Beatty Civil Engineering Ltd v Docklands Light Railway Ltd
| Jurisdiction | England & Wales |
| Judge | Sir Thomas Bingham Mr,Millett,Pill L JJ. |
| Judgment Date | 03 April 1996 |
| Court | Court of Appeal (Civil Division) |
| Date | 03 April 1996 |
Court of Appeal
Sir Thomas Bingham Mr, Millett and Pill L JJ.
John Blackburn QC and Clive Freedman (instructed by Masons Clerkenwell) for the plaintiff contractor.
Vivian Ramsey QC and David Thomas (instructed by Ashurst Morris Crisp) for the defendant employer.
The following cases were referred to in the judgment:
Ata Ul Haq v City Council of NairobiUNK (1962) 28 BLR 76.
Hosier & Dickinson Ltd v P & M Kaye LtdWLR [1972] 1 WLR 146.
Northern Regional Health Authority v Crouch Construction Co LtdELR [1984] QB 644.
Contract — Building contract — Terms — Employer's certificate — Employer to determine whether time extension to be granted and amount of final payment — Contract defined factors to be taken into account by employer when making decision — Contractor disputed employer's final decision — Whether general power to review employer's decision — Whether power to review employer's decision in special circumstances.
This was an appeal from a decision of Judge Cyril Newman QC sitting as an Official Referee on two preliminary issues in an action on a building contract.
The proceedings arose out of a contract, made on 20 October 1989, for substantial engineering works for the continuation of the Docklands Light Railway. Clause 44.4 entitled the plaintiff contractor to such an extension of time for completion of the contract as the defendant employer determined. Under cl. 60.5 the contractor was entitled to such payment as in the opinion of the employer was finally due. Other clauses in the contract provided for various factors to be taken into account when the employer determined what, if any, extension of time was to be allowed and the amount finally due under the contract.
The contract gave rise to claims and counterclaims between the parties. The contractor claimed, inter alia, a longer extension of time than the employer had granted and additional costs incurred as a result of disruption, for which it alleged the employer was responsible. The contractor contended that the decisions and judgements of the employer provided for in the contract only amounted to contractual machinery necessary for the day to day administration of the contract, which did not deprive it of the ordinary right of any contracting party to resort to the court to resolve any dispute.
Judge Cyril Newman QC held that the court had no general power to review the employer's decisions, opinions, instructions, directions, certificates or valuations, in particular those relating to the final determination. The court's powers were limited to special circumstances established in law as justifying interference, in particular where such decisions were not in accordance with the contract. The contractor appealed against the judge's decision that the court had power to interfere in special circumstances.
Held, dismissing the contractor's appeal:
1. The parties' respective rights and obligations were governed by the contract. Under cl. 44.4 and 60.5 the contractor's entitlement depended on the employer's judgement. Although that judgement was not expressed to be binding and conclusive, there was no agreed means of challenging it nor any objective standard by which the contractor's entitlement was to be assessed. The court could only give fair effect to what the parties had agreed.
2. The employer was nevertheless under a duty to act honestly, and bound by the contract to act fairly and reasonably. If, therefore, the contractor could prove a breach of that duty it would be entitled to a remedy.
3. The judge had correctly determined that the court had no general power to open up, review and revise the employer's decisions, opinions, instructions, directions, certificates or valuations. The second answer ought to be rephrased so as to provide that the court could grant appropriate relief to the contractor if and to the extent that it proved breaches of contract by the employer.
(Delivered by Sir Thomas Bingham MR)
On 26 February 1996 Judge Cyril Newman QC sitting as an official referee answered two preliminary questions raised at an early stage of a long action between Balfour Beatty Civil Engineering Limited (“the contractor”) and Docklands Light Railway Limited (“the employer”). The questions were:
“(1)Does the court have a general power to open up, review and revise the decisions, opinions, instructions, directions, certificates or valuations of the employer, in particular:
(1) the final determination and certificate of the employer under cl. 44.4;
(2) the final certificate of the employer under cl. 60.5.?
2. If not, are the powers of the court limited to special circumstances established in law as justifying interference by the courts?”
The answer given by the judge to the first of these questions was no. His answer to the second question was yes, but he added the qualifying words “in particular whether such decisions, opinions, instructions, directions, certificates or valuations have been proved to be not in accordance with the provisions of the contract”. In this appeal the contractor challenges the answers given by the judge to those questions. The employer seeks to uphold them.
The proceedings arise out of contract no. 1 for the Beckton extension of the Docklands Light Railway. This contract provided for the carrying out of extensive civil engineering works including the building of six bridges and three viaducts, the improvement of the station at Poplar, work on the track of the railway and the installation of new signalling equipment. The contract gave rise to claims and counterclaims between the contractor and the employer. Relevant for present purposes are claims by the contractor for a longer extension of time than the employer has granted and a claim for additional costs it incurred as a result of disruption for which it alleges the employer was responsible. Under its extension claim the contractor seeks payment of some £1.8m and under its disruption claim about £1.5m. The detailed facts giving rise to these claims are not in issue on this appeal.
What is the role of the court in these proceedings? Can it, as the contractor argues, investigate all the facts and decide what extension should...
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