Amey Birmingham Highways Ltd v Birmingham City Council

This judgment will be in the following parts: (1) Introduction; (2) Pleadings and Procedure; (3) Dispute and Adjudicator's Decision; (4) Jurisdiction and Relief; (5) Background Facts; (6) Project Agreement; (7) Subsequent Facts; (8) Law; (9) Issue 1 -- Scope of the Agreement as set out in the Dispute; (10) Issue 2 -- Updating of the Agreement as set out in the Dispute; (11) Issue 3 -- Certificates following Issues 1 and 2; (12) Declarations and Discretion; (13) Conclusions and (14) Order. I apologise for the delay in the provision of this judgment.

Introduction

On 7 March 2015 a notice of intention to refer a dispute ("Dispute") to adjudication was referred by Birmingham City Council ("BCC") to Amey Birmingham Highways Limited ("ABHL") pursuant to a Project Agreement dated 6 May 2010 ("Project Agreement"). On 9 July 2015 Andrew Goddard QC ("Adjudicator ") gave his decision ("Adjudicator's Decision") in respect of only parts of the Dispute: (1) what is the scope of ABHL's obligations in relation to core investment works ("Issue 1"); (2) whether ABHL is under an obligation to keep updated the Project Network Model ("Issue 2"); and (3) whether the Milestone Certificates issued by the Independent Certifier should be set aside ("Issue 3"), together ("the Issues").

Under clause 70 of the Project Agreement provision was made for the Adjudicator's Decision in respect of the Issues in the Dispute to come before a court in certain specified circumstances instead of the usual contractual provision for arbitration. The particular relief sought in this case is declaratory and in effect seeks, on behalf of ABHL, who were unsuccessful as a result of the Adjudicator's Decision, that the court finds the Adjudicator was wrong in law. This court will therefore consider that Adjudication Decision, having regard to the limited Dispute based only on the Issues placed before the Adjudicator and on which successful relief was achieved by BCC and will do so by means of consideration of the background facts; the Project Agreement; subsequent facts; the law in respect of the Issues and consideration of the extent to which the court would agree to give the declarations sought by ABHL.

This judgment does not purport to deal with broader questions which may rightly or wrongly concern BCC about the performance of the Project Agreement by ABHL over the first five years of its term.

On 14 August 2015 BCC wrote to ABHL in respect of compliance with the Adjudicator's Decision and raised, amongst other matters, the question of payment, namely, that BCC was seeking to dispute £1,186,877.69 in respect of a monthly payment for August 2015 and that there had been an overpayment of £18,806,066.79 in respect of the monthly payments between June 2013 and July 2015. In their opening, counsel for ABHL indicated that the value at risk as a result of the Adjudicator's Decision was between £25 and £35 million.

The project between BCC and ABHL relates to the rehabilitation, maintenance, management and operation of the roads and street lighting network in the City of Birmingham pursuant to a Government Private Finance Initiative. This project, described in ABHL's opening as the largest Government Highways Sector PFI contract in the United Kingdom, was assessed in the total value of £2.7 billion. The period over which BCC and ABHL have bound themselves is 25 years, but this particular Dispute concerns the first five years, namely the "Core Investment Period" as defined by the Project Agreement.

Whilst many of these PFI contracts are complicated and certainly detailed, in terms of their documentation, this contract, like many other PFI contracts, will require consideration not just of the main body contract terms and two important Schedules considered by the Adjudicator but in addition to those main body clauses the other supporting Schedules and Method Statements wherein the devil lies in the detail; and in order to construe the Project Agreement consideration will have to be given to this level of detail which is well beyond the exercise which the Adjudicator was required to consider. In this sense, this case could be considered complicated, but it has, unfortunately, become overcomplicated both by reference to the pleadings, such as they are, and extensive factual and witness statements and very considerable documentation, much of which has not proved of much assistance in the exercise of the construction of the Project Agreement that the courts regularly undertake.

In essence, and in hindsight, the case may have been better formulated and considered as a Part 8 construction summons in the traditional way. This case does not raise novel or important points of law but in essence has allowed the parties to realign the legal arguments in accordance with the recent decision in Arnold v Britton [2015] 2 WLR 1593 which was reported after the Adjudicator's Decision.

Pleadings and Procedure

On 18 August 2015 ABHL issued a claim form in accordance with CPR Part 7 against BCC. The claim form succinctly sets out ABHL's case in almost all material respects. It therefore may pay to quote from it fully:

“This dispute arises out of a Project Agreement dated 6 May 2010 (hereinafter the "Project Agreement") entered into between Birmingham City Council (the Respondent and hereinafter the "Authority") and Amey Birmingham Highways Limited (the Claimant and hereinafter "ABHL") in relation to the highway network in the Birmingham area. The Project Agreement was entered into pursuant to the Government’s PFI initiative.

By the terms of the Project Agreement, the Authority engaged ABHL to act as the Service Provider for the rehabilitation, maintenance, management and operation of the Project Network for a term of 25 years. By way of a Sub-Contract, ABHL contracted with Amey LG Limited (hereinafter "ALG") to act as the Services Sub-Contractor. In broad terms, the obligations of ALG under the Sub-Contract are 'back-to-back' with the obligations of ABHL under the Project Agreement in that the operative clauses are effectively the same.

A dispute arose between the parties as regards the proper meaning of the Project Agreement and by way of a Notice of Intention to Refer a Dispute to Adjudication dated 7 May 2015 (the "Notice"), the Authority commenced an adjudication pursuant to clause 70.1.3 of the Project Agreement in relation to the extent of the Service Provider's obligations and sought a number of declarations in relation thereto.

On 9 July 2015 the Adjudicator issued his decision in relation to the dispute referred. The Adjudicator made a number of declarations (which did not encompass every declaration sought by the Authority and which were granted in terms different to those sought by the Authority in its Notice) as regards:

1.

The scope of ABHL's obligation to carry out 'Core Investment Works’ and meet the requirements of ‘Performance Standard 1' as set out in the Project Agreement.

2.

ABHL's obligations as regards the updating of the 'Project Network Model' and the 'Project Network Inventory'.

3.

The effect of Milestone Certificates issued pursuant to the Project Agreement and specifically that the certificates in relation to Milestones 6 to 9 could be opened up, reviewed and revised.

The Adjudicator further ordered that ABHL was to re-calculate the Network Condition Indices relevant to each of Milestones 6 to 9 inclusive by reference to the actual Project Network Inventory.

ABHL considers the decision reached by the Adjudicator to be wrong and wishes to challenge that decision and to have this dispute finally determined as it is entitled to do pursuant to clause 70.3 of the Project Agreement. In this claim ABHL seeks declarations as to the proper operation of the Project Agreement as regards, inter alia:

1.

The scope of ABHL's obligation to carry out 'Core Investment Works' and whether this obligation extended to assets contained in the ‘Project Network Model’ or to all assets within the ‘Project Network’.

2.

Whether ABHL were under an obligation to update the 'Project Network Model' in line with the 'Project Network Inventory' .

3.

The effect of Milestone Certificates previously issued pursuant to the Project Agreement and whether these can properly be opened up, reviewed and revised pursuant to the relevant terms of the Project Agreement.

