(1) Costain Ltd (2) O
Case reference:
[2005] EWHC 1018 (TCC)
Friday, 20 May 2005
Key terms: Interim Injunctions -CTRL - Project Manager - Incorrect Payment Assessments - Recourse to Adjudication
The Claimant consortium was carrying out work to the Channel Tunnel High Speed Rail Link Project “CTRL”. They sought an interim injunction. They argued that the Project Manager (comprising Bechtel Limited, Ove Arup and Partners, Sir William Halcrow and Partners and Systra) the rail link engineers “RLE”.
The contract provided for actual costs to be paid less any disallowable costs. There was also a target cost mechanism, and the Project Manager was to assess the amounts due at each assessment date. Payment of Certificate No 47 issued on 6 February 2005 showed that the value of work carried out was approximately £264.2m, with disallowable costs of approximately £1.4m. Certificate No 48 on 8 April increased the disallowable costs to £5.8m.
The Consortium brought a claim against RLE on the basis that Mr Basily had encouraged Bechtel’s employees to adopt a more strict approach to the certification, and therefore operates the contract partially and in bad faith. They sought injunctive relief.
Mr Justice Jackson held that there was no evidence that Mr Basily was acting dishonestly. On that basis the Consortium had failed to show they had met the injunction test set out in the case of American Cyanamid Co v Ethocon [1975] AC 396. RLE submitted, that in any event the Project Manager was able to act in the interests of the employer, and did not need to act impartially as between the employer and the contractor when assessing the payment under the conventional approach established in Sutcliffe v Thackrah [1974] AC 727. His Honour had failed to understand how the principles in Sutcliffe could not apply, but did not make a final decision on the issue. In respect of whether there was a breach of duty Mr Justice Jackson concluded that the Consortium had established that there was a serious question to be tried. Nonetheless it was not appropriate to grant an interim injunction. This was because the contractor provided a rapid mechanism, namely adjudication, by which the Consortium could resolve issues in respect of interim payments.
The contract provided for actual costs to be paid less any disallowable costs. There was also a target cost mechanism, and the Project Manager was to assess the amounts due at each assessment date. Payment of Certificate No 47 issued on 6 February 2005 showed that the value of work carried out was approximately £264.2m, with disallowable costs of approximately £1.4m. Certificate No 48 on 8 April increased the disallowable costs to £5.8m.
The Consortium brought a claim against RLE on the basis that Mr Basily had encouraged Bechtel’s employees to adopt a more strict approach to the certification, and therefore operates the contract partially and in bad faith. They sought injunctive relief.
Mr Justice Jackson held that there was no evidence that Mr Basily was acting dishonestly. On that basis the Consortium had failed to show they had met the injunction test set out in the case of American Cyanamid Co v Ethocon [1975] AC 396. RLE submitted, that in any event the Project Manager was able to act in the interests of the employer, and did not need to act impartially as between the employer and the contractor when assessing the payment under the conventional approach established in Sutcliffe v Thackrah [1974] AC 727. His Honour had failed to understand how the principles in Sutcliffe could not apply, but did not make a final decision on the issue. In respect of whether there was a breach of duty Mr Justice Jackson concluded that the Consortium had established that there was a serious question to be tried. Nonetheless it was not appropriate to grant an interim injunction. This was because the contractor provided a rapid mechanism, namely adjudication, by which the Consortium could resolve issues in respect of interim payments.