Alstom Power Ltd v Somi Impianti SRL [2012] EWHC 2644

This summary was provided by CMS Cameron McKenna LLP.

For more information visit http://www.cms-cmck.com/Construction/Construction-Disputes

summary

In the case, the Court decided that, SOMI (the Defendant) had to make the written declaration requested by Alstom (the Claimant). This declaration stated that all equipment and materials required for the execution and completion of the subcontracted works; including goods, materials, plant and equipment brought to the site by the Defendant whether owned, leased or hired by Defendant are deemed to be the property of the Claimant. Furthermore, the declaration clarified that the Defendant is not entitled to remove such items from the site.

Technology and Construction Court, Queen’s Bench Division, The Hon Mr Justice Akenhead

Background

Alstom Power Limited (“Alstom”) was engaged as main contractor by RWE Npower plc (“RWE”) to engineer, procure and construct a power plant in Pembrokeshire, Wales. In turn, Alstom employed SOMI Impianti s.r.l (“SOMI”) as a sub-contractor to carry out mechanical and piping erection, under a contract, dated 16 April 2010, (the “Contract”). Terms of the Contract relevant to this dispute included:

Clause 54.1, which provided for all of the sub-contractors equipment and materials necessary to complete the works to be deemed exclusively for the execution of the agreed works, and stated that these should not be removed from the site;
Clause 54.2, which provided that the sub-contractors equipment and materials, whether owned, leased or hired by SOMI would be deemed to be the property of Alstom while on the site. It further clarified that this would not prejudice the right of SOMI to use the equipment and materials or their responsibility to operate and maintain them;
Clause 54.5, which specified that upon removal from the site, with the consent of Alstom, the equipment and materials would re-vest in SOMI;
Clause 54.6, which stated that in the event of termination of SOMI’s employment, Alstom could hire the equipment and materials and permit a replacement subcontractor to use them;
Clause 63, which dealt with the termination of employment of SOMI as subcontractor. It detailed that Alstom could, giving four days written notice, terminate SOMI’s employment under various circumstances, including:

(a) the insolvency or financial instability of SOMI to proceed;

(b) persistent or flagrant neglect to comply with contractual obligations;

(d) committing any default which could seriously affect the proper implementation of the main contract works;

In this event, Alstom would still be entitled to use SOMI’s equipment and materials to complete the works, either themselves or by employing another sub-contractor; and
Clause 63. 3, which provided that Alstom would maintain the equipment and materials and on completion of the works return them to SOMI, whilst enabling Alstrom to sell such equipment and use the proceeds to satisfy any debt if the Contract was terminated.

In August 2011, Alstom sought to terminate the employment of SOMI. SOMI had performed poorly in terms of progress with the works, got into financial difficulties and then suspended some of the works. After December 2011, insolvency proceedings were commenced against SOMI in Italy.

The parties fell into dispute over the deemed ownership of the equipment. Alstom had retained the equipment brought on to the site by SOMI. In 2012, SOMI attempted to forcibly remove assets from the site and on one occasion the police had to be called to resolve a confrontation.

In August 2012, Alstom were successful in claiming £5,328,341.80 plus interest from SOMI. This summary judgement enforced a previous adjudication decision.

the issue

The court had to decide whether to enforce a declaration by SOMI that all equipment, materials and appliances required to complete the works under the Contract, including those brought on to the site by SOMI are deemed to be the property of Alstom and that SOMI is not entitled to remove any such items from the site.

the decision

Initially there was disagreement as to the legal and procedural impact of the insolvency proceedings taking place in Italy relating to SOMI and the effect that this might have on the property or title to various items. However, it was decided that the court did have jurisdiction to decide whether and to what extent Alstom had title to the property rights in the subcontractor’s equipment as the Contract was governed by the law of England and Wales. In any event, it was indicated that the ‘judicial commissioner’ in Italy, appointed to handle the insolvency proceedings was not expected to bring in the property belonging to SOMI until 2015.

Furthermore the court decided, on proper construction of the Contract, that;

the title to the goods and materials had passed from SOMI to Alstom, although this was not intended to be a permanent transfer of ownership where it was not anticipated that the equipment or materials would be physically incorporated permanently into the works. It was merely to secure their continued presence on the site until they are no longer required or the works were completed;
that Alstrom has possessory rights over SOMI’s equipment until the work was completed at the end of the warranty period;
that Alstrom had the right to sell SOMI’s equipment under clause 63.3 if and when the correct procedure under the Contract was implemented;
Alstrom is not currently in breach of contract for retaining the subcontractors equipment on the site; and
that declarations should be made as requested by Alstrom.

This summary was provided by CMS Cameron McKenna LLP.

For more information visit http://www.cms-cmck.com/Construction/Construction-Disputes

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