The declarations sought by ABHL raise questions of law as regards the proper construction of the Project Agreement and the proper interpretation of the relevant clauses thereof. ABHL further claims by way of implied contract and/or restitution, for all costs and/or losses incurred by ABHL in seeking to comply with the Adjudicator's decision in the event that the proper operation and/or construction of the Project Agreement is held to be inconsistent with the declarations made by the Adjudicator.

Pursuant to clause 103.3.7 of the Sub-Contract referred to above, ABHL is entitled to elect that its subcontractor, ALG, challenge and defend a claim made against ABHL. ABHL made such an election in respect of the dispute which is the subject of this claim form. Accordingly, this claim form is issued on ABHL's behalf by ALG pursuant to clause 103.3.8 of that Sub-Contract and it is ALG who pursues the claim in the name of ABHL (and it is ALG's legal representatives who are identified as the claimant’s legal representatives below).”

That document contained a Statement of Truth from Asif Ghafoor, a Director of ABHL.

In view of the fact that this action started as a CPR Part 7 claim, Particulars of Claim were, in due course, served on 25 September 2015 with a statement of truth by a Director, John Gerard Connelly.

As a matter of record, the declarations sought in the prayer go beyond those contained in the Claim Form. The Particulars of Claim seek at paragraph 55(1) that the Decision was wrong and is not binding on the Claimant or the Defendant; at paragraph 55. (2) in the terms pleaded in paragraph 41 (see below); at paragraph 55(3) that there is no obligation on the Claimant to amend the Project Network Model so that it accurately reflects the actual extent of the Project Network and the Project Road; and/or at paragraph 55(4) that the Certificates for Completion of Milestones 6 to 9 are final and binding on the Claimant and the Defendant.

Paragraph 41 of the Particulars of Claim asserts that, on a proper construction of the Project Agreement, the proper construction of the requirements of PS1A and PS1B depends on the Project Network Model and sets out the proper construction under 13 specific subparagraphs relating to Section Length and condition indices for (Carriageway), Footways, Verges, Cycle Tracks and Kerbs.

Having set out the parties and factual background of the Project Agreement in paragraphs 1 to 5 of the Particulars of Claim, paragraphs 6 to 22 set out details of the Project Agreement. I propose to return to some of these paragraphs in due course when reviewing the pleadings and the particular issues which bear particular significance to the question of law required to be addressed in this judgment. Details are then given of the issue of Certificates of Completion between paragraphs 23 and 26; the dispute and the adjudication in paragraph 27 and 28; the Adjudicator's Decision itself in paragraph 29; and then from paragraphs 30 to 32 compliance with that decision.

It is ABHL's case that the Adjudicator's Decision was wrong and this argument takes two separate parts, namely paragraphs 33 to 42 dealing with Issue 1, the scope of the Core Investment Works; and paragraphs 43 to 46, dealing with Issue 2, relating to the updating of the Project Network Model. Issue 3 is referred to in more detail from paragraphs 47 to 54. It is to be noted that the relief set out in paragraph 55 of the Particulars of Claim seeks declarations 1, 2, 3 and/or 4 as set out above. As will be explained below, it was the case of ABHL that if they were successful on Issues 1 and 2, then Issue 3 falls away.

Quite separately, the Particulars of Claim seek payment on the basis of an implied term and/or restitution in the sum of £89,653.01, being the costs incurred by ABHL to put into effect the Adjudicator's Decision.

On 2 October 2015, Mr Justice Stuart Smith made an order having before him the Particulars of Claim but prior to the service of a Defence or a Reply. That order included for a stay of paragraphs 56 to 59 of the Particulars of Claim, namely the claim based on the implied term and/or restitution, that the Defence would be filed and served, followed by a Reply, and that the parties would file a Statement of Agreed Facts. Permission was given for witness statements, which order was made without prejudice to either party applying to exclude evidence that was inadmissible as a matter of law but comprising four elements: (1) the matters pleaded in paragraphs 5 to 53 of the Particulars of Claim; (2) the practical effects of the differing interpretations of the Project Agreement; (3) the factual contents of the Project Network Model; and (4) the role, powers and obligations of the Independent Certifier and the process followed by him in relation to the issue of Certificates of Completion 6 to 9. Provision was also made for service of witness statements in reply.

In giving a judgment on 2 October 2015, Mr Justice Stuart Smith said this:

“1.

There can be no doubt at all that the conduct of this action has been bedevilled by the fact that the claimant issued proceedings under Part 7 instead of Part 8. A strong technical argument can be advanced to say that this is a claim which could have been issued under Part 8 and that life may have been much simpler if it had been. Paragraph 3.3.2 of the TCC guide says:

'A Part 8 claim form will normally be used where there is no substantial dispute of fact, such as the situation where the dispute turns on the construction of a contract or the interpretation of a statute.'

This case is essentially about the interpretation of a contract, and although we wait with bated breath to see whether there is a substantial dispute of fact, many of the facts are not in dispute and those matters which may be said to be in dispute may or may not prove to be relevant or admissible in any event.

2.

Having now seen the claimant's Particulars of Claim, it seems plain, as I think Miss Day accepted, that if that document had been served in the context of proceedings which had been issued as Part 8 proceedings there could be no complaint. That points to what I think has gone wrong in this case so far. It is that the distinction between Part 7 proceedings and Part 8 proceedings has had a wholly disproportionate effect on the defendant's thinking and approach. The reason why I describe the effect as being disproportionate is that it has failed to take into account the extensive powers of case management which are open to the court whether a claim is brought under Part 7 or Part 8.”

Thus, while the orders that bind the parties in this action did provide for a fully pleaded case and witness statements, it appears that the anticipation was, as is common with many construction summonses in the TCC, that the parties would agree basic facts and limit their evidence to those four categories which may assist the court in construing the Project Agreement having regard to the specific issues that are before this court.

The Defence is dated 23 October 2015 and contains a Statement of Truth from John Blakemore, a Director of BCC. It is quite a substantial document. Paragraphs 1 to 4 set out a summary of the Defendant's position and paragraphs 9 to 18 positively set out the correct operation of the Project Agreement. From paragraph 19 onwards until paragraph 74 the Defence pleads to the Particulars of Claim. So far as the relief is concerned and paragraph 55 of the Particulars of Claim, that is simply denied in paragraph 75. Specifically paragraphs 51 to 60 deal with Issue 1; paragraphs 61 to 64 deal with Issue 2; and paragraphs 65 to 74 deal with Issue 3.

The summary in paragraph 2 of the Defence, having set out at paragraph 1 an assertion that the Adjudicator was correct, explains the dispute as to the type of inventory to which the Claimant's contractual obligations relate, namely (1) an actual inventory or (2) a static default inventory; and further in paragraph 3 of the Defence it is asserted that the claimant was required to perform all the Services on an actual inventory basis, namely the Project Network as opposed to an historic and static default inventory basis which represents only part of the Network. In paragraph 4 it asserts the consequence of the Claimant's position, if accepted, would be that significant and random parts of the Project Network would not be rehabilitated and that the contractual payment mechanisms would be based on unreliable data which was generally skewed in the Claimant's favour.

