Conor Engineering Ltd v Constructions Industrielles de la Mèditerranèe (CNIM) [2004] EWHC 899

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The primary activity on site is a matter of fact in each case – here it was found to be the incineration of waste.  Even if an adjudicator's decision prescribed a "final date for payment" of the sums awarded in that decision erroneously in fact or in law, the decision would not be invalid as a result.  Where an adjudicator orders that payment be made within x days of his decision, the time for payment runs from the date the decision is said to be made and not the date it is received by the parties.

Recorder David Blunt QC,  London TCC

5 April 2004

Les Constructions Industrielles de la Mediterranee (CNIM) SA ("CNIM") was the main contractor employed by Hampshire Waste Services Ltd to design, build and deliver a plant for the incineration of waste and the generation of electricity.  CNIM subcontracted elements of the works to Conor Engineering Limited ("CEL") namely installation of boilers and installation of pipework, under two separate contracts.

CEL served Notices of Adjudication under both contracts on 25 November 2003.  The same adjudicator was appointed in respect of both adjudications.  CNIM attempted to have the adjudicator take account of its claims against CEL for liquidated and ascertained damages in the adjudications, but the adjudicator declined to address them on the ground they had not previously been notified to CEL and so were not then in dispute.

The adjudicator issued decisions dated 16 January 2004, both of which ordered CNIM to make payment to CEL of certain amounts "within 14 days of the date of the Decision".  However, CNIM did not actually receive the decisions until 19 January 2004.

CNIM issued Notices of Withholding on 26 January 2004, the grounds for withholding being its entitlement to payment of liquidated and ascertained damages.

CEL raised proceedings to enforce the adjudicator's decisions, arguing that the Notices of Withholding had been issued too late to be effective.  Since the parties' contracts did not contain the necessary provisions, the Scheme for Construction Contracts applied and Notices of Withholding had to be issued not later than 7 days before the final date for payment.  The adjudicator had decided the final date for payment was 30 January 2004 meaning that the Notice of Withholding was 4 days late.

CNIM argued the primary activity on the site was power generation and so the operations carried out by CEL were not "construction operations" for the purposes of the Act by virtue of section 105(2).  Consequently, the Act and therefore the Scheme did not apply to impose time limits for the serving of Notices of Withholding.  CNIM also argued that even if the Act and Scheme did apply, the dates for payment directed by the adjudicator were not the final dates for payment within the meaning of section 111(2) and, in any event, time did not begin to run until the adjudicator's decisions had actually been received.

It was agreed by the parties that "the site" meant the whole of the site and not the area where CEL's works were performed (ABB Zantingh Limited v Zedal Business Services Limited – see Adjudication Watch 12.12.2000).  The court decided that on the facts the primary activity on the site was to be waste incineration and not power generation.  Consequently the works were "construction operations" within the meaning of the 1996 Act and so the Scheme applied.

The court also decided that the adjudicator must be taken to have decided, rightly or wrongly, that the final date for payment of the sums awarded in his decisions was 14 days from the date of the decisions.  Even if this view were erroneous in fact or law, the decisions would not be invalid as a result.  On that basis, any Notice of Withholding should have been served at the latest not later than 7 days before expiry of the 14 day period.

The court considered CNIM's argument that the 14 day period allowed by the adjudicator should run not from the date of his decisions but from the date CNIM actually received the decisions to be "unsustainable".  This was on the basis that the adjudicator had expressly ordered that payment be made within 14 days of the date of his decision and stated that the decision was made on 16 January 2004.

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