Herbosh-Kiere Marine Contractors Ltd v Dover Harbour Board
| Jurisdiction | England & Wales |
| Judge | Mr Justice Akenhead |
| Judgment Date | 26 January 2012 |
| Neutral Citation | [2012] EWHC 84 (TCC) |
| Docket Number | Case No: HT-11-511 |
| Court | Queen's Bench Division (Technology and Construction Court) |
| Date | 26 January 2012 |
[2012] EWHC 84 (TCC)
Mr Justice Akenhead
Case No: HT-11-511
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION TECHNOLOGY AND CONSTRUCTION COURT
Royal Courts of Justice
Strand, London, WC2A 2LL
Samuel Townend (instructed by SNR Denton UK LLP) for the Claimant
Jessica Stephens (instructed by Speechly Bircham LLP) for the Defendant
Hearing date: 20 January 2012
In the First World War, a former cargo ship, the Spanish Prince, having been appropriately converted, was deliberately sunk by the Admiralty close to the entrance to Dover Harbour. The purpose was to hinder or prevent German U-Boats firing torpedoes into what was at that time a strategically important and recently constructed harbour. During the Second World War, having been damaged by a bombing raid, the rermains of another vessel, the War Sepoy, were sunk alongside the Spanish Prince. In April 2010, the Dover Harbour Board ("DHB") employed Herbosch-Kiere Marine Contractors Ltd ("HKM") by contract ("the Contract") to provide the equipment including barges, personnel and supervision to remove the remains of the Spanish Prince, together with some debris from the War Sepoy. The project was completed somewhat late and issues arose between the parties in relation to the final account; to a substantial extent at least, these issues related to the delays, their causes and the financial credits or debits attributable thereto. HKM instituted, as it was entitled to do, adjudication proceedings against DHB in October 2011 which were contested by the latter, and, in these court proceedings, HKM seeks to enforce the adjudicator's decision in its favour. DHB contests these proceedings on the basis that the adjudicator significantly exceeded his jurisdiction or failed to follow the rules of natural justice because he adopted, it is argued, a method of assessing the financial compensation due for the delays which had been put forward by neither party before or during the adjudication.
The Background
HKM are specialist marine contractors which clearly has experience, often with the use of heavy lifting barges, of seabed excavation, dredging and clearance. The contract between the parties was in the standard form of International Wreck Removal and Marine Services Agreement, sometimes known as "Wreckstage 99". Part 1 of the pro-forma Contract comprised 18 filled in boxes, Box 7 of which described the nature of the services to be provided:
"To provide marine equipment, personnel and supervision as detailed within Annex I to remove and dispose part of the vessel wreck Spanish Prince and associated field of debris. As detailed within Annex II VESSEL to be removed entire length down to a minimum -8.5m datum, accordingly some remains of the wreck and other associated debris will remain on the seabed on completion and works. No contaminated or special waste including Asbestos, is included within the agreed works…The works are to be monitored against the agreed works programme…"
The "Lump Sum Price" was said in Box 10 (a) to be £1,787,912 but this "figure is subject to change for reasons noted within this agreement". Box 13 identified that certain "Extra Costs" might be payable under various contract clauses and in the context of the "risk register" and "pain/gain assessment".
Although it is not part of this Court's function to construe the clauses in Part II of the Contract, it will be helpful to set out several clauses:
"7. If the Contractor is delayed in performing its obligations under this Agreement due to adverse weather or sea conditions or due to any other reason outside the control of the Contractor, including the effect of any risk noted within the contract Risk Register, the Contractor shall receive from the Company additional time and compensation
- per working day or pro rata—at the rates set out in Annex 1, for the time the Contractor is delayed in commencing or continuing the services with the progress…"
19.1 The works will be deemed complete once the Company certifies the works had been completed…
19.2 A pain/gain share of time related costs is incorporated within this agreement, based on the agreed contract programme of works…
19.3 Additional time awarded to the Contractor under the terms of this agreement for weather delays or additional instructed works and the like, will be added to the contract programme of works, and all time to be paid at the agreed resource rates noted within Annex I. the programme will be regularly updated by agreement to indicate any extended Contract completion date, facilitating the assessment of Pain/Gain share based on the final completion date."