In their asserted correct interpretation of the Project Agreement, BCC essentially plead as follows: (1) the obligations in relation to road rehabilitation are clear from the wording of the Project Agreement and they relate to the entirety of the Project Network (in paragraphs 11 to 14); (2) that BCC's interpretation accords with the remainder of the Project Agreement (in paragraphs 14 and 15), relying, in particular, on clauses 5.1, 6.1, 20.2, 54.4, 55 and 68.1 of the Project Agreement; (3) that ABHL's interpretation would lead to practical difficulties (in paragraphs 15.3 and 15.4 of the defence); that reference should be made to the factual matrix of the Project Agreement (in paragraphs 16 and 17 of the defence); and, lastly, so far as Issue 2 is concerned, reference should be made to clauses 19.2.1, 6.1.1A.1, 55.1.9, Method Statements 2 and 13, Good Industry Practice and Schedule 2, Part 11, paragraph 1.3.

So far as the specific response to the Particulars of Claim, I will turn, once having reviewed the Reply, to what appear to be the more important paragraphs which in the course of the argument before this court related to both Issue 1 and Issue 2.

The Reply, dated 13 November 2015, is also, maybe understandably, long. In paragraph 2 of the Reply it is asserted that the Defence is notably lacking, incorrect and misconceived in fundamental respects, of which seven particular matters are raised, including, amongst some of the matters complained of, the fact the construction of the Project Agreement by reference to "commercial common sense" does not address or acknowledge the difficulties of the actual language used; that terms are used which do not reflect the contractual definitions; and that the Defendant misunderstands and miscategorises the Claimant's case.

In response to paragraphs 2 to 4, the Reply asserts, in paragraph 4, both that BCC have misstated the dispute between the parties and that the dispute concerns the method by which the Condition Indices were calculated and that ABHL rely upon the contractual definitions of the Project Network Model, which is not largely based on industry averages.

The Reply pleads to BCC's positive case on the correct construction of the Project Agreement in paragraphs 7 to 18. As I shall be returning to some of the more detailed issues on the proper construction of the Project Agreement, I pass over this for the moment. In respect of the issues on the scope of the Project Agreement for Issue 1, the Reply pleads, from paragraph 44 to 51, and largely comprises denials. In respect to the updating of the Project Network Model for Issue 2, the Reply pleads from paragraph 52 to 55, for which, again, in large part, there are denials with several references back to other parts of the Reply. Lastly, Issue 3, concerning certificates, is dealt with in the Reply between paragraphs 56 to 64 and, again, generally, comprises denials with one or two limited admissions.

This generally indicates the pleaded issues and I therefore now set out the particular pleaded cases on Issue 1 and Issue 2 leaving aside Issue 3 for reasons that appear below.

On the understanding that the Project Agreement is a long and complicated contract, the Particulars of Claim set out in summary ABHL's case on the Project Agreement from paragraphs 8 to 21 which provide that:

“8.

Pursuant to the Project Agreement, the Claimant undertook to provide the Services from the Service Commencement Date for the remainder of Contract Term, which runs to the 25th anniversary of the Planned Service Commencement Date (7 June 2010). The Services were defined as:

"the works and services which are necessary for the Service Provider to undertake (or to procure the undertaking of) in order to comply with the provisions of schedule 2 (Output Specification) and the other provisions of this Contract".

9.

Schedule 2 of the Project Agreement is divided into 11 parts. Parts 1 to 10 set out 11 Performance Standards: Part 1 contains Performance Standard ('PS') 1A and PS 1B. Parts 2 to 10 contain PS 2 to PS 10 respectively.

10.

Part C of the Project Agreement (clauses 9 and 10) relates to the Core Investment Period. Clause 9 sets out 10 Milestones; and clause 9.1 sets out the Planned Milestone Completion Dates… [which are then set out]

The period of time between the Service Commencement Date and the date on which a Certificate of Completion for Milestone 10 is issued (or the Claimant is deemed to have achieved Milestone Completion in relation to Milestone 10) is described as the Core Investment Period or CIP.

11.

PS 1A (in Part 1A of Schedule 2) relates to the works to be carried out by the Claimant during the CIP (also defined as the Core Investment Works (or "CIW")). PS 1B (in Part 1B of Schedule 2) relates to the works to be carried out by the Claimant after the CIP. PS 2 to PS 10 (in Parts 2 to 10 of Schedule 2) relate to works to be carried out by the Claimant both during and after the CIP, throughout the whole of the Contract Term. The contractual definition of the Core Investment Works is as follows:

"those works and/or services to be carried out (or procured to be carried out) by the Service Provider in order to meet the requirements of part 1A of schedule 2 (Output Specification) during the Core Investment Period".

12.

Pursuant to clause 45 and the Payment Mechanism in Schedule 4, the Claimant is to receive Monthly Payments from the Defendant. Central to the quantification of these is the Monthly Unitary Charge (or MUC) which is to be calculated in accordance with paragraph 1.4 of Schedule 4. Central in turn to the quantification of the MUC is the Monthly Adjustment Factor (or MAF). Pursuant to paragraph 1.6 of Schedule 4, the MAF is calculated by reference to the Milestone step-up set out in Table 1 in Schedule 4. Pursuant to clause 9.2 and Schedule 4, where the Independent Certifier has issued a Certificate of Completion in respect of a Milestone pursuant to the provisions of clause 12 that Milestone shall, from the relevant Milestone Completion Date, be taken into account for the purposes of calculating the Milestone step-up (and hence the MUC). There are similar provisions relating to Certificates of Partial Completion. In simple terms, the Milestone step-up (and hence the MAF and in turn the MUC) increases as more Milestones are certified as complete by the Independent Certifier.

13.

Pursuant to clause 13.2.2, the Independent Certifier is to assess whether Milestone Completion or Partial Milestone Completion has been achieved by the Claimant. Milestone Completion is defined as, in respect of each Milestone, 'the completion (or deemed completion) pursuant to clause 9.4.4 and 9.4.7 (as applicable) by the Service Provider of the Services necessary to meet both the relevant Milestone Completion Criteria, the relevant Targets for Milestone Completion in all Districts and the requirements of part 2 of schedule 2 (Output Specification). The Milestone Completion Criteria are set out in Schedule 15 and refer back to the Milestone District Target Tables in PS1A; and the Targets for Milestone Completion are likewise set out in PS 1A. Thus, Milestone Completion (to be certified by the Independent Certifier) is defined in large part by reference to the requirements of PS 1A.

14.

Also pursuant to clause 13.2.2, the Independent Certifier, having assessed whether Milestone Completion or Partial Milestone Completion has been achieved, must, within 10 Business Days of the date of assessment referred to in clause 13.2.1, issue to the Claimant a Certificate of Completion, a Certificate of Partial Completion or a Certificate of Non-Completion. In the latter two instances, the certificate is to specify the outstanding matters that must be attended to before a Certificate of Completion (or, in the case of a Certificate of Non-Completion, a Certificate of Partial Completion) can be issued.

15.

Clause 13.4.1.1 provides that the Milestone Completion Date shall be the date upon which the Certificate of Completion is issued for that Milestone, provided that if a Certificate of Completion is issued before the relevant Planned Milestone Completion Date, the Milestone Completion Date shall be the same as the Planned Milestone Completion Date.

