Wales and West Utilities Ltd v Pps Pipeline Systems GMBH
| Jurisdiction | England & Wales |
| Judge | Mr Justice Akenhead |
| Judgment Date | 23 January 2014 |
| Neutral Citation | [2014] EWHC 54 (TCC) |
| Date | 23 January 2014 |
| Court | Queen's Bench Division (Technology and Construction Court) |
| Docket Number | Case Nos: HT-13-449 and HT-14-08 |
[2014] EWHC 54 (TCC)
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
TECHNOLOGY AND CONSTRUCTION COURT
Royal Courts of Justice
Strand, London, WC2A 2LL
Mr Justice Akenhead
Case Nos: HT-13-449 and HT-14-08
Frances Pigott (instructed by Osborne Clark) for the Claimant
Mark Chennells (instructed by Fenwick Elliott LLP) for the Defendant
Hearing date: 16 January 2014
These two sets of proceedings relate to a dispute or possibly two disputes arising between the parties out of a contract dated 4 May 2012 ("the Contract") for the supply and construction by PPS Pipeline Systems GmbH ("PPS") of a new gas pipeline from Llanwrin in Powys to Dolgellau in Gwynedd; some 24 kilometres of steel pipe was to be laid in Snowdonia. The Employer was Wales & West Utilities Ltd ("Wales"). The Contract value was some £8,629,060.18. The primary issues between the parties relate to the jurisdiction of the adjudicator in two adjudications known as Adjudication Nos. 2 and 3 and in particular the scope of the dispute referred to him in Adjudication 2. The second set of proceedings, by which a court order was sought for the appointment of an arbitrator, has been resolved, subject to questions of costs.
Background
The contract was based on the NEC3 Engineering and Construction Contract (June 2005 Edition with later amendments) and provision was made for adjudication by way of Option W2. Apart from referring to disputes being "referred to and decided by the Adjudicator", there is little that assists otherwise. W2.3 (in the standard NEC3 present tense) states:
"(1) Before a Party refers a dispute to the Adjudicator, he gives a notice of adjudication to the other Party with a brief description of the dispute and the decision which he wishes the to Adjudicator to make…
(2) Within seven days of a Party giving a notice of adjudication he
• refers the dispute to the Adjudicator…
(4) The Adjudicator may
• review and revise any action or inaction of the Project Manager or Supervisor related to the dispute…"
To understand the nature of the issues between the parties in this case, it is necessary to refer to a number of the Contract's provisions:
(a) The NEC Conditions by Clause 16 provide for the Project Manager and the Contractor to give each other early warning of events which might increase costs, cause delays or impair performance of the completed works and then to cooperate as to how to overcome or address such events.
(b) Clause 60.1 identifies "compensation events" which may give rise to the Contractor becoming entitled to extensions of time and to payments for related costs. They include:
"60.1(1) The Project Manager gives an instruction changing the Work Information…
60.1(14) An event which is an Employer's risk as defined under clause 80.1 of this contract."
One of the standard compensation events was excluded by agreement namely the encountering of "physical conditions…which an experienced contractor would have judged at the Contract Date to have such a small chance of occurring that it would have been unreasonable for him to have allowed for them" (Clause 60.1(12)). Provision was made for notification of such compensation events, the submission of quotations and the assessment of compensation.
(c) One of the Employer's Risks was identified in Clause 80.1 to be "Claims, proceedings, compensation and costs payable which are due to…a fault of the Employer or a fault in his design".
(d) One of the incorporated contract documents was the "Works Information", Clause 51 of which stated:
"Imported Sand Surround/Pipe Protection
The Contractor is deemed to have included within his submitted Lump Sum Price for the provision and placing/fixing of the following quantities in relation to imported sand surround/pipe protection:
• Sand surround, 150 mm bed, 150 mm to sides and 150mm depth of cover over the pipeline -21,500 m
• "Rockguard" HD or similar approved protective coating -2000m".
PPS was due to start work in January 2012 and complete in October 2012. It seems that it did finish on time. The major part of the works involved excavating and laying the steel pipe in the trenches. As appears from the Works Information, the pipes were to be laid in places with a coating which was to be a wrapping material which was clearly intended to guard against abrasive damage to the pipes. This was, it was common ground, to be used (if required) in areas where the excavation had been in rock and the steel pipe needed to be protected against damage from the rock.
