Darchem Engineering Limited v Bouygues Travaux Publics and Laing O’Rourke Delivery Limited

The Technology and Construction Court has handed down its judgment in the recent case of Darchem Engineering Limited v Bouygues Travaux Publics and Laing O’Rourke Delivery Limited, bringing helpful judicial guidance on the ability of a single member of an unincorporated joint venture contracting party to commence an adjudication.

Clyde & Co was instructed by the successful party in this application, Bouygues Travaux Publics and Laing O’Rourke Delivery Limited, acting in an unincorporated joint venture (“BYLOR”).  BYLOR is responsible for delivering the main civil engineering works package in the construction of Hinkley Point C nuclear power station. Hinkley Point C is the first nuclear power station to be constructed in the UK for 30 years and one of the largest and most complex infrastructure projects in Europe.

Background

BYLOR appointed an unincorporated joint venture comprising Darchem Engineering Limited and Efinor Limited (now Framatome Limited) (“EDEL”) to undertake works at the Hinkley Point C nuclear power station in Somerset (the “Subcontract”). Darchem Engineering Limited (“Darchem”) commenced three adjudications against BYLOR pursuant to the Subcontract in its own name, rather than as EDEL. Darchem stated in its references 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, BYLOR challenged the jurisdiction of the Adjudicator on the basis that Darchem was not entitled to bring an adjudication as it was not a party to the Subcontract. The Adjudicator rejected this argument in all three adjudications. 

Darchem sought to enforce the Adjudicator’s third decision in the sum of £23,944,012 by way of summary judgment. 

Submissions

Darchem’s position was that Darchem was entitled to bring an adjudication in its sole name as it was a party under the Subcontract. Its reasons included:

• The “Agreement” section of the Subcontract presents a list of parties which lists each separate entity to both joint ventures. The Agreement further states that “All of the above are together known as the “Parties”. 
• This was a definitional sentence by which all four entities are Parties, meaning that Darchem was a Party for the purposes of the adjudication provisions of the Subcontract. 
• Insofar as necessary, under the priority of documents clause, the Agreement took precedence over the conditions of the Subcontract. 
• Darchem was acting jointly and severally with its subcontractor joint venture constituent. 

BYLOR argued that Darchem was not a party to the Subcontract and could not bring an adjudication in its sole name. BYLOR’s reasons included:

• The Conditions of Subcontract are drafted in a manner objectively consistent with the Subcontract being bilateral. The language throughout the Subcontract indicated that there were only two parties.  
• The Agreement stipulated that words and expressions shall have the meanings as and respectively assigned to them in the conditions of subcontract. 
• The conditions defined the Parties as the Contractor and Subcontractor. Italicised words were identified in the Subcontract Data, which identifies the entities comprising the joint ventures and does not include reference to the parties acting jointly and severally. 

Judgment 

Although this was an adjudication enforcement to which the Court will typically take a robust approach, the issue in this particular enforcement was the proper construction of the Subcontract. 

As both parties concurred, on the matter of construction, the Subcontract must be construed as a whole. 

Language consistent with the Subcontract being bilateral

Looking at the conditions, the Judge concurred with BYLOR that the Subcontract is drafted in a manner consistent with it being bilateral due to the terminology. The Subcontract contained language such as “either”, “other”, “neither” and so on. There were therefore two parties, not four, or even six as Darchem submitted.

The termination provisions further supported BYLOR’s position, with one clause specifically providing for a situation where a Party comprises two or more companies acting in joint venture. It can be inferred from this that the word “Party” is not elsewhere a reference to each constituent of the two joint ventures. 

Similarly, under the parent company guarantee provisions, there is a specific provision for where the Subcontractor comprises two or more companies. This is again consistent with the objective intention that “Subcontractor” is taken to be a single entity. 

With regards to Darchem’s argument that “Parties” in the Agreement section is definitional and all four stated entities are “Parties”, the Judge looked at the following sentence:

“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.”

The sentence includes language which specifically contemplates that one or more of the two Parties is a joint venture comprises of more than one legal entity. Accordingly, this sentence is consistent with there being only two Parties.

Joint and several liability 

A further argument advanced by Darchem was that each constituent of the joint venture subcontractor are acting jointly and severally with the other.

On this point, the Judge noted that the words “acting jointly and severally” are capable of conveying a broader meaning than merely taking on joint and several liability. Notwithstanding this, clause 12.6 of the Subcontract specifically addresses a situation where the Subcontractor comprised two or more companies acting in joint venture. 

The first sentence of clause 12.6 imposes joint and several liability upon each constituent company of the joint venture, and the second sentence provides that a notified leader can bind the Subcontractor. Absent a notification, the Contractor is entitled to rely upon each constituent as having authority to bind. 

As such a notification is required, it cannot follow that a constituent of the subcontracting joint venture has unilateral entitlement to act severally. There would be no purpose in distinguishing between the situation where notice is, or is not, given.

This clause also does not oblige the Contractor to rely upon a constituent as having the authority to bind the Subcontractor, and here, BYLOR explicitly rejected Darchem’s authority to bring an adjudication in its own name. 

Concluding on this point, the Judge held that 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 joint venture is joint and several. 

Implications if Darchem was correct

The Judge explored the implications if Darchem was correct in its interpretation. 

Looking at adjudication in particular, if each of Bouygues, LOR, Darchem and Framatome were indeed a separate “Party” for the purposes of the adjudication provisions, then a dispute over a payment certificate, for example, could lead to four adjudications concurrently on the same point. 

There does not appear to be a procedural mechanism in the Subcontract to prevent such a situation. If it was intended that each constituent entity had such rights, it would be reasonably expected that the Subcontract would have a mechanism with procedural safeguards. 

Conclusion 

It was held that 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 subcontractor joint venture. It follows that the summary judgment application fails.

Darchem has been granted permission to appeal from the Court of Appeal and it is likely that this will be heard later this year.