…

17.

The Milestone District Targets are set out in detail in paragraphs 1.4 to 1.13 of Part 1A of Schedule 2 (for Milestones 1 to 10, respectively). For the purpose of these proceedings, the most important elements of those targets are the targets in relation to the condition indices. The following condition indices are of particular relevance:

(1)

the Network Condition Index or NCI which means the index representing the condition of RSLs (which term is explained below) in the Project Area;

(2)

the Footway Condition Index or FWCI which means the index representing the condition of Footways in the Project Area;

(3)

the Verge Condition Index or VGCI which means the index representing the condition of Verges in the Project Area;

(4)

the Kerb Condition Index or KBCI which means the index representing the condition of Kerbs in the Project Area;

(5)

the Cycle Track Condition Index or CTCI which means the index representing the condition of Cycle Tracks in the Project Area.

Detailed rules are set out in Schedule 2 (and in particular Part 11 of Schedule 2) as to how these indices are to be calculated.

18.

By way of summary only:

(1)

There are 4 separate NCI calculations for Carriageways: for NCI_main (which relates to the Strategic Route and Main Distributor Network); NCI_sec (which relates to the Secondary Distributor Network); NCI_link (which relates to the Link Road Network); and NCI_local (which relates to the Local Access Road Network). NCI_main is calculated by reference to three other indices: the Pavement Condition Index or PCI; the Skid Resistance Index or SRI; and the Surface Condition Index or SCI. ... Each of those indices is to be calculated in respect of, and by reference to a Road Section Length or RSL. This is defined as follows:

"the individual section lengths of a Project Road between consecutive nodes in the Project Network Model".

(2)

There are 2 separate FWCI calculations ... which relates to the Prestige, Primary and Secondary Footway Network ... and […] the Link and Local Access Footway Network. Each of those indices is to be calculated in respect of, and by reference to, a Footway Section Length or FSL […] This is defined as:

"a length of Footway associated with a Road Section Length for an individual cross sectional position identified in the Project Network Model".

(3)

VGCI ... is calculated in respect of, and by reference to, a Verge XSP Length. This is the same as a Verge Section Length or VGSL. This is defined as follows:

"a length of Verge for an individual cross sectional position identified in the Project Network Model".

(4)

CTCI ... is calculated in respect of, and by reference to, a Cycle Track XSP Length. This is the same as a Cycle Track Section Length or CTSL. This is defined as follows:

"a length of Cycle Track for an individual cross sectional position identified in the Project Network Model".

(5)

KBCI ... is calculated in respect of, and by reference to, a Kerb XSP Length. This is the same as a Kerb Section Length or KSL (or KBSL). This is defined as:

"a length of Kerb associated with a Road Section Length for an individual cross sectional position identified in the Project Network Model".

For the avoidance of doubt, XSP means cross-sectional position. This is a standard industry term which is used to describe inventory items (such as carriageways, footways, verges, kerbs, etc.) relative to the centreline of a carriageway.

19.

Each of the definitions quoted in paragraph 18 above refers to the Project Network Model (or "the PNM"). This is defined as follows:

"the database document 0626 which provides information in respect of the Project Roads including RSLs, numbering, length, hierarchy, allocation and preferred direction of survey and inspection and digitised geographical centreline representation".

20.

The Project Network Model is a database consisting of 6 data tables, namely:

(1)

MSEC: this includes data on RSLs (including, amongst many other matters, their length and their description);

(2)

MINV: this includes further data on RSLs and data on FSLs, VGSLs, CTSLs and KSLs (including, amongst many other matters (and where appropriate), their length, their width, their surface type and their XSP);

(3)

MSURV: this includes records of surveys carried out on the road network;

(4)

MSECSURV: this includes records of survey dates and sections included in the surveys;

(5)

MCON: this includes records of condition data from Detailed Visual Inspections or DVIs and Deflectograph Surveys;

(6)

MSCRIM: this includes records of condition data in respect of skid resistance.

21.

Under Method Statements 2 and 13 (which are at Schedule 3 to the Project Agreement), the Claimant was, from the date of the Project Agreement, to use the Pavement Management Model (or "the PMM") to calculate the condition indices. Paragraph 2.62 of Method Statement 2 provides that the PMM shall be the Claimant's main tool for calculating all condition indices in accordance with the Output Specification; and that it shall use the PMM to determine the annual investments required to upgrade and maintain "those Project Roads held in the Project Network Model".

Paragraph 2.374 of Method Statement 13 provides that the PMM shall use the Project Network Model (containing the Road, Footway, Verge, Cycle Track and Kerb Section Lengths) as its base, against which all condition data shall be referenced.”

The defence to paragraphs 8 to 21 of the Particulars of Claim is contained in paragraphs 26 to 36 of the Defence and they provide as follows:

“26.

Paragraph 8 is admitted. The Claimant undertook to provide Services to the entire Project Network and deliver a 'fence-to-fence' approach [the Defendant then repeats paragraphs 11 to 18 which is their positive case on the construction of the Project Agreement].

27.

Paragraphs 9, 10 and 11 are admitted.

28.

Save that the reference to 'clause 12', should be to 'clause 13' and that no admissions are made as to how 'central' various matters are to quantification, paragraph 12 is admitted.

29.

Paragraphs 13, 14 and 15 are admitted, save that it is denied that the Project Agreement provides that the Independent Certifier 'must' issue the Certificates as alleged in paragraph 14. Further:

29.1.

Pursuant to Clause 13.2.1, the Claimant has to notify the Independent Certifier and the Defendant 5 Business Days before the date upon which the Claimant requires the Independent Certifier to perform its assessment; and

29.2.

Milestone Completion Criteria is defined by reference to each Project Network Part, which is the actual inventory.

30.

For the avoidance of doubt, the Independent Certifier does not have authority to determine and/or affect the proper interpretation of the Project Agreement. Clause 5 of the Independent Certifier's Deed of Appointment provides:

‘5. LIMITATIONS ON AUTHORITY

The Independent Certifier shall not:

5.1

make or purport to make any alteration or addition to or omission from the Output Specification (including, without limitation, the setting of performance standards) or issue any instruction or direction to any contractor or professional consultant employed or engaged in connection with the Project; or

5.2

unless both the Authority and Service Provider consent in writing [sic] or agree to any waiver or release of any obligation of the Authority or the Service Provider under the Project Agreement or of any contractor or professional consultant employed or engaged in connection with the Project;

for the avoidance of doubt, the Independent Certifier shall not express an opinion on and shall not interfere with or give any advice, opinion or make any representation in relation to any matters which are beyond its role and responsibilities under this Deed.

31.

Paragraph 16 is admitted. The Adjudicator considered and correctly interpreted Clause 13.5 in paragraphs 163 to 170 of his Decision.

32.

Paragraph 17 is admitted, save that it is denied that any elements of the Milestone District Targets are more important than the others and/or are of particular relevance. It is noted that the Claimant accepts that the condition indices are defined by reference to the Project Area, RSLs, Footways, Verges, Kerbs and Cycle Tracks. Those terms are all defined by reference to the actual inventory (the Project Road), and are not limited to a static DRD0626.

33.