On 11 October 2012, PPS wrote to Wales in the following terms:
" Reference: Llanwrin to Dolgellau HN307 Pipeline Replacement
Early Warnings-Further Information
Additional Rock and Exceptional Weather Conditions
We are in receipt of your letter dated 4 th October, 2012 and would like to thank you for allowing us the time to investigate these matters in greater detail before notifying you of the relevant clauses relating to why these matters entitle us to a Compensation Event under the Contract and/or otherwise entitle us to additional payment.
We will take each issue in turn setting out our position.
Additional Quantity of Rock from that represented/detailed in the Contract
The Contract sets out information in respect of the occurrence of rock on the Project in various key documents contained within the Site Information and in the Works Information…
We have based our tender offer on the content of these documents which [Wales] have provided to us at tender stage. At that time, we established a quantity of rock likely to be encountered from that information and made an appropriate allowance for the deletion of clause 60.1(12) of the Contract in respect of the risk of any "unforeseen rock". Both our price and this allowance were predicated upon the information provided by [Wales] being:
a. Accurate and plotted correctly as to location, and
b. Representative in a genuine way of the conditions to be encountered both in specific locations and more widely.
Having executed the works and in the knowledge of the actual conditions prevailing, we know that our reasonable assumptions in this regard were in fact mis-placed…
PPS consider that the inaccuracy and unrepresentative nature of the information provided constitutes an Employer's Risk Event in accordance with clause 80.1, in that it may be negligence and/or a fault of the Employer and/or a fault in the Employer's Design. This is a Compensation event under clause 16.1(14) and otherwise.
Elements of the Employer's Design are set out in the Works Information…
• Sand surround, 150 mm bed, 150 mm to sides and 150mm depth of cover over the pipeline -21,500 m
• "Rockguard" HD or similar approved protective coating -2000m
The above "pipe protection" is of two types: sand for cobbly/rough ground and Rockguard HD or similar to protect from excavated hard rock in the backfill.
This quantity of rock shown by the Site Information and the Works Information can be established by the Site Information as 2,700m and by the Works Information as being no more than would require 2,000m of Rockguard. In actuality PPS have installed some 8,000m of Rockguard and 23,000m of sand. These are clear changes to the Works Information which should have been instructed by the Project Manager.
The Works Information is at the very least misleading and it now appears that the Works Information was based upon incorrect information.
The required changes to the Works Information constitute Compensation Events under clause 60.1 (1) and otherwise under 60.1.
Further, and/or in the alternative, the numerous instances of notifications of the additional rock possibly constitute Force Majeure events as described in clause 94.2.
In addition to the contractual rights set out above, we are advised that we have a common law claim in Negligent Misstatement and/or Misrepresentation in respect of both the quantity of rock likely to be encountered and as to the nature and extent of the works required to deal with it.
We attached further supporting information that demonstrates matters outlined above.
Exceptionally Inclement Weather…
Summary
Notwithstanding the significant difficulties we have encountered during and throughout the construction period we have made every effort to complete the works safely, efficiently, on time and without damage to the environment…
We trust the above sets out our position and provides the required notices under the Contract that you have been kind enough to await pending further investigations…"
On 18 October 2012, PPS sent to Wales an "Early Warning Notification" purportedly pursuant to Clause 16:
" Increased quantities of rock
The trench excavation and following operations have been seriously delayed due to rock. We have commissioned an expert report, which has highlighted the fact that the Works Information provided at Tender Stage is inaccurate. Not only has the quantity of rock encountered considerably increased throughout, the expected locations have been different…
For these reasons, we respectfully request that you consider payment for the additional costs incurred. As notified, we are prepared to allow Wales…to carry out a full audit to establish the actual costs incurred. We confirm that if this request is accepted, we will not seek contractual entitlement (i.e. any savings made will benefit the Project)…
The following activities may be affected:
• Topsoil Strip & Benching
• Mainline Trench Excavation
• Lower & Lay
• Backfill
• Reinstatement…"
Wales wrote to PPS on 29 October 2012, its letter being headed "Re: HN037 Pipeline Replacement; and Early Warning Further Information". It does not refer specifically to the Early Warning Notice of 18 October 2012 but it does reply specifically to the letter of 11 October...
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