In PBS Energo AS v Bester Generacion UK Ltd and anr [2020] EWHC 223 (TCC), Cockerill J had to consider arguments about extensions of time, ground conditions, contractual termination (both parties tried to terminate), asbestos, milestone payments, whether marking goods as belonging to one party meant title passed, non-payment, the prevention principle and liquidated damages (LADs).
The dispute arose out of a sub-contract for a (yet to be built) biomass energy plant in Wrexham. Bester was the contractor and PBS was the subbie, although they are referred to as employer and contractor in sub-contract, with Bester effectively passing down to PBS the majority of the obligations it was subject to in its contract. As the list of issues considered by the judge shows, the project went spectacularly wrong.
Evidence of fraud can be used, EG, 22 June 2019, considered an earlier judgment where Pepperall J dismissed the application by PBS for summary judgment of an adjudicator’s award in its favour because there was evidence the award had been obtained by PBS’s fraud.
Despite the complexity of the case, it is easy to summarise the result: PBS lost and Bester won. Two of the judge’s many findings are worth closer examination.
LADs
This judgment is one of the first judicial considerations of LADs since the Court of Appeal’s decision in Triple Point Technology Inc v PTT Public Company Ltd [2019] EWCA Civ 230 (The case that time forgot, EG, 11 May 2019). That caused something of a stir by holding that a LADs provision did not apply in a situation where the contractor had failed to complete its work.
The Court of Appeal had relied on a seemingly long-forgotten House of Lords decision – British Glanzstoff Manufacturing Co Ltd v General Accident Fire and Life Assurance Co Ltd 1913 SC (HL) 1. In both Glanzstoff and Triple Point, the LADs provisions were conditional on the contractor failing to complete the relevant works or section in time. Although there has been some criticism from commentators as to whether or not the Triple Point decision is correct, it could have wide-reaching consequences, since many building contracts, including the current JCT suite, have LADs clauses that are drafted on the assumption the contractor has completed the work or section before the employer can claim LADs. Triple Point made it clear that if LADs do not apply, the employer can still recover damages at common law for any delay (although this is often a time-consuming and expensive exercise which pre-agreed provisions for delay are supposed to help the parties avoid).
PBS tried to defeat Bester’s claim for LADs by relying on Triple Point. Cockerill J disagreed and allowed Bester’s claim. She stressed Triple Point turned on the particular wording of the LADs clause in question and the contractual provisions in this case (based on the 1999 FIDIC Silver Book) were not drafted so as to make it conditional on the work having been completed. Not only did the sub-contract allow for pre-existing claims (including those for LADs) to survive termination, but the LADs provision was drafted so as to give Bester a right to claim damages from the time at which the works should have been completed.
Termination and the prevention principle
Although both parties tried to terminate as a result of alleged breaches of contract by the other, Cockerill J accepted that Bester was entitled to terminate because, in breach of clause 15.2 of the sub-contract, PBS had abandoned the works or demonstrated an intention not to perform its obligations.
It was difficult for PBS to deny it had abandoned the works because it had been absent from the site for nearly four months by the time Bester terminated. However, PBS argued the abandonment should not count against it because the site had been locked and it was impossible for it to return. PBS relied on the prevention principle, arguing Bester could not insist PBS return to site when Bester had made it impossible to do so.
The judge gave this argument short shrift. Taking comfort from Adyard Abu Dhabi v SD Marine Services [2011] EWHC 848 (Comm), Obrascon Huarte Lain SA v Her Majesty’s Attorney General for Gibraltar [2014] EWHC 1028 (TCC), and North Midland Building Ltd v Cyden [2018] EWCA Civ 1744; [2018] PLSCS 139, Cockerill J stressed the principle only applied when there was prevention in fact. The judge stressed it was not, as is often argued, “some broad or overarching principle”.
PBS faced three problems. First, the evidence showed PBS locked the site. That was not done by Bester or Bester’s client. Second, and although Bester’s client changed the locks later on, it did not stop PBS from working on other (off-site) elements. Finally, PBS had never actually tried to return to site. The judge described the argument as a “nice example of a hypothetical prevention”.
Learning points
Cockerill J’s emphasis on what the evidence before her actually showed, as well as the judge’s erudite analysis of the issues not covered in this note, make the judgment well worth a read.
Stuart Pemble is a partner at Mills & Reeve