Paragraph 18 is admitted. The defined terms identified all refer back to the actual inventory. By way of example only:

33.1.

Road Section Lengths, or RSLs, are merely a convenient way of breaking the network down into measurable sections (also referred to as maintenance lengths);

33.2.

RSLs are defined as (emphasis added):

"the individual section lengths of a Project Road between consecutive nodes in the Project Network Model."

33.3.

RSLs are therefore defined by the Project Road, namely the actual inventory. Insofar as it is relevant, as the Project Network Model is updated to reflect the actual inventory, the reference to the Project Network Model is consistent with (and supports) the Defendant's construction of the Project Agreement; and

33.4.

The information provided on Road Section Lengths in the static DRD0626 does not, and is nowhere stated to, limit the Claimant's obligations.

34.

Paragraph 19 is admitted. The Project Network Model models, provides information on, and is defined by reference to Project Roads, the actual inventory.

35.

Paragraph 20 is admitted, save that MSCRIM only contains functional thresholds for skid surveys as opposed to records of condition data. The Claimant is obliged to update all the 6 data tables in the Project Network Model. Paragraph 18 above is repeated. In fact:

35.1.

The Claimant collects condition and inventory data which would enable it to update all the data tables, including the MINV;

35.2.

The Claimant accepts it is required to update all the data tables in the Project Network Model save for the MINV; however

35.3.

The Project Agreement does not differentiate between which data tables should be updated and the Claimant has provided no reasonable justification for distinguishing MINV. As the Claimant collects the relevant data for MINV, there is no legitimate reason why the Claimant does not update MINV; and

35.4.

Instead, the Claimant stated in the Adjudication that it updates another database, the Project Network Inventory. The Claimant therefore appears to hold two databases recording the same data, one live and one static.

36.

Paragraph 21 is admitted, save to the extent that it differs from the precise wording of Method Statements 2 and 13. Further:

36.1.

Method Statement 2 also confirms that the Pavement Management Model should be updated with any inventory data from surveys. By way of example only:

36.1.1.

Paragraph 2.64 provides that the Asset Manager shall "provide the updated Detailed Visual Inspection (DVI) data and inventory updates necessary to run the PMM"; and:

36.1.2.

Paragraph 2.67 provides that the Claimant "shall direct that its Pavement Life cycle Manager shall ensure that the PMM is continually updated throughout the Contract Term"; and

36.2.

Method Statement 13 also confirms that the Project Network Model and Pavement Management Model are to be updated throughout the Project. By way of example only:

36.2.1.

The Service Delivery Statement at paragraph 2.2 provides that the Claimant "shall use the information arising out of all surveys, inspections, tests and assessments to draw up and update the Service Provider Programmes to bring the Project Network up to the required standards defined in schedule 2 (Output Specification) and to continue to maintain the Project Network at the required level during the Contract Term to ensure safe passage for users of the Project Network";

36.2.2.

Paragraph 2.46: "The Service Provider shall ensure that all of the survey data referred to in paragraph 2.46 above is stored and referenced to the Project Network Model held as the Confirm UKPMS module forming part of the MIS. The Service Provider shall extract the required data from the UKPMS module to populate the PMM which shall be updated with data on a regular basis...”;

36.2.3.

Paragraph 2.118 provides: “The Asset Manager shall run the PMM regularly during the CIP with the most current survey data to demonstrate the Service Provider's compliance with the Milestone District Targets in Part 1A ... of schedule 2 … and post CIP continued compliance with Part 1B of schedule 2 from DVI surveys shall also be used to monitor performance in respect of Part 2 ... of schedule 2".

36.2.4.

Paragraph 2.376 provides: "The Service Provider shall ensure that all survey data is [sic] collected in accordance with Clause 6 (Surveys and Inspections) of the Contract in order to enable the calculation of condition indices".

36.2.5.

Paragraph 2.377 provides: "The Service Provider shall ensure that all [sic] surveys are loaded to the PMM as soon as practicable after results have been collected …"; and

36.2.6.

Paragraph 2.388 provides: "In accordance with Part 11 … of schedule 2 … the Service Provider shall only use complete and current survey datasets to calculate the condition indices with the following exceptions ...”

The reference back to paragraphs 11 to 18 of the Defence referred to in paragraph 26 of the Defence thus refers back, as indicated, to the four points made in those paragraphs, namely (1) that BCC allege that the words in the Project Agreement make it clear that it relates to the entirety of the Project Network; (2) the remainder of the Project Agreement must be read as a whole, citing Performance Standards 2 to 10, clause 5.1, clause 6.1, clause 20.2, clause 54.4, clause 55 and clause 68.1; (3) indicating that ABHL's interpretation gives practical difficulties; and (4) reliance upon factual matrix, in particular pre-contract negotiations in 2005 to 2009. The difficulties relied upon in the Defence are set out in paragraph 15.3 in the following way:

“15.3.

In addition, the Claimant's interpretation would lead to, and has led to, many practical difficulties. By way of example only:

15.3.1.

If a Footway is 1.9 m wide (so wider than the default 1.8m in the static DRD0626), the Claimant, on the basis of its own interpretation, would only be obliged to perform improvement works to 1.8m of the Footway as recorded in DRD0626. The precise 1.8m (out of 1.9m) which is to be rehabilitated is unspecified, and, according to the Claimant's interpretation, the remaining 10 cm strip would be left unrehabilitated. This would obviously be absurd;

15.3.2.

If a Footway does not exist, but is contained in the static DRD0626, then the Claimant has sought to obtain credit for the Footway in the Milestone Completion Criteria without performing any works. The Claimant is therefore choosing whether to apply the actual inventory or the default inventory depending on which benefits it most;

15.3.3.

The condition data obtained by the Claimant and inputted into the Project Network Model does not marry up with the inventory data. The Pavement Management Model will then calculate skewed results based on inaccurate and incomplete data readings. For example, as there are no Verges in the default inventory, then the condition of a grass Verge in the actual inventory (which are assumed to be in perfect condition) will generally be inputted against the default details for a Footway. The true state of the Footway, even if dire, will not be used in the condition indices as there is nothing for it to match up against in the MINV database; and

15.3.4.

These issues arise, and arise to a much greater extent, across the entire Project Network. On the basis of the Claimant's suggested interpretation, large sections of the Project Network are left entirely unrehabilitated.

15.4.

The Claimant's interpretation does not make commercial (or any other) common sense. As the Claimant should reasonably have known, the Defendant would and indeed could not have entered into an agreement on the terms proposed by the Claimant. Again, that is an end to the Claimant's claim.”

The Reply responds to paragraphs 26 to 36 of the Defence in paragraphs 23 to 32 as follows:

“23.

In the premises of the Particulars of Claim and of the foregoing and/or in any event, the second sentence of paragraph 26 is denied.

24.

As to paragraph 28, it is admitted that clause 13 was the intended reference.

25.

As to paragraph 29:

(1)

Paragraph 29.1 is admitted.

(2)

As to paragraph 29.2, Schedule 15 sets out Milestone Completion Criteria - insofar as they pertain to Project Roads after Contract Year 1 - for NCI, FWCI, VGCI, KBCI, CTCI and SRI. Those are not Project Network Parts. The Milestone Completion Criteria relevant to the present proceedings are therefore defined by reference to the various condition indices which in turn are to be calculated by reference to the data in the PNM.

