MW High Tech Projects UK Ltd and Another v Biffa Waste Services Ltd
| Jurisdiction | England & Wales |
| Judge | Mr Justice Stuart-Smith |
| Judgment Date | 02 February 2015 |
| Neutral Citation | [2015] EWHC 949 (TCC) |
| Court | Queen's Bench Division (Technology and Construction Court) |
| Date | 02 February 2015 |
| Docket Number | Claim No: HT-2015-00032 |
[2015] EWHC 949 (TCC)
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
TECHNOLOGY AND CONSTRUCTION COURT
Rolls Building,
110 Fetter Lane,
London EC4 1NL
Mr Justice Stuart-Smith
Claim No: HT-2015-00032
Mr V Moran QC and Mr J Rivett (instructed by Keatings) appeared on behalf of the Claimants.
Mr J Nash QC and Ms E Campbell (instructed by Nabarros) appeared on behalf of the Defendant.
Judgment approved
Monday, 2 February 2015
Introduction
Late on 26 January 2015 the first claimant made an urgent application ex parte to restrain the defendant from calling upon a retention bond and to require the defendant to countermand any steps it had already taken to call upon the bond. At that hearing I issued a temporary injunction in the terms requested by the claimants, and gave directions for a return date on 30 January. I also directed that the second claimant be added as a party. The second claimant is the first claimant's parent company and was added so as to ensure that there was substance to support the undertaking in damages which was then given on behalf of both claimants. As will become apparent, the second claimant had some involvement in the facts underlying this dispute. I will refer to the first claimant as "M+W" and the second claimant as "M+W gmbh". I will refer to the defendant as "Biffa" and to the provider of the retention bond, Euler Hermes Kreditversicherung AG, as "Euler". Biffa complied with my interim order, but applied on 30 January 2015 to set it aside. At the end of the hearing, I gave my decision, which was to set aside the interim injunction. This judgment sets out the reasons for that decision.
The Contractual Structure
In 2010 West Sussex County Council contracted with Biffa for the management and disposal of waste generated in its area. The contract was a Materials Resource Management Contract dated 28 June 2010 ("the MRMC contract"). One of the requirements of the MRMC contract was that a waste treatment plant ("the Plant") should be designed and constructed near Horsham. On the same day, Biffa entered into a contract with M+W for the design, construction, installation, commissioning and testing of the Plant ("the EPC Contract"). The time for completion of the contract was determined by reference to what were called ATC tests, ATC dates and ATC longstop dates. They were defined to include the following. ATC1 "means the certificate issued by the Independent Certifier confirming that the ATC1 tests had been passed". ATC1 date "means the date that the ATC1 tests were passed, as stated in the ATC1". Planned ATC1 date "means the date specified in the EPC delivery plan on which the ATC1 date is scheduled to be achieved, as adjusted from time to time in accordance with this contract". ATC longstop date "means the date 10 months from the planned ATC1 date".
The relevant provisions of the EPC Contract were as follows. Clause 11.2.1 stated:
"The Contractor shall complete the Works…ensuring that ATC1 is achieved on or before the Planned ATC1 Date;…"
Clause 22 provided for liquidated damages for delayed completion. Clause 22.1 provided:
"If ATC1 has not been issued by the Planned ATC1 Date, the Employer shall issue a notice in writing the Contractor to that effect."
Clause 22.3 provided:
"Subject to Clause 22.4, provided a notice has been issued under Clause 22.1 (and has not been cancelled), the Contractor shall, upon the Employer's demand, pay or allow to the Employer liquidated damages, at the relevant rate stated in Clause 22.8, from the relevant Planned ATC1 Date up to and including the ATC1 Date."
Clause 22.7 said:
"The Employer may (at any time after demanding the same) deduct liquidated damages arising under this Clause 22 from any sum due or to become due to the Contractor under this Contract. Further or alternatively, the Employer may recover the same from the Contractor within eight (8) Business Days of the Employer's demand."
