X Ltd v Y Ltd (2005)
| Jurisdiction | England & Wales |
| Judge | MR. JUSTICE JACKSON |
| Judgment Date | 22 March 2005 |
| Neutral Citation | [2005] EWHC 769 (TCC) |
| Court | Queen's Bench Division (Technology and Construction Court) |
| Date | 22 March 2005 |
[2005] EWHC 769 (TCC)
IN THE HIGH COURT OF JUSTICE
TECHNOLOGY AND CONSTRUCTION COURT
QUEEN'S BENCH DIVISION
St. Dunstan's House
Mr. Justice Jackson
MR. T. ELLIOTT QC (instructed by CMS Cameron McKenna) appeared on behalf of the Claimant.
MR. M. SMITH (instructed by Eversheds LLP) appeared on behalf of the Defendant.
This judgment is in five parts, namely: Part 1 introduction; Part 2 the facts; Part 3, the present proceedings; Part 4 the law; Part 5 does Claim 1 fall within the scope of the arbitration clause in the Implementation Contract?
PART 1 – INTRODUCTION
This case involves a challenge to the decision of an arbitral tribunal that the tribunal does not have jurisdiction to deal with one of the heads of claim which are being advanced in an arbitration. The Claimant in the arbitration and the applicant in the present proceedings is a joint venture company called X Limited ("X"). The Respondent in the arbitration and the defendant in these proceedings is Y Limited ("Y").
The only statutory provision which is relevant to the present proceedings is section 67 of the Arbitration Act 1996. Section 67, so far as material, provides:
"(1) a party to arbitral proceedings may (upon notice to the other parties and to the tribunal) apply to the court -
(a) Challenging any award of the arbitral tribunal as to its substantive jurisdiction…
(3) On an application under this section challenging an award of the arbitral tribunal as to its substantive jurisdiction, the court may by order (a) confirm the award, (b) vary the award or (c) set aside the award in whole or in part."
It is common ground between counsel and it is now established law that the procedure under section 67 of the Arbitration Act 1996 is by way of re-hearing, not review.
That concludes my introductory remarks. It is now time to outline the facts.
PART 2 —THE FACTS
Between 1985 and 1987 a specialised plant was installed in a building at the premises of Z (the "Plant"). During commissioning in 1991, corrosion was discovered in the Plant. A instigated a project to resolve this problem. In due course three companies (including Y) were invited to tender for the work of producing a proposal to repair/modify the Plant.
The basis for the tenders was a document known as Specification A. This document is at pp.203 to 262 of bundle 3 and I shall refer to it as "Specification A". Y's tender was successful. On 24 th August 1992, Y entered into a contract with A; the "PDS Contract". In Part 1 of the PDS Contract, Y agreed that for the price of £767,599 it would carry out three tasks which I would summarise as follows: (1) carry out a Project Definition Study defined at section 2 of Specification A, resulting in a proposal to repair/modify the existing Plant, to provide a facility meeting the requirements of section 3 of Specification A; (2) plan and cost the provision of the repaired/modified Plant; (3) provide an incentive price proposal for the implementation of the repairs/modifications to the existing Plant to meet the requirements of Specification A. Clause 1.1 of Part 2 of the PDS Contract incorporated certain Standard Conditions. Clause 30 of these conditions provided for arbitration.
Pursuant to the PDS Contract, Y produced an interim report in November 1992 and a final report in February 1993, which I shall refer to as "the Final Report". In the Final Report, Y put forward a number of options for the repair/modification of the Plant. The recommended option was option 3. Y also produced its priced proposal for carrying out the work which comprised option 3.
In early 1993 X became involved in running Z. By a contract dated 5th March 1993 with A, X undertook the operation and maintenance of Z's facilities ("the Term Contract"). This contract expired in 2000. By Clause 7 of the Term Contract provision was made for X to enter into project contracts with the A for specific work relating to Z. One such project contract was a project contract dated 1st April 1993. I shall refer to this project contract as "Project Contract S".
During the spring and summer of 1993 there were meetings between representatives of X and Y. X contend that during these meetings Y made statements of fact and opinion which induced X to take on the role of prime contractor for the work required to the Plant. There may be an issue as to whether X needs to amend its Points of Claim in the arbitration in order to rely upon these meetings, but that is not an issue which I am required to consider.
