[2014] EWCA Civ 1679

By an agreement dated 22 March 2010 Bentley agreed to carry out civil engineering works on a hydro-electricity generating plant in Scotland. The works were defined in the documents referred to in clause 2 of the contract, all of which were agreed to form part of it and were to be read and construed accordingly. Clause 2 also provided that the documents to which it referred should be read and construed in a prescribed order of precedence. The agreement included the NEC3 Engineering and Construction Contract Conditions June 2005 Edition (with amendments June 2006), Contract Data sheets Parts 1 and 2, Post Tender Clarifications, Works Information and Site Information.

It was agreed that the penstock pipeline was not completed until 25 October 2012. An adjudicator held, however, that section 2 of the works as defined in Options X5 had been completed on 21 February 2012. He held that there was an inconsistency between Part 1 of the Contract Data and clause 6.2 of the Works Information and that the former took precedence. On the true construction of Option X5 the provisions defining the scope of section 2 were in his view to be construed as requiring completion of the penstock pipeline only to the extent necessary to enable the hydro plant to be installed. It was common ground that in order to achieve that limited purpose only a short length of pipeline upstream and downstream of the powerhouse was required.

RWE, dissatisfied with the adjudicator’s decision, began Part 8 proceedings seeking a declaration that Bentley’s obligation was defined by clause 6.2 of the Works Information, and that all the work described as forming part of section 2 had to be finished before the section as a whole could be regarded as complete. If correct, that meant that the intake, penstock pipeline and tailrace all had to have been completed and tested.

Mr Justice Akenhead had held that the agreement should be read as a whole and construed so far as possible to avoid inconsistencies between different parts on the assumption that the parties had intended to express their intentions in a consistent and coherent way. In his view, there was no significant inconsistency between Option X5 and clause 6.2, which were capable of being read together without undue difficulty.

Bentley submitted that this approach to the documents had been wrong. There was a clear discrepancy between Option X5 and clause 6.2. Bentley argued that the former called only for the installation of the hydro plant as part of section 2, whereas the latter required its testing and commissioning. Bentley submitted that the existence of this discrepancy either meant that the entirety of clause 6.2 should be omitted, or if that were too extreme, at least the whole of the provisions in clause 6.2 defining section 2 in favour of the corresponding provisions of Option X5.

Moore-Bick LJ started from the same position as the judge, that the contract documents should as far as possible be read as complementing each other and therefore as expressing the parties’ intentions in a consistent and coherent manner. Option X5 was worded in more general terms than clause 6.2, which identified in greater detail the work comprised in each section. That was reflected in clause 1 of Part 1 of the Contract Data, which expressly recognises that the works “are more comprehensively set out in Part 2, Works Information”. Despite differences in detail, however, Moore-Bick LJ stated that one would expect the two provisions to complement each other and that only in the case of a clear and irreconcilable discrepancy would it be necessary to resort to the contractual order of precedence to resolve it.

Both clauses purported to define the content of section 2 and both referred to the completion and testing of the penstock pipeline, which strongly suggested completion of the whole run. Moore-Bick LJ noted that this conclusion was reinforced by the more specific language used in the second bullet point in the part of clause 6.2 which dealt with section 2. Moore-Bick LJ held that these two parts of the contract were capable of being read together sensibly on the basis that section 2 was intended to comprise substantially the whole of Bentley’s work, other than the part which fell within section 1. He stated that, approached in this way, it did not matter for the purposes of the agreement whether the reference was to “installing” the hydro plant (X5) or to “testing and commissioning” it (clause 6.2), because none of that formed part of Bentley’s work. Moore-Bick LJ continued:

“Moreover, insofar as there is any uncertainty in Option X5 about the scope of section 2, the right way to resolve it, in my view, is by obtaining such assistance as one can from other parts of the contract. For that purpose clause 6.2 with its more detailed provisions is the obvious place at which to start. I agree with the judge, therefore, that the two clauses can and should be read in harmony with each other. The result is that Bentley’s obligation was to complete the pipelines by 27th May 2011.”

Moore-Bick LJ further remarked that even if it was assumed that there was a genuine discrepancy between the documents, deciding the order of precedence would only become necessary where “different provisions on their true construction impose different obligations in relation to the same subject matter”. Option X5 could therefore not be considered in isolation. Moore-Bick LJ therefore held that the judge was correct to hold that section 2 of the works had not been completed until the whole of the penstock pipeline had been completed and tested.

The appeal was dismissed.