26.

As to paragraph 30:

(1)

It is admitted that the Independent Certifier's Deed of Appointment contains clause 5 as quoted therein (subject to the replacement of "[sic]" with "consent").

(2)

It is no part of the Claimant's case that the Independent Certifier was obliged to, or did, determine or affect the proper interpretation of the Project Agreement. Its role and obligations are pleaded (in summary form) in paragraphs 13 and 14 of the Particulars of Claim. Alternatively if (which is denied) as part of its role and obligations laid down in the Project Agreement the Independent Certifier was obliged to determine or affect the proper interpretation of the Project Agreement, then it had authority so to do.

27.

In the premises of the Particulars of Claim and of paragraphs 56 to 64 below and/or in any event, the second sentence of paragraph 31 is denied.

28.

As to paragraph 32, save that it is admitted that some of the condition indices are calculated by reference to RSLs, the second and third sentences are denied. The Defendant has again misunderstood the Project Agreement (and paragraph 17 of the Particulars of Claim): the condition indices are not defined by reference to the Project Area, Footways, Verges, Kerbs and Cycle Tracks, but are indices which represent the condition of RSLs, Footways, Verges, Kerbs and Cycle Tracks (as more fully pleaded in paragraph 17 of the Particulars of Claim).

29.

As to paragraph 33, the Claimant repeats paragraph 2(2) above. In the premises and/or in any event:

(1)

The second sentence is denied.

(2)

Paragraph 33.1 is denied.

(3)

The quoted definition in paragraph 33.2 is admitted (save for the added emphasis).

(4)

The first sentence of paragraph 33.3 is denied. RSLs are defined as "the individual section lengths of a Project Road between consecutive Nodes in the Project Network Model".

(5)

As to the second sentence of paragraph 33.3, the Claimant repeats paragraph 2(5) and 9(5) above.

(6)

As to paragraph 33.4, the Claimant repeats paragraph 9(4) above.

30.

As to paragraph 34, the Claimant repeats paragraphs 2(2) and 9(5) above.

31.

As to paragraph 35:

(1)

The Claimant repeats paragraphs 9(5) and 16 above.

(2)

The Claimant does not believe that MSCRIM contains only the functional thresholds as pleaded (but this is of no importance to the parties' dispute).

(3)

The Claimant collected and continues to collect condition and inventory data that could - subject to such update being in accordance with the provisions set out at paragraph 9(5) above - be used to update the tables in the PNM.

(4)

It is admitted that the Claimant recorded and continues to record survey data in the Project Network Inventory (and that it confirmed that in the adjudication). That accords with the provisions set out at paragraphs 9(5) and 16 above. The Defendant was well aware before the adjudication that the Claimant was recording survey data in the Project Network Inventory as shown by the extract from its letter of 24 November 2014 to the Independent Certifier provided at paragraph 41 where the Defendant informed the Independent Certifier that its view was that the Network Condition Indices should be calculated using the Project Network Inventory.

(5)

Save as aforesaid, paragraph 35 is denied.

32.

As to paragraph 36:

(1)

The quoted extracts from Method Statements 2 and 13 are (subject to the correction of minor typographical errors) admitted.

(2)

It is denied (if the same be alleged) that these extracts impose any obligation on the Claimant to update the PNM in the manner alleged by the Defendant. Rather the extracts are consistent with and support the Claimant's case as pleaded in the Particulars of Claim and herein as to its obligations (including its obligations in relation to the updating of the PNM).”

The references to paragraphs 2(2), 2(4) and 2(5) of the Reply provide as follows:

“2(2) The Defendant's case is reliant on the concept or concepts variously described as "the entirety of the Project Network", "the entire Project Network", "the Project Network as a whole", "an actual inventory, reflecting the true nature and extent of the Birmingham road network" and - most frequently - "the actual inventory" when none of those statements reflects any contractual definition. The contractual definition of the Project Network is set out at paragraph 34 of the Particulars of Claim which the Defendant admits at paragraph 51. It is that definition that circumscribes the Project Network and there is no meaningful qualification (such as 'entire' or 'actual') that can extend that definition or the extent of the Project Network beyond its proper contractual meaning.

…

2(4) The Defendant has misunderstood and/or mischaracterised the Claimant's case as a case which ignores entirely the definitions and use of the terms Project Network, Project Network Parts and Project Roads. The Claimant does not ignore those definitions: it expressly pleads the definitions of Project Network and Project Roads. The Claimant's case is not that its obligations only arise in respect of some subset of the Project Network, rather that the agreed contractual measures for achievement of various performance standards in the Output Specification are clearly to be calculated by reference to the PNM.

2(5) The relationship between the Defendant's case on the proper construction of the Claimant's obligations and the Defendant's case that the Claimant was obliged (in some undefined way) to update the PNM is unclear. However, it would appear (in particular from the Defendant's repeated comparisons between a static and an updated PNM) that its case has shifted to a case based principally on the Claimant's obligation to update the PNM rather than a case based on construing the provisions relating to the calculation of the condition indices. For the reasons given below, the Defendant's case on the updating obligations is wrong.

…

9(5) ...

(a)

As defined in the Project Agreement the Project Network Model provides information in respect of the Project Roads. It is not defined as providing and as a matter of fact it does not provide information about any other Project Network Part nor is it defined as modelling the Project Network.

(b)

Save to the extent that amendments to the lengths of existing carriageway inventory recorded in the PNM are to be made in accordance with paragraphs 3.2.4, 3.2.5, 4.2.4, 4.2.5, 5.2.4 and 5.2.5 of Part 11 of Schedule 2 (as pleaded in paragraph 39 of the Particulars of Claim), the second sentence is denied. Paragraph 2.2.4.1 of Part 8 of Schedule 2 provides that the results of all surveys required to be carried out pursuant to clause 6 are to be recorded by the Claimant in the appropriate part(s) of the Management Information System ('MIS'). A similar provision is found at paragraph 1.3.1 of Part 11 of Schedule 2. In accordance with clause 19.1, paragraph 2.2 of PS 8 and table 1 at paragraph 2.28 of Method Statement 2, the PNM is not part of the MIS.

(c)

The Claimant's obligation to update the PNM is set out in clause 19.2.1 by reference to PS8. Paragraph 2.3 of PS 8 sets out the Claimant's obligations in respect of updating the PNM, as pleaded in paragraph 45 of the Particulars of Claim. Clause 55.1.9 relates to that obligation, and the Claimant will rely upon the whole of clause 55.1, which specifies the liability in respect of which the Claimant indemnifies the Defendant.

(d)

In the premises and/or in any event, it is denied that the Claimant has a free-standing general obligation to update the information in the PNM other than in accordance with PS 8.”

