Darchem Engineering Limited v Bouygues Travaux Publics & Anor

Introduction

The Claimant Darchem Engineering Limited (‘Darchem’) seeks to enforce, by way of summary judgment, an adjudicator’s decision in the principal sum of £23,944,012 (‘the Decision’).

The underlying dispute relates to a contract (‘the Subcontract’) entered into between two Joint Ventures (‘JVs’). The Main Contractor was an unincorporated JV consisting of Bouygues Travaux Publics (‘Bouygues’) and Laing O’Rourke Delivery Limited, formerly Laing O'Rourke Construction Limited (‘LOR’), known as ‘BYLOR’. The Subcontractor was another unincorporated JV consisting of Darchem and Framatome Limited (formerly known as Efinor Limited (‘Efinor’) before it became part of the EDF Group) (‘Framatome’), known as ‘EDEL’. The Subcontract related to the procurement, off-site manufacture (including production of workshop/manufacturing drawings), pre-fabrication, factory testing, delivery to site, pre-assembly, installation and testing of stainless-steel pools, pits and tanks (including associated works such as embedment plates, framing channels, leak detection system, support steelwork, handrails, staircases and sumps) for Hinkley Point C nuclear power station in Somerset.

Three adjudications, the third of which is the subject of these enforcement proceedings, were brought by Darchem alone, stating that it was ‘acting jointly and severally as the Subcontractor in accordance with the Agreement and clause 12.6 of the Subcontract’. In each adjudication, the jurisdiction of the Adjudicator was challenged on the basis that Darchem was not a party to the Subcontract and was not entitled to bring an Adjudication pursuant to the relevant provisions of the Subcontract. This challenge was rejected by the Adjudicator. (Other challenges then made, relating to whether there was a dispute capable of reference have not been pursued in the enforcement proceedings).

The question of jurisdiction therefore turns on whether one entity within the Subcontracting JV was entitled to bring adjudication proceedings in its own name, rather than together with the other company in the subcontractor JV.

It is well-established, as Mr Buckingham KC for Darchem observed, that the Court adopts a robust approach to adjudication enforcement. However, the issue at stake on this adjudication enforcement is the proper construction of the Subcontract. The same point could have arisen in a different context and in a different dispute resolution forum. The fact that the exercise of construction is presently required to be undertaken in the context of an adjudication enforcement is not of relevance to what the right answer is.

The dated cover page for the ‘Form of Subcontract Agreement states as follows:

“(1)

Bouygues Travaux Publics and Laing O’Rourke Construction Limited

(The Contractor)

and

(2)

Darchem Engineering Limited and Efinor Limited

(The Subcontractor)”

The Subcontract, on the first page, then sets out:

“THIS AGREEMENT is made on the 31st of October 2018 between:

1.

Bouygues Travaux Publics (a company organised and existing under the laws of France with registration number 40798530) whose principal place of business is at 1 Avenue Eugene Freyssinet, 78280 Guyancourt (“Bouygues”) and

2.

Laing O'Rourke Construction Limited (company registration number 04309402) whose registered office is at Bridge Place Anchor Boulevard, Admirals Park Crossways, Dartford, Kent, DA2 6SN (acting jointly and severally with Bouygues, the “Contractor") and

3.

Darchem Engineering Limited (company registration number SC 144767) whose registered office is at 15 Atholl Crescent, Edinburgh, EH3 8HA and

4.

Efinor Limited (company registration number 09763462) whose registered office is at The Broadgate Tower Third Floor, 20 Primrose Street, London, United Kingdom, EC2A 2RS (acting jointly and severally with Darchem Engineering the “Subcontractor”)

All of the above are together known as the “Parties”.”

After the Recitals, the Subcontract continues:

“NOW IT IS AGREED THAT

Interpretation

In this Agreement (including the recitals) words and expressions shall have the meanings as are respectively assigned to them in the conditions of subcontract referred to below. Article and clause headings are for information purposes only and do not affect the interpretation of this subcontract.

The Subcontract

This Agreement, together with the following documents, constitute the “subcontract”:

•

this Agreement;

•

the conditions of subcontract

•

the Subcontract Data part one…

•

the Subcontract Data part two….

In the case of ambiguity or inconsistency in or between any of the documents which constitute the subcontract, the order of precedence will be as follows:

1.

this Agreement;

2.

the conditions of subcontract; and

3.

the remaining documents constituting this subcontract, which shall be of equal precedence and which shall be taken to be mutually explanatory of one another.

Appointment

3

The Contractor appoints the Subcontractor to Provide the Subcontract Works in accordance with this subcontract and the Subcontractor accepts such appointment.”

