[2016] EWHC 2614 (TCC)

Highways England Company (“HEC”) applied to strike out part of a claim challenging an expert’s decision under a Private Finance Initiative contract. The contract was a design, build, finance and operate contract under which HEC, a government-owned company, had engaged Connect Plus (“CP”) to provide various services over a 30-year period in respect of the M25 motorway around London. The contract was for some £6.2billion in total. In 2014, a dispute between the parties arose regarding the interpretation and application of a specific element of the compensation mechanism known as the “critical incident adjustment”. The dispute resolution provisions of the contract provided for a tiered process whereby the dispute was passed to a Network Board for consideration at first instance. It was subsequently referred to an expert for expert determination pursuant to the dispute resolution provisions in the contract. The expert’s determination was said to be binding on the parties unless and until it was “revised, cancelled or varied” by the court.

HEC said that a critical incident was an incident which was declared as such by a National Incident Liaison Officer (NILO) on behalf of HEC. Therefore, HEC had discretion to declare whether or not an incident was critical and this was only challengeable if HEC acted deliberately unfairly or in bad faith. CP asserted that the relevant definition of Critical Incident was contained in a list of incidents that were deemed to be critical — the list being within the M25 DBFO Co Service Provider Contingency Plan. Further, CP contended that the incidents on the list were to be taken to have been declared in advance as critical incidents or that HEC was obliged to declare that something was a critical incident if it was in accordance with the deemed list.

The expert favoured HEC’s interpretation. A Critical Incident for the purposes of calculating the Critical Incident Adjustment meant an incident declared as critical by a NILO. If a “deemed critical incident” took place, such incident was not to be treated as declared as a critical incident for the purposes of the Critical Incident Adjustment. CP issued proceedings to challenge the expert determination. As a general principle, parties who sign detailed and specific dispute resolution provisions are usually held to be bound by them. If one party brings court proceedings which the other says are not in accordance with the dispute resolution provisions, and are therefore in breach of them, the court has the inherent jurisdiction to stay the proceedings.

CP claimed that the expert was wrong in his construction and application of the Contract. In addition, the parties had agreed previously a different approach to the Contract and HEC was estopped from departing from that approach. HEC applied to strike out the second ground of the challenge on the basis that the court had no jurisdiction to consider it, because it was not a claim that had been determined by the expert. The Contract’s dispute resolution clause allowed the court to “open up, review and revise any … determination of the Expert”, but only if the claim was the “same or substantially the same” as the dispute the expert had determined (as per the judgment of Mr Justice Ramsey in HG Construction Ltd v Ashwell Homes (East Anglia) Ltd [2007] EWHC 144).

Mr Justice Coulson disagreed with CP. He held that the original dispute referred to the expert was the same as the dispute referred to the court. Even though CP were relying on contract clauses and documents which had not been presented to the expert, the underlying dispute was about more than just the interpretation of the words. The dispute had always included the operation of the contract provisions and the applicable procedures that were adopted in practice. In reaching this conclusion, the Judge adopted the approach to the words “same or substantially the same” as outlined by Lord Justice Dyson in Quietfield Ltd v Vascroft Construction Ltd (Dispatch Issue 69 and Issue 79), where he said:

“There is an analogy here, albeit an imperfect one, with the rules developed by the common law to prevent successive litigation over the same matter.”

Even if the second ground was a new claim, it would not be right to strike it out as it would be subject to the agreed resolution procedure under the Contract. Further, with regard to the argument that HEC was estopped from putting forward its interpretation of the agreement, Mr Justice Coulson held that it did not amount to a submission that the expert had never had the jurisdiction to deal with that dispute in the first place. The argument was that the expert had reached the wrong result, not that he lacked or had exceeded his jurisdiction.

Finally, Mr Justice Coulson declined to order a stay because there had been no breach of the parties’ contractual dispute resolution procedure. Further, he held that a stay would be contrary to the overriding objective as it would “merely cause delay and increase expense”. It would simply not be possible to draw a dividing line between those parts of the case that the court could deal with and those that should be referred to the Network Board and/or expert first. In accordance with this pragmatic approach, the Judge confirmed that this would have been the case even if he had been wrong and there had been a breach of the contract’s dispute resolution procedures. Further, any future decision by the expert was almost certainly going to be challenged, which would result in the court potentially having to consider two experts’ determinations, with potentially different results. It was therefore: “difficult to see any useful purpose being served by such an exercise”.