Empyreal Energy Ltd v Daylighting Power Ltd

Expert determination clauses must be construed according to the contract’s language and structure. The expert may determine factual matters necessary to resolve the question lawfully referred, including whether alleged defects exist, their nature and effect, where those matters are necessary to assess a contractual reduction or reimbursement. The expert’s jurisdiction remains confined by the contractual machinery and the dispute identified in the referral. A notice of intention to refer is construed objectively and substance prevails over form. It must nevertheless identify the dispute with sufficient clarity to leave a reasonable recipient in no reasonable doubt as to the intended referral. A claim for the cost of remedial works is not necessarily a claim for reimbursement or reduction of the contract price.

Empyreal Energy Limited and Daylighting Power Limited were parties to an EPC contract for the design and construction of a solar park. Empyreal alleged defects and referred a claim for approximately £1.7 million to an expert determiner under clauses 13.7(b), 13.8 and 36 of the contract. The expert accepted the claim and ordered Daylighting to pay.

Daylighting brought Part 8 proceedings challenging the expert’s jurisdiction, while Empyreal sought summary judgment to enforce the determination. The issues were whether the referred dispute fell within the contractual expert determination machinery and whether Empyreal had served a valid notice of intention to refer.

1. Jurisdiction. The claim to enforce the determination failed. Under clauses 13.7(b) and 13.8, an expert determining a reasonable reduction or reimbursement of the contract price may consider whether alleged defects exist, and their nature, extent and effect, even where those matters are disputed. Such matters are necessary to determine the contractual financial adjustment.
2. The expert’s jurisdiction is nevertheless confined by the contract and by the dispute actually referred. Clause 13.8 concerned an inability to agree a reduction or reimbursement of the contract price. Empyreal’s correspondence, application and submissions objectively advanced a claim for the costs of proposed remedial works, rather than an adjustment or reimbursement of part of the contract price. The expert’s determination likewise treated the matter as a straightforward claim for repair costs.
3. The expert therefore lacked jurisdiction. The determination dated 5 May 2020 was null, void, of no effect and non-binding.
4. Notice. The letter of 25 February 2020 and email of 4 March 2020 could properly be read together. A notice need not use a prescribed label, and it was not merely a threat because it evidenced a settled intention to refer, subject to payment or agreement to adjudication.
5. However, the composite notice was materially confused about the nature of the dispute. It did not clearly and unambiguously identify an intended claim for adjustment of the contract price under clauses 13.7(b) and 13.8. It therefore failed the objective standard applicable to notices of intention to refer. The notice was invalid, and it was unnecessary to decide the separate issue of service under clause 33.