In response to the Defendant's case from paragraph 15.3 as to the practical difficulties, the Reply pleads in paragraph 13(4) as follows:

“13(4). As to paragraph 15.3, the Claimant repeats paragraph 7(1) above. The Project Agreement should not be construed by reference to alleged practical difficulties (which are denied, as pleaded further below) which emerged following contract formation. Further or alternatively, the purported practical difficulties set out at paragraph 15.3 and its sub-paragraphs are also unrealistic and wrong:

(a)

The example given in paragraph 15.3.1 presupposes that:

(i)

the Claimant is under an obligation to rehabilitate all of the "actual inventory"; and

…

(ii)

the Claimant would choose not to carry out works on the "10 cm strip" on the basis that it would be left out of account in the calculation of the FWCI.

Each of those presuppositions is incorrect. As to (i), the Claimant repeats paragraph 9 above. As to (ii), account would be taken of any defects in the 10 cm strip in the calculation of FWCI.

(b)

As to paragraph 15.3.2, the Claimant does not make any choice to obtain a preferential outcome as suggested therein. It simply calculates the condition indices in accordance with the Project Agreement.

(c)

As to paragraph 15.3.3, it is admitted that there are occasions on which the condition data obtained by the Claimant does not marry up with the inventory data. It is denied that this gives rise to the calculation of skewed results or that the data readings are inaccurate or incomplete. As to the example given by the Defendant:

(i)

It is denied that there are no Verges in the Project Network Model.

(ii)

The relevance of a grass verge to the calculation of the condition index is not understood.

(iii)

The allegation that the condition of a grass verge is "inputted against the default details for a Footway" giving rise to the consequence in the last sentence is denied.

(d)

As to paragraph 15.3.4, it was never the intention that 100% of the Project Roads would be rehabilitated (if by that the Defendant means subject to treatment). Using Footways by way of example, by use of a statistical Output Specification the Project Agreement provided - in broad terms - that sufficient treatments would be carried out:

(i)

to bring the average FWCI in each PFI district to "Good" condition or above ... By virtue of the statistical nature of the Output Specification, that requirement can be achieved even though, for example, numerous FSLs are on the threshold of being Poor as long as there are enough FSLs in Good or Excellent condition to raise the average FWCI above 6.6;

(ii)

to ensure that no individual FSL had an FWCI of "Poor” or “Failed" ... By virtue of the statistical nature of the Output Specification, that requirement can be achieved even though, for example, individual 20m sub-sections of an FSL are Poor or Failed as long as the rest of the FSL is of a sufficiently high condition to raise the average FWCI for that FSL above 4.8.

(e)

Paragraph 5.4 is denied.”

Having set out in broad terms the pleaded issues that concern Issue 1 as to the true construction of the Project Agreement in respect of its scope, it is apparent that consideration will have to be given beyond just the general terms of what are known as the main body contract terms, but consideration will also have to be given to the Method Statements and Schedules attached to the Project Agreement in which the detail of the parties' obligations is to be found.

ABHL's case on Issue 2 essentially is contained in paragraphs 44 to 46 of the Particulars of Claim as follows:

“44.

In reaching this part of his decision, the Adjudicator relied upon clause 19.2.1 of the Project Agreement (see paragraph 157 of the Decision). This provides as follows:

"From the Service Commencement Date the Service Provider shall accurately update the Project Network Model in accordance with Performance Standard 8 of schedule 2 (Output Specification) and shall ensure that the information contained in it is up to date at all times."

45.

As is apparent from its wording, clause 19.2.1 addresses the Claimant's obligation to update the Project Network Model in accordance with PS 8 (a point made in the adjudication by the Defendant: at paragraph 44.3 of its written submissions). Paragraph 2.3 of PS 8 sets out the Claimant's obligations in respect of updating the Project Network Model as follows:

"2.3.1

Where the Authority notifies the Service Provider of a change to the Project Network in accordance with this Contract, the Service Provider shall ensure that all information provided to the Service Provider by the Authority relating to such change is input into the Project Network Model within five (5) Business Days of the date of such notification unless otherwise agreed between the parties.

2.3.2.

On each occasion where the Project Network Model is updated in accordance with paragraph 2.3.1 the Service Provider shall provide the Authority with an electronic copy of the updated Project Network Model within one (1) Business Day of the date on which the Project Network Model is altered in accordance with paragraph 2.3.1 above.

2.3.3.

The Service Provider shall, from the Service Commencement Date, notify the Authority on a monthly basis of any amendments it would recommend to be made to the Project Network Model specifying all details and the reasons for such recommendation."

Further detail is given on these obligations in paragraph 2.61 of Method Statement 10.

46.

These provisions do not impose on the Claimant a general obligation to update the Project Network Model and the Adjudicator was wrong to reason that such an obligation was introduced by the closing words of clause 19.2.1 (an argument not made by either of the parties). That is not what the clause says; the clause is clearly dealing with a specific and not a general obligation; and it would be inconsistent with paragraph 2.3 of PS 8 and paragraph 2.61 of Method Statement 10 ..."

The Defence responds to paragraph 44 to 46 of the Particulars of Claim in paragraphs 62 to 64 of the Defence as follows:

“62.

Paragraph 44 is admitted. For the avoidance of doubt, the Adjudicator did not rely solely on Clause 19.2.1. The Defendant will rely on paragraphs 143 to 157 of the Decision in full (much of which are unchallenged by the Claimant).

63.

Save that the Claimant has correctly quoted from paragraph 2.3 of PS 8 and that Method Statement 10 provides some (albeit limited) information on the Claimant's obligation to update the Project Network Model, paragraph 45 is denied. The proper construction of the Claimant's obligations to update the Project Network Model, supported by Method Statements 2 and 13 (see paragraph 36 above), is set out in paragraph 18 above.

64.

Paragraph 46 is denied. Without prejudice to the generality of the foregoing denial:

64.1.

The Adjudicator's Decision was correct. Clause 19.2.1 (amongst others) does impose an obligation on the Claimant to update the Project Network Model. Paragraph 18 above is repeated. On the Claimant's (wrong) interpretation the words "and shall ensure that the information contained in it is up to date at all times" in Clause 19.2.1 are redundant;

64.2.

The Defendant did rely on Clause 19.2 (amongst others) in the Adjudication;

64.3.

The Claimant's obligation to update the Project Network Model is consistent with paragraph 2.3 of PS 8 and paragraph 2.61 of Method Statement 10. The Claimant has failed to particularise any inconsistency;

64.4.

The Claimant's reliance on paragraphs 34 to 42 is noted, but it is denied those paragraphs support the Claimant's position. Paragraphs 51 to 60 above are repeated. The proper construction of the Project Agreement is set out in paragraphs 11 to 18 above; and

64.5.

It is denied that the Defendant accepts that its case on the Claimant's obligation to update the Project Network Model is dependent on its case on the scope of the Core Investment Works...”

The Reply responds to paragraphs 61 to 64 of the Defence in paragraphs 53 to 55 of the Reply as follows.

“53.

As to paragraph 62 (and for the avoidance of doubt), the Adjudicator's reasoning for his decision is not binding upon the parties and there is no obligation on the Claimant to challenge it or to plead particulars of every aspect of that reasoning which it considers to be incorrect. The Court is to consider the dispute afresh. Further or alternatively, the reasoning relied upon by the Adjudicator in paragraphs 143 to 157 of the Decision is incorrect and does not support the construction of clause 19.2.1 of the Project Agreement which he found.

54.

