RWE Npower Renewables v J N Bentley
Technology and Construction Court, 22 April 2013
In 2010 Bentley was awarded a contract by RWE for construction works in connection with the Black Rock Hydro Electricity scheme in northern Scotland. The work included the construction of a powerhouse building and extensive pipelines to divert water from the River Glass through the new hydro plant facility.
The contract was let on an NEC3 Option B form, which also included sectional completion and associated delay damages options, which were set out within the contract data. These provisions required Bentley to complete the pipeline works by 27 May 2011, but included the words “to allow hydro plant to be installed”. The works information, however, included a more comprehensive definition of what sectional works were to be completed by 27 May 2011; this stipulated that “all of” the pipeline works were required to be completed by that date.
Bentley’s pipeline works were not completed until some time after May 2011 and so RWE had made a payment deduction for liquidated damages. Bentley had successfully overturned this deduction in an adjudication, on the basis of the precedence of contractual documentation, which gave priority to the contract data over the works information, the relevant part of the contract data only requiring the completion of sufficient pipeline works “to allow hydro plant to be installed”.
In his judgment, Mr Justice Akenhead stressed that contract documents must be read as a whole and it is only in the case of irreconcilable ambiguity between different documents when a specified order of precedence would kick in. He also said that commercial contract interpretation should not be swayed by sympathy for one side which may have inadvertently signed up to something which it later regrets.
He found that there was in fact no ambiguity, as the parties’ intentions that the whole of the pipeline works would be complete by the sectional date of 27 May 2011 was clear from a review of all of the various contract documents. Therefore, as the pipelines were not completed by this date, RWE was entitled to deduct delay damages.
Richard Hildrick’s analysis
It is not unusual for construction contracts to contain apparently conflicting provisions within different documents, and this case serves as a useful reminder of how such ambiguities are to be dealt with.
It is a well-established principle of law that contracts should be interpreted objectively as per the understanding that would be reached by any reasonable person with all the background knowledge available at the time of the contract.
In taking such an approach, the entire contract document must be read as one, to establish if any apparent ambiguities can be reconciled. Only when different provisions are then established as fundamentally in conflict will any stated precedence of documents come into play, and if there is no such stated precedence, the contra proferentem principle might apply, whereby the ambiguous provision is generally construed in favour of the party who did not draft that provision.
So in this case, although the contract data document, which had the higher contractual standing, appeared to place a lesser obligation upon the contractor, when read as a whole it was clear that the contract intended the greater obligation as expressed in other documents and it was that overall contractual intention which was given effect to.
Parties must therefore be careful to ensure that the contract being entered into properly reflects the obligations, risks and benefits which were intended, rather than some other meaning. Different provisions which cover the same ground and thus create the potential for ambiguity and interpretation should be avoided in favour of one provision dealing comprehensively with the matter in question.
Richard Hildrick MSc MRICS MCIOB FCIArb is a quantity surveyor, contracts consultant and adjudicator. Tel: 01347 811155 Email: [email protected]
