RWE NPower v Alstom Power [2009] EWHC B40 (TCC)

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(a) Where a notice of adjudication under Part 1 of the Scheme for Construction Contracts (England and Wales) Regulations 1998 (“the Scheme”) purported to refer claims under a single contract to adjudication, the fact that some of the claims actually arose under another contract did not invalidate the notice to refer.  (b) In deciding whether the claims referred constituted a single dispute or more than one dispute, a benevolent interpretation of the notice of adjudication should be adopted.  Where the elements of a dispute were linked, that was a single dispute.  (c) “Without prejudice” privilege attached to the content of the exchanges of a negotiation and not to the fact that the negotiation had taken place.  There was nothing to stop a party relying on the fact that there had been negotiations over a claim it had notified in open correspondence, and that those negotiations had not resulted in an agreement or payment, in order to establish that a "dispute" had crystallised.  (d) Where parties to a contract to which the Housing Grants, Construction and Regeneration Act 1996 (“the Act”) did not apply agreed to refer disputes to adjudication in accordance with Part 1 of the Scheme, they thereby incorporated the parliamentary intention behind the Scheme so as to preclude set-off against an adjudicator’s award..

Technology and Construction Court, Judge Havelock-Allan QC


RWE NPower PLC (“RWE”) employed Alstom Power Limited (“Alstom”) at the Aberthaw power station under three contracts at about the same time, including a contract for the repair and maintenance of the boilers (the “Boiler Contract”), a contract to overhaul the feed system at the power station (the “Feed System Contract”) and an ongoing reactive maintenance contract.  The Boiler Contract was to be carried out over a staggered three-year period between 2007 and 2009, to allow the power station to remain in operation; Alstom was awarded a contract for 2007, RWE retaining the option to extend the contract by two further one-year periods.  The Boiler Contract and Feed System Contract incorporated a set of standard conditions entitled ‘Model Condition of Contract for Repair Modification and Rehabilitation of Boilers and Associated Plant’.  Clause 39 of these conditions provided that RWE would be entitled to deduct from any monies due, or becoming due to Alstom under the contract, all costs, damages or expenses for which under the contract Alstom was liable to RWE. 

The 2007 works overran and Alstom claimed that additional costs had been incurred.  Fearing that the 2008 works would also overrun, the parties agreed to amend the Boiler and Feed System Contracts by way of a deed (the “Deed”), which settled financial and procedural changes for the 2008 works.  The Deed did not settle Alstom’s claims arising from the 2007 works.  However, it did stipulate that the two contracts should be amended to provide that either party could refer disputes arising under the contracts to adjudication in accordance with the Scheme. 

Subsequent to the Deed, Alstom gave RWE by way of a letter dated 25 October 2007 notice of a claim in outline under both contracts for extension of time and extra costs in respect of the 2007 works.  RWE responded stating that they required supporting documentation for the claim, but that “without prejudice” to this, they wished to continue discussions to resolve the issue. Alstom replied stating that the documentation was being compiled, and further correspondence was exchanged in which both parties expressed the view that, if at all possible, the 2007 claim should be resolved by a process of discussion and negotiation.  The correspondence culminated in two letters from Alstom to RWE in May 2008, both marked “without prejudice”: the first enclosing details of their claim for an extension of time; and the second providing details of their claim for additional payments. RWE replied, again giving their initial comments on a  “without prejudice” basis.  In October 2008, Alstom sent to RWE a Scott Schedule covering the claim for additional costs to try and assist in a quicker resolution to some of the items contained in the claim.  A revised version of this was submitted in December 2008.  In January 2009, Alstom emailed RWE asking RWE to respond in detail to the May 2008 claims, to which RWE responded that they had no record of a claim having been submitted in accordance with the terms of the contract.  A second letter sent by RWE at the same time, marked “without prejudice”, acknowledged Alstom’s May 2008 letters, but stated that as they had been issued on a “without prejudice” basis they could not be used as the basis for a claim, and RWE would not allow Alstom to rely on them. 

Alstom subsequently commenced an adjudication under the Boiler Contract in which it claimed additional costs (a) in respect of the provision of metallurgical memoranda of non-destructive testing of metal structures and welds (“met memos”); (b) for work carried out to valves; (c) in respect of scaffolding works; and (d) in respect of additional insulation works. RWE responded disputing the jurisdiction of the adjudicator on three grounds: (1) There was no dispute to adjudicate, as no claim was submitted by Alstom with regard to the matters referred to the adjudicator, all previous submissions having been marked “without prejudice”; (2) Alstom were relying on without prejudice submissions to aid their claim contrary to natural justice; and (3) the sums claimed in respect of met memos and valves arose under the Feed System Contract, not the Boiler Contract.  Alstom conceded that the claims in respect of met memos and most of the valves did arise under the Feed System Contract and asked from them to be withdrawn from the referral. 

