Rhodia Chirex Ltd v laker Vent Engineering Ltd

An amendment removing an express reference to expert determination does not necessarily exclude that mechanism. The contract must be construed as a whole. Where the relevant expert provisions remain incorporated and are preserved elsewhere in the contract, the expert jurisdiction may continue.

Under a termination scheme providing for provisional and final certificates, an expert’s decision on a disputed provisional certificate operates as a revision of that certificate. The revised provisional balance is payable promptly. A later final certificate is a separate stage and cannot retrospectively defeat the accrued entitlement arising from the expert-revised provisional certificate.

The appeals arose from a piping sub-contract incorporating the IChemE model form. Rhodia terminated the contract without default by Laker Vent. A project manager issued a provisional termination certificate, including a deduction for retention monies. An expert appointed under the contractual machinery decided that the deduction was wrong and later determined a further sum due to Laker Vent.

The High Court granted summary judgment to Laker Vent on both claims. Rhodia challenged the expert’s jurisdiction, the effect of his decisions, and the validity of a later final termination certificate containing Rhodia’s cross-claim. The central issues were whether the amended dispute clause excluded expert determination, whether Rhodia had submitted to the expert’s jurisdiction, and whether the expert’s decisions revised the provisional certificate or determined the final account.

Both appeals were dismissed unanimously. Lord Justice Auld delivered the judgment, with Lady Justice Hale and Lord Justice Dyson agreeing. The summary judgments were upheld, although the second appeal was upheld on a different basis from that adopted by the High Court.

1. Contractual jurisdiction. The amendment to clause 11 removed the former qualified obligation to refer disputes to an expert. It did not remove expert determination as an available contractual option. Clause 46 was expressly subject to clause 45, while clauses 43.9, 16.7 and other provisions preserving expert determination remained untouched. There was therefore no conflict engaging the contractual order of precedence in clause 6.
2. Submission to jurisdiction. The High Court’s alternative finding was unnecessary and incorrect on the summary-judgment evidence. Whether conduct amounts to submission to an expert’s jurisdiction is highly fact-sensitive. Failure to reserve a jurisdictional objection, together with other circumstances, may amount to a clear submission, but silence or lack of clarity is insufficient by itself. Rhodia’s correspondence was capable of being understood as an acceptance for expediency while reserving a later jurisdictional challenge. Rhodia therefore had a real prospect of defending this issue.
3. Effect of expert determination. Clause 43.9 provides for a provisional certificate only where the relevant amounts cannot yet be ascertained. If the project manager’s best estimate is disputed, the expert’s final decision operates under clause 45.2 as a revision of the provisional certificate. The revised balance is payable promptly under clause 43.10. The expert’s contractual and factual powers were not confined to quantum. The instruction to pay the retention monies forthwith was unnecessary, because the revised balance was already overdue, but it was arguably within the power to revise the project manager’s payment instruction.
4. Final certification and arbitration. The second expert decision was binding only as a further revision of the provisional certificate, not as a final certificate. A later final certificate could not affect proceedings enforcing the revised provisional entitlement. Issues concerning final certification and cross-claims not referred to the expert could be considered in fresh arbitration or court proceedings if the contractual machinery had broken down. A stay under section 9 of the Arbitration Act 1996 was unavailable because the subject of the proceedings was the binding effect of the revised provisional certificate, not a dispute within those proceedings. The court applied the principle discussed in Halki Shipping Corporation v Sopex Oils Ltd [1998] 1 WLR 726.

1. Court of Appeal (Civil Division) — In [2003] EWCA Civ 1859, both appeals were dismissed. The second summary judgment was upheld on the primary basis that the expert’s decision revised the provisional termination certificate.
2. High Court of Justice, Queen’s Bench Division, Technology and Construction Court — His Honour Judge Mackay granted summary judgment for Laker Vent on the retention monies on 30 August 2002. Following further hearings, he gave judgment for Laker Vent on 6 February 2003 and made the summary judgment order on 10 March 2003.