There was also an adjudication clause, Clause 23 which called for the adjudication to be conducted under the Institute of Civil Engineers procedure.
Annex 1 contained a breakdown of the Lump Sum Price materially including the following three elements:
There then followed a breakdown of what each such "resource" comprised such that, for instance, Barge 2 comprised not only the barge itself but also, amongst other things, a crawler crane, a demolition grab and a tug boat and crew.
| "Barge 1 resource 60 days @ £8097 | £485,820 |
| Barge 2 resource 64 days @ £11120 | £711,680 |
| Supervision resource 64 days at £2615 | £167,360" |
The contractual "Pain/Gain" formula appears (without the Court making any finding on this) to involve the correlation between delay and the resources rates for Barges 1 and 2 and the supervision. This formula appears to have been one which was designed to reward HKM if it finished earlier than it should and the opposite if it finished culpably late.
It seems to have been common ground that the works started in late June 2010, albeit there may well have been some issue as to whether the work should have started in early June 2010. There is no dispute that there was some delay caused by weather or sea conditions and by the finding of asbestos within the wreck, although the extent of the delay was very much in issue. Again, it was common ground at least in the court proceedings that the barge, comprised within the description of Barge 2 in the Contract (the "Waasland"), was demobilised by HKM in late September 2010, albeit that the tugboat (called the "Multicat") remained until about 23 October 2010. The works as a whole were completed on 15 December 2010. Again it seems to have been common ground that the original contract completion period was some 64 days. Thus, arguably the project overran by some three months.
Disputes arose on the final account between the parties. On 23 June 2011 HKM put forward to DHB the final version of the account stating: "in a final effort to move the account forward, we list below the following discrepancies with some narrative explaining why we contend that extensions of time generally should be increased by DHB". The prose part of this letter is undoubtedly concerned with what HKM believed was their extension of time entitlement. It addresses delays attributable to Weather ("Variation No. 2"), Asbestos ("Variation No. 3"), Stone Fill ("Variation No. 4"), Bombing of Boilers ("Variation No. 5") and Quay/Waste Operations. The letter went through every month from June to December 2010 highlighting when and why additional extensions were required. The letter concluded by enclosing for the attention of DHB HKM's final account dated 23 June 2011 including the items and adjustments noted earlier in the letter. The gross sum of £3,946,365.91 was claimed leaving, after payments, a balance of £905,588.34 said to be due.
The attached final account claimed the Lump Price items as well as the Variations, although the Asbestos claim was split into two with one being called Asbestos and the other being called "Asbestos-disrupted works". There is no doubt that the calculations for money claimed against these various delay or disruption Variations is done on a resource by resource basis. An example is the Weather Variation:
The "Pain/Gain" assessment is also set out on a resource by resource basis so, for instance it does not apply in relation to Barge 2 as from 26 September 2010 when it was demobilised. Similarly the Multicat tug features until 15 October 2010 when it was demobilised.
| "Barge 1 resource | days 41.4 | 8,097.00 | 335,350.75 |
| Barge 2 resource rate (£11,120 less multicat £2350 | days15.7 | 8,770.00 | 137,762.08 |
| Multicat (identified separately to barge 2) | days 22.4 | 2,350.00 | 52,581.25 |
| Supervision | days41.4 | 2,615.00 | 108,304.58 |
| Quay waste operations to endof October | days 29.2 | 3,480.00 | 101,616.00" |
The response from DHB came on 13 July 2011 in the form of a letter and further valuation. That one-page valuation addresses the delays which DHB is accepting again on a resource by resource basis, it being accepted, at least for the weather and the stone fill that the Multicat rate can be extracted and used separately. For all items for which delay is accepted, supervision at the full rate is allowed for the longest delay affecting operations. Thus, in the same way as HKM claimed the full supervision rate for the whole period of delay for Barge 1 even though Barge 2 was delayed by less, so too did DHB allow the full supervision rate for the longest period of delay relating to the two Barges. This response led to an additional £162,024.25 being certified and paid by DHB to HKM
There is no suggestion that there were any further material exchanges between the parties. But it is clear that by October 2011 HKM had decided to seek adjudication.
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