Payment

4.

The Contractor will pay the Subcontractor in consideration of his Providing the Subcontract Works and remedying the Defects the amount due in accordance with this subcontract.”

5.

Subsuming Provisions

…

(c)

Darchem Engineering Limited and Efinor Limited respectively warrant that all obligations, works and/or services performed under the Preconstruction Subcontracts by Darchem Engineering Limited and Efinor respectively have been performed and carried out in accordance with the requirements of this subcontract and that Darchem Engineering Limited and Efinor Limited shall be jointly and severally liable to the Contractor for the liability of either of them under the Preconstruction Subcontracts.

(d)

Darchem Engineering Limited and Efinor Limited respectively acknowledge that the Contractor has already paid the cumulative sum of £671,294.06 to Darchem Engineering Limited and the cumulative sum of €1,076,442.54 to Efinor (in both cases plus value added tax where applicable) under their respective Preconstruction Subcontracts prior to the Subcontract Date and that these sums are included in the tendered total of the Prices set out in the Subcontract Data.

IN WITNESS WHEREOF this Agreement has been executed and delivered as a deed by the Parties on the date first before written. Where either Party constitutes (under applicable laws) a joint venture, consortium or other unincorporated grouping of two or more persons the liability of such persons to the other Party under this Agreement shall be joint and several.”

There follows ‘Executed as a Deed by […]’ with signatures of a Director and Company Secretary for each of the four listed entities identified at the start of the Agreement.

The Conditions of Subcontract, commencing at page 8, include the following further provisions relied upon variously by Mr Buckingham KC, for Darchem, and Ms Stephens KC, for BYLOR, during the course of argument:

(1)

“Clause 11 (‘Identified and Defined Terms’)

“11.1

In these conditions of subcontract, terms identified in the Subcontract Data are in italics and defined terms have capital initials.

…

11.2

(11) The Parties are the Contractor and the Subcontractor.”

(2)

Clause 12 (‘Interpretation and the Law’)

“12.6

If the Subcontractor comprises two or more companies or other entities acting in joint venture, consortium, partnership, unincorporated grouping or otherwise, each such company or other entity is jointly and severally liable to the Contractor tor the performance of the subcontract works and all of the Subcontractor's obligations under this subcontract. These companies or entities notify the Contractor of their leader who has authority to bind the Subcontractor and each of the companies or entities and in the absence of notification the Contractor is entitled to rely upon each such company or other entity as having authority to bind the Subcontractor and each of them. The Subcontractor does not alter his composition or legal status without the prior consent of the Contractor.”

(3)

Clause 91 (‘Reasons for Termination’)

“91.1

Either Party may terminate if the other Party has done one of the following or its equivalent.

• If the other Party is an individual and has

[there then follows a list relating to e.g. bankruptcy petitions]

Where a Party comprises two or more companies acting in joint venture, partnership or otherwise, a reference to that Party in this clause 91.1 is deemed to be a reference to each such company individually.”

(4)

Clause 91.2, containing similar wording to that set out above in the context of one of the default reasons comprising ‘R11’, relating to change of ownership of the Subcontractor.

(5)

Clause X4.1A, in the context of parent company guarantees:

“If the Subcontractor comprises two or more companies constituting (under the Applicable Law) a joint venture, consortium, partnership or other unincorporated grouping, the Subcontractor gives to the Contractor, in the form set out in the Subcontract Works Information, a guarantee duly executed by the ultimate parent company of each such company stated in the Subcontract Data. […]”

(6)

Option W, which deals with Dispute Resolution.

“2.2

Notwithstanding any other provision of the Dispute Resolution Rules, any Party may at any time

2.2.1

seek adjudication of any Dispute, in which case the adjudication procedure set out in Rule 4 applies, […]

…

4.17

The Adjudicator's decision is binding upon the Parties unless and until the Dispute to which it relates is finally determined by the tribunal appointed in accordance with Rule 6, or by written agreement of the Parties in accordance with Rule 3 or otherwise.”

(7)

The Sub Contract Data Part One identified the ‘Contractor’ as:

“Name: An unincorporated Joint Venture of Bouygues Travaux Publics (Company registration number 407985308) and Laing O’Rourke Construction Ltd. (Company registration number 04309402)”

(8)

The Sub Contract Data Part Two identified the ‘Subcontractor’ as:

“Darchem Engineering Limited and Efinor Limited acting as EDEL”

The general approach to contractual construction is well established. The Court should ascertain the objective meaning of the language by which the parties have chosen to express their agreement. As Mr Buckingham KC and Ms Stephens KC both fairly responded when faced with those parts of the Subcontract which provided their respective constructions with a headwind, the contract must be construed as a whole. Its provisions should, so far as is possible, be read together and in a manner which reconciles them with one another and so far as possible to avoid inconsistencies between different parts, on the assumption that the parties had intended to express their intentions in a coherent and consistent way.