Clause 22 did not, as sometimes occurs, state that the contractor would become liable to liquidated damages at any time before when they fell to be allowed or paid. Instead, the natural meaning of the words of clause 22.1 and clause 22.3, when taken on their own, was that the employer's, issuing of a notice in writing pursuant to clause 22.1 was merely a prerequisite to being entitled to demand liquidated damages at a later date. No obligation to pay or allow liquidated damages to the employer arose unless and until a demand was subsequently made under clause 22.3. This natural meaning was consistent with clause 22.7, which stated that the employer may "(at any time after demanding the same)" deduct liquidated damages arising under clause 22;" and, later in the clause, that the employer may recover liquidated damages from the contractor "within 8 business days of the employer's demand".
Clause 43 required M+W to procure parent company guarantees (by clauses 43.1 to 43.2(a)), a performance bond (which is not directly relevant to the present application (clause 43.3) and a retention bond (clause 43.5), which is directly relevant. The parent company guarantee and the two bonds were required to be in the form set out in schedules 18, 24 and 28 respectively.
Clause 43.6 is central to M+W's argument and provided as follows:
"It shall be a condition precedent to the Employer's right to make a call upon either the Performance Bond or the Retention Bond that the Employer has first called upon the Parent Company Guarantee…in respect of the same matter. In the event that the Guarantor has not accepted in writing each and every aspect of such a call on the Parent Company Guarantee…made by the Employer, including any requirement to make payment within ten (10) Business Days of receipt of a notice from the Employer pursuant to Clause 1 of the Parent Company Guarantee…then such condition precedent shall be discharged."
While the requirement that the employer "has first called upon the parent company guarantee" is not qualified or explained further, it is obvious that such call may be controversial, because the second sentence contemplates that the guarantor may not accept each and every aspect of the call. Where that happens, the condition precedent is discharged.
Clauses 49 and 50 provided for Termination on Contractor Default and for the compensation that would be payable in that event. Clause 49.1 said:
"If a breach falling within limb (k) (failure to achieve ATC1 by the ATC1 Longstop Date) of the definition of 'Contractor Default' has occurred, this Contract shall terminate on the day after the ATC1 Longstop Date."
2 said:
"If a Contractor Default other than that referred to in Clause 49.1.1 above has occurred and the Employer wishes to terminate this Contract, it must serve a Termination Notice on the Contractor."
Clause 50.1 said:
"On termination of this Contract under Clause 49 (Termination on Contractor Default) the provisions of Part 2 of Schedule 10 (Compensation on Termination) shall apply."
Contractor Default was defined and included as limb (k) "A failure to achieve ATC1 by the ATC1 longstop date". As indicated in clause 50.1, Schedule 10 set out a detailed arrangement for what was to happen in the event of termination. Part II dealt with what was to happen on termination for Contractor Default. Where, as in this case, the EPC Contract was terminated prior to issue of the ATC1 having been achieved, clauses 1.2.2 to 1.2.9 apply. Clause 1.2.2 set out a formula for determining what the contractor is to pay to the employer "by way of compensation and damages". One of the constituent elements of the formula was "Y" which was defined as follows:
"Y is the total damages for delay in respect of the Works calculated as follows:
(i) the liquidated damages (if any) for which the Contractor is liable pursuant to Clause 22 prior to the Termination Date and which have not been paid;
(ii) the liquidated damages (if any) that the Contractor would have been liable for had it not been for the termination of this Contract, such liquidated damages being based on the state of progress of the Works as at the Termination Date as measured against the Works Programme and the Planned ATC1 date."
Clause 1.2.3 to 1.2.9 of Schedule 10 provided that the cost to complete and delay damages, as defined by the Schedule, would be the amount calculated in accordance with the formula "as agreed by the parties, or as determined by an independent expert". In the absence of agreement, the independent expert was to produce a compensation statement containing a reasonable estimate of the cost to complete and delay damages that will determine the amount payable. By paragraph 1.3.5 of Schedule 10, interest would be payable at Libor plus one per cent from the termination date to the actual date of payment.
Returning to the main body of the EPC Contract, the continuation of obligations on termination was provided for by clause 3, which stated:
"3.1.1 The termination of this Contract is without prejudice to the rights, obligations and liabilities of the Parties accrued prior to termination.
3.1.2 The termination of this Contract for any reason shall not affect the continuing rights and obligations of the Parties under this Clause and Clause 14.11 (Duty to Mitigate),…Clause 73 (Notices),…and Schedule 10 (Compensation on Termination), or under any other provision of this Contract which is expressed to survive termination or which is required to give effect to such...
