about them.
In short, however, Veolia alleges that the reason for the problems is the 31 Alleged Defects and the supply of non-compliant biomass fuel (under the Biomass Fuel Supply Agreements). Equitix has served notices pursuant to clause 7.5 of the O&M Contract in respect of all the Alleged Defects. It is the effect of those notices on the dispute resolution provisions of the O&M Contract that gives rise to the first issue in the dispute before me.
Equitix commenced these Part 8 proceedings on 17 January 2019. Equitix sought a declaration that Veolia was not entitled to commence proceedings under Part 3 of Schedule 8 to the O&M Contract in respect of Alleged Defects which are the subject of a notice under clause 7.5, where Part 3 of Schedule 8 is the dispute resolution procedure which would otherwise apply in respect of Alleged Defects in Kantor's works.
Equitix sought a further declaration which was relevant if Part 3 applied and was in the following terms:
“The President of the CIArb [the Chartered Institute of Arbitrators] is obliged to appoint experts in the field of biomass energy plants pursuant to paragraph 1.9 of Schedule 8, Part 3 of the O&M Contract meaning persons who possess technical expertise in the field of biomass energy plants.”
Equitix further sought injunctions restraining Veolia from taking steps to commence an adjudication under Part 3 and from applying to the President of the CIArb to appoint an adjudicator unless the application stated that the person should be an “expert with technical expertise in the field of biomass energy plants.”
An application was made for an interim injunction; a limited interim injunction was initially granted; but that injunction was discharged by Stuart-Smith J on 24 January 2019.
Thereafter, on 29 January 2019, Equitix itself applied to the President for the appointment of 3 experts to form the panel envisaged by the contract (as more fully set out below). Equitix's position now is that the three appointees selected by the President do not meet the contractual specification.
The relevant provisions of the O&M and EPC Contracts
I set out below the provisions of the O&M and EPC Contracts to which I will refer in this judgment. I shall refer to some clauses without setting them out in full and summarising the nature of their provisions only.
O&M Contract
Under the O&M Contract, Equitix is referred to as the Employer and Veolia as the Contractor. Kantor is referred to as the EPC Contractor.
Clause 1: Definitions and Interpretation
(i) At clause 1.1, the following definitions, amongst others, are provided:
“Defect”: means any defect, shrinkage, or other fault in the Works or any part thereof which is caused by a failure of the EPC Contractor to comply with the terms of the EPC Contract.
“Defects Notification Period”: means …. the time period for notifying Defects in the relevant element of the Works under the EPC Contract, being a period of two (2) years such period to be calculated from the Actual Taking Over Date ….”
“Derived Benefit”: means a right or benefit in respect of circumstances under or pursuant to any Related Agreement to which the Employer is or becomes entitled from time to time, to the extent that such circumstances relate to a right or benefit (including relief from the Contractor's obligations under this Agreement) claimed by the Contractor arising under or pursuant to this Agreement (whether or not in this Agreement such right is expressed to be subject to clause 7 (Related Agreements and Interface) …..”
“Dispute Resolution Procedure”: means the process set out in Clause 38 (Dispute Resolution Procedure) of this Agreement;
“Efficiency Liquidated Damages”: a payment to be made by the Contractor to the Employer in accordance with paragraph 4.1.1 of Part 2 of Schedule 2
“Employer Breach”: means a breach by the Employer of any of the Employer's material obligations under this Agreement or by any Employer's Counterparty (other than the EPC Contractor the approach to which is detailed in Schedule 8 (Interface)) of such Employer's Counterparty's material obligation under the relevant Related Agreement, the approach to which is detailed in Clause 7 (Related Agreement and Interface) in each case if and to the extent that such breach materially affects the Contractor's ability to comply with its obligations under this Agreement …..
“Employer's Counterparty”: means a counterparty to the Employer under a Related Agreement
“Employer Related Parties”: means the Employer's sub-contractors, suppliers and consultants …
“Employer Risk”: means any of the following:
…
(b) a Defect that occurs during the First Operating Year, provided that the Contractor has complied with the provisions of Part 2 of Schedule 8 (Interface);
….
(d) a Defect that is the subject of a Defect Notice prior to the end of the Defect Notification Period and has not been rectified by the end of the Defect Notification Period (until such time as it is rectified), provided that the Contractor has complied with the provisions of Part 2 of Schedule 8 (Interface); ….
“Energy Service Liquidated Damages”: a payment to be made by the Contractor to the Employer in accordance with paragraph 2.1.1 of Part 2 of Schedule 2
“EPC Parties”: means the EPC Contractor and its sub-contractors and suppliers
…
“ Excluded Event”: means loss or damage to the Facility or any part thereof:
(a) to the extent resulting from an Employer Risk; or
(b) to the extent resulting from any act(s) or omission(s) of the Employer or any Employer Related Party (apart from (i) the EPC Parties which shall be governed according to Schedule 8 (Interface) and ….
“Operational Period Start Date”: the Actual Taking Over Date
“Parallel Defence”: means any defence or resistance available to the Employer in respect of any claims, disputes or proceedings raised or brought by any Employer's Counterparty under any Related Agreement, to the extent that the circumstances giving rise to such defence or resistance relate to any defence or resistance available to the Contractor in respect of any claims, dispute or proceedings raised or brought, or that may be raised or brought, by the Employer pursuant to this Agreement …. “Performance Liquidated Damages” the Energy Service Liquidated Damages and/or the Efficiency Liquidated Damages
“Related Agreements”: means the EPC Contract, the PPA, the Agreement for Lease, the Lease, the Biomass Fuel Supply Agreements, the Connection Agreement, the Management Services Agreement and the Independent Certifier Contract.
(ii) Clause 1.4: “This Agreement shall be read and construed as a whole and any provision of this agreement may qualify or affect the interpretation of any other provision of this Agreement.”
(iii) Clause 1.7: “Where this Agreement contains any reference to the EPC Contractor liaising with, giving an instruction to or otherwise dealing with the Contractor, the EPC Contractor shall in all circumstances be deemed to be acting on behalf of the Employer (but without prejudice to the provisions of Clause 7 (Related Agreements and Interface) and Schedule 8 (Interface).”
(iv) Clause 1.8: “where this Agreement obliges a Party to procure that something occurs or does not occur, such obligation shall only be discharged if such thing occurs or does not occur ….”
(v) Clause 1.9: “Clause headings do not form part of or affect the interpretation of this Agreement.”
Clause 2.2 provides:
“The Contractor shall provide the Services as follows:
2.2.1 prior to the Mobilisation Period Start Date [defined as a date not less than 5 months...
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Table of cases
...Life assurance Society v hyman [2002] 1 aC 408 I.3.103 Equitix ESI Chp (Shef ) Ltd v Veolia Energy & Utility Services UK plc [2019] EWHC 593 (TCC) III.24.36 Equitix ESI CHP (Wrexham) Ltd v Bester Generacion UK Ltd [2018] EWHC 177 (TCC) II.6.83, III.24.60, III.24.64, III.24.141, III.24.142 E......
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Statutory adjudication
...10 (TCC) at [38], per Edwards-Stuart J. 234 For example, in Equitix ESI CHP (Shef ) Ltd v Veolia Energy & Utility Services UK plc [2019] EWHC 593 (TCC) the contract in question concerned a biomass energy plant. he adjudication provisions in the contract contemplated an adjudicator being nom......