Empyreal Energy Ltd v Daylighting Power Ltd

[2020] EWHC 1971 (TCC)

An expert made a determination that DPL pay EEL the sum of £1.7 million in respect of the costs of remedying works. DPL said that the dispute referred was not a dispute permitted to be referred to expert determination and that EEL had not served its notice of intention to refer the dispute in accordance with the contract. Mr Justice Stuart-Smith noted that resort to expert determination was only available where the Contract provided for the dispute to be referred to an expert. The process of referral to an expert was commenced by a party serving notice on the other “of its intention to refer the dispute” either to the CIArb or such other expert as may be agreed. Notice must be given of “intention to refer” and notice must be given of the party’s intention to refer “the dispute” to the expert.  The dispute identified in the Notice as the dispute intended to be referred and the dispute which the expert is entitled and required to decide are therefore one and the same. The parties only had five working days to make their submissions to the expert who was to provide a decision within seven working days.

Taking the Notice first, EEL submitted that its letter of 25 February 2020 and email of 4 March 2020 should be read together as constituting an adequate notice of intention to refer. The Judge was not troubled by the failure to state in those documents that they were intended to be a Notice of Intention to Refer: “it is much more important to look at the substance than the form”.

Reading the two documents together, the Judge did not “characterise” them as being a mere threat. The email of 4 March 2020 indicated a settled intention to refer, albeit that it would not be necessary to do so if DPL were to pay the sum claimed or agree to adjudication. However, the Judge was troubled by what he termed the “confusion” that permeated the documents about the nature of the dispute that was being referred. Mr Stuart-Smith said:

“Viewed objectively, it cannot be concluded that the composite notice was sufficiently clear and unambiguous to leave a reasonable recipient in no reasonable doubt that it was intended to be a claim for adjustment of the Contract Price pursuant to the operative provisions of clauses 13.7(b) and 13.8 ...  The purported notice was therefore inadequate and invalid.”

This mattered because of the first objection to the expert determination. Was the dispute referred by EEL and decided by the expert one which the Contract permitted to be resolved by expert determination? The Judge thought not. The Contract provided that where the contractor failed to remedy a defect, under clause 13.7(a) EEL could arrange for the work to be carried out and claim the cost of this remedial work from DPL as a debt. Or, under clause 13.7(b) EEL could determine and agree a reasonable deduction in the Contract Price. Clause 13.8 stated that where the amount of reimbursement pursuant to clause 13.7(b) could be agreed then it should be resolved in accordance with clause 36 (i.e. expert determination). However, EEL had advanced a claim for the cost of repairs and not, as required by clauses 13.7(b) and 13.8, a claim for an adjustment of the Contract Price in relation to which the notional cost of repairs was supporting evidence. EEL’s submissions were confusing and failed to identify the true basis for a claim under clause 13.7(b).

Accordingly, the Expert did not have jurisdiction and the Expert’s Determination was null, void and not binding. 

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