Ms Stephens KC also emphasised, first, that “[w]here the parties have used unambiguous language the court must apply it”: Rainy Sky SA v Kookmin Bank [2011] UKSC 50 at [23]; and second, that where a word or expression is expressly defined by the contract, the court will give effect to the agreed definition. If a contract defines a term, there is no permissible basis for ignoring it save in exceptional circumstances: The Interpretation of Contracts, 8th Ed., Lewison at Chapter 5, Section 11.

As principles to apply, these were not disputed.

At the heart of the contractual analysis is the following question: is Darchem a ‘Party’ for the purposes of clause 2.2 of Option W. If it is not such a ‘Party’, it had no right to commence the adjudications, and the Adjudicator had no jurisdiction. Although Mr Buckingham KC makes analogous reference to section 108 HGCRA 1996, he does not contend that if Darchem falls outside of the contractual definition of ‘Party’ for the purposes of Option W, the contract is non-compliant and Darchem nevertheless had a right to have brought an adjudication in any event pursuant to the Scheme.

The centrepiece of Mr Buckingham KC’s constructional argument is that within the ‘Agreement’ element of the Subcontract:

The contrary constructional argument advanced by Ms Stephens KC is that:

Ms Stephens KC is correct in her submission that the whole of the Conditions of Subcontract are drafted in a manner objectively consistent with the Subcontract being bilateral, with two parties, rather than four or six:

Clauses 91.1 and 91.2 are also strongly supportive of Ms Stephens KC’s position. Having stipulated that either Party may terminate if the other Party has one of a number of things relating to winding up, administration and liquidation etc, the clause specifically addresses the situation where a Party comprises two or more companies acting in joint venture. In these circumstances, a reference to Party ‘in this clause 91.1’ is deemed to be a reference to each such company individually. The obvious inference is that, save for the deeming provision specific to this clause, the word ‘Party’ is not elsewhere a reference to each constituent of the two JVs. Similar deeming language exists in clause 91.2 in respect of the word ‘Subcontractor’, and that too is limited to deeming the wider meaning to the term ‘in this paragraph’, and not more broadly.

In this respect, there is no equivalent wording in Option W deeming the word ‘Party’ in clause 2.2 to be a reference to each company individually. These clauses demonstrate a clear objective intention that (a) Party is not generally understood as a reference to the constituent companies making up a Joint Venture, but to the Joint Venture indivisible entity; and (b) where Party is to be deemed to mean otherwise (and, in particular, a reference to the constituent parts of the Joint Venture), the parties have said so. It follows that, all things being equal, the word ‘Party’ is not a reference to one of the constituent parts of the JV, but to the JV itself.

Clause X4.1A also deals specifically with the situation, in the context of parent company guarantees, where the Subcontractor comprises two or more companies. This is again consistent with the objective intention that, generally, ‘Subcontractor’ is taken to be a single entity.

However, the Subcontract is not the conditions of subcontract alone. Mr Buckingham KC’s construction relies upon the contents of the Agreement, and if necessary its precedence over the other parts of the Subcontract.

Central to his argument are the words, ‘All of the above are together known as the “Parties”’. It is contended that this is a definitional sentence by which all four stated entities are ‘Parties’ (and that, therefore, Darchem is a ‘Party’ for the purposes of clause 2.1 of Option W).

The word ‘Parties’ is repeated at the end of the Agreement, prior to the executory signatures. Immediately following the statement that the Agreement has been executed and delivered as a deed, ‘by the Parties’, the Agreement continues: ‘Where either Party constitutes (under applicable laws) a joint venture, consortium or other unincorporated grouping of two or more persons the liability of such persons to the other Party under this Agreement shall be joint and several.’ This sentence is consistent with there being only two ‘Parties’. It is also language which specifically contemplates, as is the case here, that one or more of the (two) Parties is a joint venture consisting of more than one legal entity. A natural reading of the words is that each of the constituent entities is not itself a ‘Party’, but forms part of a Party; and that joint and several liability is imposed in respect of the obligations undertaken by that ‘Party’. Read in this light, the plural word ‘Parties’ in the immediately preceding sentence, would naturally mean the two JVs, not each constituent entity.