On 22nd September 1993, A produced a revised version of Specification A. The revised version was designated J. Accordingly, I shall refer to this as "Specification J". In this revised version some parts of the original specification were retained, some parts were changed, and some parts were expanded.
On 12th October 1993 A and Y entered into a contract, which is known as the "Implementation Contract". By Part 1 of the Implementation Contract, Y agreed to carry out six items of work which I would summarise as follows: (1) provision of a repaired/modified Plant to meet the requirements of section 3 of Specification J, price £15,469,685; (2) upgrade of DCS, price £371,820; (3) provision of additional tanker unloading facilities, price £24,845; (4) provision of donor traceability system for infeeds, price £131,270; (5) provision of corrosion monitoring system in accordance with Annex K to Specification Issue J, price £229,575; (6) provision of support services, price to be at rates quoted in Appendix E.
Clause 1.1 of Part 2 of the Implementation Contract incorporated Standard Conditions. Clause 30 of those conditions (which applied both to the PDS Contract and to the Implementation Contract) provided as follows:
"Arbitration (English law),…[A]ll disputes, differences or questions between the parties to the Contract with respect to any matter or thing arising out of or relating to the Contract…shall be referred to the arbitration of two persons, one to be appointed by [A] and one by the Contractor, or their Umpire in accordance with the provisions of the Arbitration Act 1950 or any statutory modification or re-enactment thereof."
Clause 23.1 of Part 2 of the Implementation Contract provided as follows:
"[G] has contractorised [Z]. As a result [A] may wish to transfer its responsibilities for this contract to the contractor (hereinafter known as the Operator) appointed to manage [Z] and if this is the case [A] will notify you of this transfer. You hereby undertake that in the event of [A] and the Operator agreeing that the Operator shall, as from a given date, take over all the rights and obligations of [A] under this contract arising thereafter (a) the contract shall so transfer and take effect from that date in all respects as if any reference in the contract to [A] was reference to the Operator; (b) as from that date of transfer [A] shall be relieved from any further performance under the contract but without prejudice to any accrued right or liabilities; (c) you shall, if and when required by [A], agree with the Operator to give full effect to the provisions of this clause and the effect of the said agreement between [A] and the Operator…"
On the same day, 12th October 1993, Project Contract S between A and X was amended. The effect of this amendment was that, as between A and X, X assumed responsibility for the repair/modification work to the Plant.
The final event on 12th October 1993 was that A wrote to Y invoking Clause 23 of Part 2 of the Implementation Contract. The effect of this letter was that a transfer of contractual obligations occurred. X became substituted for A as, in effect, the employer under the Implementation Contract.
X proceeded to perform its obligations under the Implementation Contract. In order to meet the requirements of section 3 of Specification J, Y implemented certain recommendations which it had made in the Final Report.
On 9th June 1997 Y handed over the Plant to X. From then on X carried on the day-to-day operation of the Plant.
In January 1999, corrosion was again discovered in the Plant. A served a notice on X rejecting the work which had been done. X served a similar notice on Y. In due course, A made a financial claim against X for breach of Project Contract S and for breach of a later contract which replaced Project Contract S ("Project Contract T"). X settled that claim for (a) £13.665 million plus (b) substantial additional sums if recovered from Y.
In order to recoup its losses, in particular the sum paid to A in settlement, X commenced an arbitration against Y. The arbitral tribunal comprises Mr. Nicholas Dennys Q.C., Mr. Alan Redfern and Mr. Philip Naughton Q.C. X's claims against Y in the arbitration may be summarised as follows:
(1) Y committed breaches of the PDS Contract and acted negligently in carrying out the PDS Contract. As a result Y would, if sued, be liable to A. Accordingly, X, which is liable to A for the same loss by reason of X's breach of Project Contract S, is entitled to recover a contribution from Y pursuant to section 1 of the Civil Liability (Contribution) Act 1978.
(2) Y committed breaches of the Implementation Contract and acted negligently in carrying out the Implementation Contract, thereby causing loss and damage to X.
(3) Y made misrepresentations and negligent misstatements to X during 1993, which caused X to become prime contractor for the remedial work to the Plant and to become substituted as employer in the Implementation Contract. X thereby suffered loss and damage.
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