Alstom Power Ltd v Somi Impianti SRL

In construction contracts, ownership of plant, equipment, materials or goods is primarily determined by construing the contract as a whole. Clear wording that ownership is to pass permanently will generally be given effect. A provision stating that items are “deemed” to be the property of the contractor may instead create contractual rights of possession and use, without transferring permanent title. The court must consider the wording, the commercial purpose of the provision, and related clauses concerning removal, use, revesting and liability. Equipment required to execute the works, but not intended for incorporation in the completed works, will ordinarily require clearer words before permanent ownership is transferred.

Alstom was the main contractor for a power station project and SOMI was its subcontractor. The subcontract required SOMI to provide equipment and materials and contained separate provisions stating that materials would become Alstom’s property and that subcontractor’s equipment would be deemed to be Alstom’s property when on site.

Following SOMI’s default and termination, Alstom retained the equipment and sought declarations concerning ownership and its right to prevent removal. A previous summary judgment had addressed certain documentation, but the court had to determine whether the contractual deeming provision permanently transferred title to all subcontractor’s equipment.

1. The court granted declarations concerning the parties’ rights over the relevant goods, materials and subcontractor’s equipment. It was not appropriate on a summary application to determine the effect of the Italian insolvency procedure or Italian law on Alstom’s contractual rights.

2. Following Cosslett (Contractors) Ltd v Mid-Glamorgan County Council (2007) 85 BLR 1, the question whether title passed was one of contractual construction. Clear words indicating permanent transfer would generally be effective. Where the contract merely stated that equipment was “deemed” to be the contractor’s property, the other contractual provisions had to be examined to identify the purpose, extent and duration of the arrangement.

3. Clause 54.9 clearly transferred ownership of goods and materials to Alstom, because it stated that they would become the contractor’s property at the earlier of delivery to site or the time when payment became due.

4. Clause 54.2 did not permanently transfer ownership of subcontractor’s equipment. The contrast between “deemed to be” in clause 54.2 and “shall become” in clause 54.9 was significant. The equipment was required to facilitate execution and completion of the works, and items such as cranes and scaffolding were not generally intended to be incorporated permanently. Clauses concerning removal by consent, continued use, revesting and the contractor’s liability were consistent with a temporary contractual arrangement rather than permanent title.

5. Alstom nevertheless had important possessory and contractual rights. Following termination, it could retain equipment reasonably required to facilitate completion until the works, including the warranty period, were complete. It could also exercise the sale and set-off mechanism in clause 63.3 once the contractual conditions for that remedy had arisen.

6. The earlier judgment did not create a wider res judicata. It concerned the TOPs and the immediate question whether SOMI could remove them. It did not decide that ownership of all subcontractor’s equipment had permanently transferred to Alstom.

This was a first-instance decision. The judgment records an earlier summary judgment concerning the TOPs, reported at [2011] EWHC 3941 (TCC), but the present judgment reconsidered the scope of the contractual ownership provisions and made declarations concerning the equipment and materials.