Conor Engineering Limited v Les Constructions Industrielles de la Mediterranee SA
Case reference:
[2004] EWHC 899 (TCC)
Monday, 5 April 2004
Key terms: Enforcement - Part 8 CPR - 2 adjudication decisions - set-off - cross claims - liquidated damages - section 111 - section 105(2) (c) - power generation - incineration of domestic waste - energy recovery - final day for payment - waiver
Proceedings were brought pursuant to Part 8 of the CPR in order to enforce two adjudicator’s decisions. The defendant refused to pay on the basis that there was a valid set-off cross-claim for liquidated damages. CNIM, the defendant was the main contractor for the design, build and delivery of an incineration of waste and generation of the electricity plant in Chineham, Hampshire. The claimant Connor Engineering Limited, was employed under two contracts. The first was for a boiler, and the second for the pipework. Disputes arose under both contracts, and CNIM raised a claim for liquidated damages. The claims were referred to adjudication, and two decisions were issued on 16th January 2004, both directing payment by CNIM to Connor. CNIM refused to pay claiming the right to withhold liquidated damages in respect of the decision.
CEL argued that the final date for payment had been decided by the adjudicator, which was 14 days from the date of the decision, and therefore pursuant to section 111 of the Act they could serve a withholding notice under the Scheme not later than the 7 days before that final date for payment.
CNIM argued that the contract was one of power generation, and so was exempt by virtue of Section 105(2)(c) of the Act. As a result, a withholding notice was not required pursuant to the Act, and so there was no sanction for a failure to serve a withholding notice.
Recorder David Blunt QC referred to the power generation cases of ABB Zantingh Limited v Zedal Business Services Limited [2001] BLR 66 and ABB Power Construction Limited v Norwest Holst Engineering 77 Con L 20. The important provision was the “primary activity” of the site, which was a question of fact. CEL argued that the prima activity was the incineration of domestic waste and not power generation, whilst CNIM took the opposite view. While the power generation was clearly an important part of the plant, recorder David Blunt QC held that the primary purpose of the site was the incineration of domestic waste. This was because the site had been developed principally to avoid filling land field sites with domestic waste, and the sheer volume of waste incinerated annually was considerable by comparison to the modest output of electricity generated. As a result the Act applied. A withholding notice had not, therefore, been served in accordance with the Act 7 days before expiry of the 14 days period set out in the adjudicator’s decisions.
CNIM’s final submission was that the date for payment has been extended because CEL served an invoice stating that the payment period was 30 days. David Blunt QC held that the “insurmountable obstacle” was that the proceedings had commenced in February, together with threatening letters, which were totally inconsistent with any implication that a further extended period of time for payment had been offered by CEL. As a result he enforced the decisions.
CEL argued that the final date for payment had been decided by the adjudicator, which was 14 days from the date of the decision, and therefore pursuant to section 111 of the Act they could serve a withholding notice under the Scheme not later than the 7 days before that final date for payment.
CNIM argued that the contract was one of power generation, and so was exempt by virtue of Section 105(2)(c) of the Act. As a result, a withholding notice was not required pursuant to the Act, and so there was no sanction for a failure to serve a withholding notice.
Recorder David Blunt QC referred to the power generation cases of ABB Zantingh Limited v Zedal Business Services Limited [2001] BLR 66 and ABB Power Construction Limited v Norwest Holst Engineering 77 Con L 20. The important provision was the “primary activity” of the site, which was a question of fact. CEL argued that the prima activity was the incineration of domestic waste and not power generation, whilst CNIM took the opposite view. While the power generation was clearly an important part of the plant, recorder David Blunt QC held that the primary purpose of the site was the incineration of domestic waste. This was because the site had been developed principally to avoid filling land field sites with domestic waste, and the sheer volume of waste incinerated annually was considerable by comparison to the modest output of electricity generated. As a result the Act applied. A withholding notice had not, therefore, been served in accordance with the Act 7 days before expiry of the 14 days period set out in the adjudicator’s decisions.
CNIM’s final submission was that the date for payment has been extended because CEL served an invoice stating that the payment period was 30 days. David Blunt QC held that the “insurmountable obstacle” was that the proceedings had commenced in February, together with threatening letters, which were totally inconsistent with any implication that a further extended period of time for payment had been offered by CEL. As a result he enforced the decisions.