To continue reading
Request your trial
-
Tetronics (International) Ltd v HSBC Bank Plc
...Ms Hitching for Tetronics relied heavily upon a decision of Stuart-Smith J in MW High Tech Projects UK Ltd v Biffa Waste Services Ltd [2015] EWHC 949 (TCC). There is a fundamental difference between that case and this one however, and one which Mr Lazarus described on 31 January 2018 as an ......
-
Yuanda (UK) Company Ltd v Multiplex Construction Europe Ltd (formerly known as Brookfield Multiplex Construction Europe Ltd)
...instruments have been considered in numerous cases, including those such as MW High Tech Projects UK Ltd v Biffa Waste Services Ltd [2015] EWHC 949 (TCC) and Tetronics (International) Ltd v HSBC Bank PLC [2018] EWHC 201 (TCC). Letters of credit and on-demand bonds are broadly the same typ......
-
Shapoorji Pallonji & Company Private Ltd (a company incorporated under the laws of India) v Yumn Ltd (a company incorporated under the laws of Rwanda)
...General Insurance Limited & Ors [2003] EWCA Civ 470; [2003] 1 WLR 2214 and MW High Tech Projects UK Ltd v Biffa Waste Services Ltd [2015] EWHC 949 (TCC), per Stuart-Smith J (as he then was) at paragraphs 21 However, those principles are of no application in this case because there is no ......
-
Petrosaudi Oil Services (Venezuela) Ltd v (1) Novo Banco S.A.; (2) PDVSA Servicios S.A.; (3) PDVSA Services BV
...judge was finally deciding the parties rights under the drilling contract. The skeleton addressed the test applied in MW High Tech Projects UK v Biffa Waste Services [2015] EWHC 949 (TCC) for determining whether an interlocutory injunction should be granted on the grounds that the benefici......
-
On Demand Bonds: A Strategic Retreat?
...case; (2) The adequacy of damages as a remedy; (3) The balance of convenience; and (4) Whether the status quo should be maintained. [2015] EWHC 949 (TCC) 2013 EWCA (CIV) 1679 See Cargill International SA v Bangladesh Sugar and Food Industries Corp [1996] 4 All ER 563 (QBD) International Qua......
-
Projects And Construction Law Update - May 6, 2015
...responding to this consultation is 20 July 2015. Case law update MW High Tech Projects UK Ltd and another v Biffa Waste Services Ltd [2015] EWHC 949 (TCC) This case involved a temporary injunction granted by Mr Justice Stuart-Smith preventing a call on a retention bond. The defendant, Biffa......
-
Interaction Between On-Demand Bonds And The Underlying Contract Revisited By The English High Court On-Demand Bonds And The Underlying Contract Revisited By The English High Court
...This alert looks at the recent English High Court case of MW High Tech Projects UK Limited & Anr v Biffa Waste Services Limited [2015] EWHC 949 (TCC), which considered whether the court can or should intervene if it is established that the breach of obligation under the underlying contr......
-
Table of cases
...pty Ltd (in liq) [2010] VSCa 245 I.3.46, II.13.191, II.13.192, III.20.83 MW high Tech projects UK Ltd v Bifa Waste Services Ltd [2015] EWHC 949 (TCC) II.12.56, II.12.74, II.13.132, II.13.142 MW High Tech Projects UK Ltd v Haase Environmental Consulting GmbH [2015] EWHC 152 (TCC) II.10.129, ......
-
Security for performance
...& Marketing Ltd v Mauritius Commercial Bank Ltd [2015] UKpC 14 at [16]; MW High Tech Projects UK Ltd v Bifa Waste Services Ltd [2015] EWhC 949 (TCC) at [28]–[29], per Stuart-Smith J. See also Kejuruteraan Awam Cang Ceng (M) Sdn Bhd [1991] 3 CLJ 2502 (noted by powell-Smith, [1992] ICLr 420).......
-
Damages
...may provide for the owner to issue such a certiicate or notice: see, eg, MW High Tech Projects UK Ltd v Bifa Waste Services Ltd [2015] EWHC 949 (TCC) at [3]–[4], per Stuart-Smith J (concerning an EPC contract). It is thus the passing of the date for completion which usually triggers an obli......