The fact, also relied upon by Mr Buckingham KC, that each constituent entity then executed the deed is itself neutral. As Mr Buckingham KC rightly submitted, in the context of unincorporated joint ventures, “if a joint venture is not incorporated it has no separate legal identity distinct from those of the venturers themselves”: see Julian Bailey’s Construction Law (4th edn, 2024) at 2.108. The JV itself does not have legal standing to execute the Deed. It was therefore natural, and necessary absent authority, for each constituent entity of the two JVs to execute the deed. It does not of itself make the entity a ‘Party’ as defined.

Returning then to the words: ‘All of the above are together known as the “Parties”’. Does this sentence – and in particular the word ‘All’ - have the effect of conveying the objective intention that each of the constituent companies is a separate ‘Party’? I do not consider that it does, particularly read as part of the Subcontract as a whole and in light of the numerous express indications to the contrary. It is both linguistically and conceptually coherent to construe the wording as meaning simply that all of the entities named, together, are the constituent parts of the (two) Parties. The four entities (‘all of the above’) are, indeed, together known as the ‘Parties’: two together are known as ‘Contractor’; the other two together are known as ‘Subcontractor’, which together are the ‘Parties’. This part of the Agreement groups the four signatories into two defined ‘Parties’ (Contractor and Subcontractor), consistent with the bilateral drafting that follows throughout the Conditions.

This reading is then wholly consistent with the definition of ‘Parties’ in clause 11.2(11) of the conditions of subcontract. This is a basis for preferring it where the alternative construction creates an inconsistency or conflict. Mr Buckingham KC contends that his definition does not give rise to a conflict. This is on the basis that, he contends, clause 11.2(11) provides a definition of additional entities that ‘Parties’ under the Subcontract (i.e. ‘Contractor’ and ‘Subcontractor’), and that that does not detract from the fact that each of the four constituent entities are each also a ‘Party’ individually. Thus, as elaborated in his oral submissions, the effect of his definitional reading of ‘All of the above are together known as the “Parties”’ is to create six ‘Parties’, not two or four. This only serves to highlight the difficulty with the construction contended for. The parties cannot credibly be taken to have intended to create six ‘Parties’. This is not just because of the numerous linguistic markers already identified which are consistent with there being just two parties, which may themselves be made up of constituent entities, but because it is undermined by the absence of any contractual guidance as to which of the Parties is being referred to at any particular point in the Subcontract. It would be a recipe for confusion.

If, instead, one views Mr Buckingham KC’s definition of ‘Parties’ by reference to ‘All of the above’ in the Agreement as being inconsistent with the clause 11(2) of the conditions of subcontract, does the order of precedence nevertheless mean that it prevails? The first answer is No, because, for the reasons given, as a matter of construction there is an available construction that does not give rise to an inconsistency and that is to be preferred. If I am wrong about that, the answer is still No: the Agreement itself states, in clause 1, that words and expressions shall have the meanings as are respectively assigned to them in the conditions of subcontract. In other words, the Agreement stipulates where to look for the meaning of defined words, and that is to the conditions of subcontract. Relying on the primacy of the Agreement in the scheme of precedence does not assist where it is the Agreement which states that the meaning of words is assigned to them in the conditions of subcontract (and, at least implicitly, not in the Agreement).

The next limb of Mr Buckingham’s argument is that the elements of each JV are stated to be ‘acting jointly and severally’.

It is not in dispute that each constituent entity took on joint and several liability with its partner for the liabilities of the JV of which it was part. It is also right that the words ‘acting jointly and severally’ are at least capable of conveying a broader meaning than simply the taking on of joint and several liability. However, again, it is necessary to construe these introductory words as part of the Subcontract as a whole.

Clause 12.6 specifically addresses the question of the circumstances in which, as here, the Subcontractor comprised two or more companies acting in joint venture. The first sentence imposes joint and several liability upon each constituent company of such a Subcontractor JV.

The second sentence then provides, firstly, for a process by which there is a notified leader as having authority to bind the Subcontractor and its members. It is common ground that there was no such notification in this case. The second part of the sentence provides that absent of notification the Contractor is entitled to rely upon each constituent as having the authority to bind. However, this clause does not oblige the Contractor to act in this way (and in the context of the adjudications, BYLOR explicitly rejected Darchem’s purported authority to bring adjudication proceedings in its own name on behalf of the JV), and there is no unilateral entitlement on the part of the Subcontractor to be treated as such. It could not have that effect automatically, and without notice, or there would be no purpose in distinguishing between the situation where notice is, or is not, given. It is therefore inconsistent with each constituent part of having the unilateral and automatic entitlement to act severally in relation to any and all obligations inherent in Mr Buckingham KC’s construction of ‘acting jointly and severally’; looked at another way, and as Mr Buckingham KC accepted, clause 12.6 is otiose if Mr Buckingham’s construction is correct. Moreover, the last sentence makes clear that the clause does not implicitly alter the legal status of a constituent company within the joint venture (e.g. making it a ‘Party’ for the purposes of Option W).