The Adjudicator ordered RWE to pay Alstom a sum of £219,780.799 plus interest.  RWE commenced proceedings in the Technology and Construction Court seeking a declaration that the Adjudicator’s decision was unenforceable.  Alstom counterclaimed for enforcement of the decision.


The Court addressed the following issues:

  • Whether the Notice of Intention to Refer covered claims arising under more than one contract and hence concerned more than one dispute, and thus the decision was unenforceable.
  • Whether Alstom’s claims and all exchanges between the parties about those claims were protected by without prejudice privilege and thus Alstom could not prove that a dispute had crystallised at the time that the adjudication was commenced.
  • Whether the adjudicator had acted contrary to the principles of natural justice when he decided to proceed with the reference after reading the without prejudice documentation.
  • Whether, on the assumption that the Act did not apply to the Boiler Contract, RWE was entitled to set off against the adjudicator’s award a sum in liquidated damages (“LDs”) arising from the 2008 works which it claimed was due to it from Alstom


The Court held:

  • Under the Scheme, a Notice of Intention to Refer which refers more than one dispute is invalid and the appointment of an adjudicator in consequence of it is similarly invalid, unless the other party has nonetheless clearly and knowingly accepted the notice or the appointment as valid so that there is consent for the purposes of paragraph 8(1) of the Scheme.
  • If an adjudicator adjudicates upon more than one dispute without the consent of the parties, he exceeds his jurisdiction and his decision as a whole is unenforceable.    
  • In this case, the Notice of Intention to Refer did not cover claims arising under two contracts.  The Notice stated that the claims were being made only pursuant to the Boiler Contract.  This clothed the Adjudicator with jurisdiction to award sums for those claims only under the Boiler Contract.  The Adjudicator was not being invited to determine whether any claims were due under the Feed System Contract.  If the claims did not arise under the Boiler Contract, the Adjudicator could have made a decision dismissing those claims. 
  • The fact that Alstom had conceded that the Adjudicator lacked jurisdiction to consider the claims that arose under the Feed System Contract did not prevent Alstom from arguing that the Notice of Intention to Refer only covered claims arising under the Boiler Contract. 
  • Having found that the claim items were under the single Boiler Contract, the Court further held that they constituted a single dispute.  In deciding whether the claims referred constitute a single dispute or more than one dispute, the starting point was, again, the Notice of Intention to Refer.  The weight of judicial authority favoured giving the Notice a benevolent interpretation.  In this case, the Court found that all the heads of claim were traceable back to the original increased scope of the works and time overrun and therefore comprised one dispute.
  • The correspondence between the parties before the May 2008 claims were served was not privileged as there was nothing to negotiate about until the claims were particularised.  The "without prejudice" marking on the May claims suggested that the particulars of the claim were an opening shot in negotiations: but they were also a response to the demand by RWE that details of the claim openly notified on 25 October 2007 should be given. They therefore had a dual purpose and the particulars themselves were not privileged.  Even if they were privileged, they had lost that privilege by the time that the Notice of Intention to Refer was served. 
  • The communications between the parties after May 2008 were privileged insofar as they contained negotiations about the claims.  However the privilege attached to the content of the exchanges of the negotiation and not to the fact that the negotiation had taken place.  There was nothing to stop Alstom relying on the fact that negotiations took place over the claim that it had notified in outline on 25 October 2007 and that those negotiations did not result in an agreement or payment.  Adopting the broad approach to the definition of a "dispute" (see Amec Civil Engineering Ltd v The Secretary of State for Transport [2004] EWHC 2339 (TCC)) this was enough to establish that a dispute between the parties had crystallised by the time the Notice of Intention to Refer was served.
  • Applying Berg v IML London Limited [2002] 1 WLR 3271, a judge need only recuse himself if the knowledge he had received from privileged communications disable him from fairly continuing the case or a fair-minded and informed observer would conclude that there was a real possibility or real danger that the could not be or would not be a fair trial.  Both sides had agreed that the Court should adopt the judgment in that case as providing the appropriate test in the case of an adjudicator.  On the facts, the Court did not consider that there was a real danger that the adjudication would be unfair because the Adjudicator saw the May 2008 claims and the Scott Schedules.
  • Clause 39 of the Boiler Contract provided a broad right of set-off.  However, this had been amended by the Deed when the parties agreed to incorporate the Scheme.  By choosing to incorporate the provisions of the Scheme rather than their own bespoke provisions for adjudication, the parties intended to import into the contract the parliamentary intention underlying the Scheme.  This precluded set-off from being raised by RWE against an adjudicator’s decision. 
  • Accordingly the decision made by the Adjudicator was enforceable, and RWE was not entitled to a set off against the Adjudicator’s decision of any sum due to it from Alstom, in particular sums claimed by way of LDs. 

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