Finally, the two arguments interrelate: the clearer the language is that the words ‘Party’ and ‘Parties’ are references to the JVs, rather than their constituent parts, the less likely it is that the objective intention of the Subcontract was that each constituent part could act severally (as opposed merely to having several liability). If that were the case, the easiest way to have achieved that would be to clearly define the constituent parts as ‘Parties’, which for the reasons set out above, they did not do.

Therefore, the reference to ‘acting joint and severally’ in the context of the Subcontract as a whole is better construed as no more than a reference to the facts that (a) Efinor is acting with Darchem as ‘the Subcontractor’, and that (b) their liability for the JV is joint and several.

Next, Mr Buckingham refers to Article 5(c) of the Agreement in which Darchem and Efinor each (‘respectively’) give separate and individual warranties. Article 5(a) identifies two prior agreements: one between BYLOR and Darchem, dated 5 February 2018 and one between BYLOR and Efinor dated 31 March 2014 (‘the Preconstruction Subcontracts’). Mr Buckingham KC is correct that each gives a discrete warranty in respect of the performance of its own obligations under each preceding contract, in addition to accepting joint and several liability for the liability of either of them under the Preconstruction Subcontracts. To that extent, Mr Buckingham is right that each of the entities are ‘parties’ (small ‘p’) to the Subcontract; but being ‘parties’ to the contract is also evident from the fact they executed the deed. However, contrary to his submission, this undermines rather than supports his case:

As to the final part of the Subcontract wording upon which Mr Buckingham KC placed emphasis, in circumstances where Darchem and Efinor were not ‘Parties’ for the reasons given, the broad definition of ‘Dispute’ and the word ‘any’ before ‘Party’ (Clause 2.2 of Option W) does not assist him.

In addition to arguments based upon the words of the Subcontract, all of which have been considered above, Mr Buckingham prayed in aid following general principles

Neither principle is wrong. However, neither advances Mr Buckingham’s case as both are predicated upon Darchem being a Party to the Subcontract, as defined by the Subcontract. For the reasons I have given, that is not the case.

Stepping back, it is also instructive to consider the implications if Mr Buckingham KC’s submission was correct. I was initially doubtful of Ms Stephens’ submission that there would be chaos if each separate part of the JV was a Party, not least because the establishment of clear authorities as envisaged by Clause 12.6 would do much to address any operational uncertainties. However, in the specific context of Adjudication, there is force in the submission.

If each of Bouygues, LOR, Darchem and Framatome were indeed a separate ‘Party’ for the purposes of Clause 2.2 of Option W, a dispute could arise in relation to a particular payment certificate. That specific dispute having arisen, on the same day Bouygues and LOR could each, separately, commence an adjudication against each of Darchem and Framatome, nominating a different adjudicator for each in relation to an identical issue (i.e. up to four adjudications concurrently on the same point). It is not apparent what procedural mechanism the contract envisages to prevent such a situation.

Similarly, whilst Mr Buckingham KC relies upon Clause 4.17 of Option W to contend that the decision obtained by it is ‘binding upon the Parties’, it is clear that Option W was also drafted in anticipation that there were just two Parties (see the definition of Dispute Notice), and implicitly that the ‘Parties’ upon whom the decision was binding were parties to the Adjudication.

Had it been intended that each constituent entity to possess such rights, one would reasonably expect the contractual machinery to contain clearer and more comprehensive procedural safeguards (a) to prevent the potential chaos of the situation envisaged in paragraph 39 above; and (b) to remove the inherent ambiguity in the existing clause 4.17 in which it is not clear whether ‘Parties’ means ‘Parties’ to the Subcontract or those ‘Parties’ who had taken part in the Adjudication.

These considerations further support rejecting the construction advanced by Mr Buckingham KC.

For the reasons set out, Darchem was not a Party, as defined, of the Subcontract. It could not operate clause 2.2 of Option W in its own right. Clause 12.6 did not make it a Party and/or was not operated so as to give Darchem authority unilaterally to commence an adjudication on behalf of the JV. It follows that the summary judgment application fails.