As to paragraph 63:

(1)

As to the first sentence, the Claimant notes that the Defendant has denied that it made the point in paragraph 44.3 of its written submissions in the adjudication that clause 19.2.1 concerns the Claimant's obligation to update the PNM in accordance with PS 8. This is a surprising denial.

(2)

The second sentence is denied. The Claimant repeats paragraph 16 above.

55.

As to paragraph 64:

(1)

As to paragraph 64.1, the Claimant repeats paragraphs 9(5) and 16 above. Save as set out therein, paragraph 64.1 is denied. As to the argument from redundancy, it is denied that the words quoted are redundant: they qualify the Claimant's obligation to update in accordance with paragraph 2.3 of PS 8. Further or alternatively, if the Defendant's construction were correct that would render the contractual provisions set out in paragraphs 9(5) and 16 above, and indeed the first part of clause 19.2.1, redundant.

(2)

The Claimant notes the careful wording of paragraph 64.2. The argument pleaded in paragraph 46 of the Particulars of Claim was not an argument advanced by either party in the adjudication.

(3)

The first sentence of paragraph 64.3 is denied (if it is referring to the Defendant's case as to the Claimant's alleged obligation). If there were the free-standing general obligation to update the PNM as contended for by the Defendant, there would be no need for the first part of clause of 19.2.1, the specific provisions of paragraph 2.3.1 and 2.3.2 of PS 8, or paragraphs 3.2.4, 3.2.5, 4.2.4, 4.2.5, 5.2.4 and 5.2.5 of Part 11 of Schedule 2; and paragraph 2.3.3 of PS 8 would make no sense (since the Claimant would be obliged to make, rather than entitled to recommend, updates); and the same applies to paragraph 2.6.1 of MS 10.

(4)

As to paragraph 64.4, the Claimant repeats paragraphs 44 to 51 above.

(5)

As to paragraph 64.5, the Claimant repeats paragraph 2(5) above.”

It will therefore be seen that the parties' pleaded dispute on Issue 2 is somewhat of a narrower ambit than that concerned with Issue 1. Equally when BCC provided a skeleton argument that balance was fundamentally changed and Issue 2 became the real focus of dispute. Indeed, as set out below, BCC's oral submissions made it clear that Issue 2 had become the central dispute.

Dispute and Adjudicator's Decision

Despite the broad basis of BCC's complaints about the performance of ABHL the actual Dispute placed before the Adjudicator was limited to the Issues and the Adjudicator, having appreciated this, allowed a certain laxity in the way he dealt with this in the Adjudicator's Decision. In view of the power given to this Court under the Project Agreement, it is necessary to be clear as to what these matters were; and maybe equally what was not part of this dispute resolution process.

The Notice of Intention to Refer a Dispute to a Adjudication was served on 7 May 2015 by BCC's solicitors. It is clear from the introduction that the Notice of Intention to Refer a Dispute to an Adjudication is given pursuant to clause 70 of the Project Agreement. Having provided the Project Agreement (Volume 2) and the Definitions (Volume 1), the Output Specification and Payment Mechanism (Schedules 2 and 4), Milestone Certificates and pre-contract documents, the notice gives details of the parties and then sets out the background. In particular as follows:

"3.3.

Pursuant to Schedule 2 (Output Specification) the Service Provider is required to continually monitor and maintain the Project Network. There are 10 Performance Standards ("PS1-10") set out in Schedule 2, including the following:

3.3.1.

PS1A - Network and Infrastructure Condition during the Core Investment Period. For the purposes of the Contract, the first 5 years are the Core Investment Period ("CIP"). There are 10 Milestones over the CIP for the Service Provider to achieve;

3.3.2.

PS1B - Network and Infrastructure Condition post CIP: (together, "PS1 Requirement").

3.3.3.

PS2 - 10: Network Management / Maintenance Performance. For the purposes of the Contract, these are Services required to be delivered through the Service Period, which runs alongside and beyond the CIP (together, "PS2-10 Requirement").

3.4

There are 3 elements of asset inventory required under the Contract:

3.4.1

a Management Information System ("MIS"), which must comply with the provisions in Table 8.1 in part 8 of Schedule 2;

3.4.2

a Project Network Inventory (“PNI”), which is an electronic records system that records data in respect of Project Network Parts;

3.4.3

a Project Network Model ("PNM"), which is a database document which provides information in respect of Project Roads.

3.5

The PNI and PNM, together with Condition Surveys which the Service Provider is required to undertake as necessary pursuant to clause 6 of the Contract, feed into the Pavement Management Model, which calculates the overall condition of the pavement assets, forecasts their deterioration and identifies requirements for the Service Provider to carry out works to meet the required condition standards.”

The notice then sets out the "dispute" in paragraph 4 in the following way:

“4.1

A dispute has arisen regarding the extent of the Service Provider's obligations under the Contract, and in particular whether the Service Provider is, as it contends, entitled to provide a lesser scope of service in relation to PS1 of the Output Specification (i.e. Network Infrastructure and Condition) as compared to PS2 to PS10 of the Output Specification (i.e. the day-to-day management and maintenance requirements).

4.2

As at the Service Commencement Date and for over the first two years of the CIP, the Service Provider provided the Core Investment Works to the Project Road on the basis of its full extent (in line with the Authority's interpretation of the requirements of the Contract).

4.3.

However, during the undertaking of Milestone 6 it became apparent to the Authority (from reports and audits of work being carried out on the Project Network) that the Service Provider had changed its approach in respect of performing the Core Investment Works on the Project Road. The Service Provider was now only treating discrete elements of various sections of the Project Road and relying on the extent of the Project Road which the Service Provider considered was defined by the PNM and fixed as at the Service Commencement Date.

4.4

The PNM is primarily a diagrammatical representation of the road network providing information on road hierarchy and length of the road (in order to break it down into measurable sections for surveying purposes) and does not set out the full extent of the Project Road.

4.5

This means that:

4.5.1

one of the key deliverables of the Contract - the refurbishment of the Project Network in the CIP - is not being delivered by the Service Provider; and

4.5.2

the Service Provider is not complying with the key obligation to perform the Services in accordance with Good Industry Practice.

4.6

The Service Provider now seeks to argue that the obligations set out in PS1 only apply to assets as they are defined in relation to the PNM, because the terms in PS1A and PS1B are defined by reference to the PNM, and it is therefore only those defined terms which are the subject of the CIP.

4.7

The Service Provider has further sought to argue that it is entitled to hold 2 versions of the PNM and PNI, namely a static version as at Service Commencement Date in respect of Core Investment Works which does not record any changes to the Pavement Management Model, and a live version of the PNM and PNI which are used for Routine Maintenance and other Services

4.8

The Authority argues that this is not correct, relying on the following:

4.8.1

the requirement pursuant to clause 1.2 to read the Contract as a whole;

4.8.2

the requirement for the Service Provider to have satisfied itself of the condition and extent of the Project Network at the Pre-Commencement Survey date pursuant to clause 5.1;

4.8.3

the requirement pursuant to clause 6.1 for the Service Provider to keep sufficient records and data to enable the Authority to support a defence under section 58 of the Highways Act that requires the Authority to know or reasonably be expected to know whether or not the condition of the Project Network was likely to cause danger to users of the Project Network;

4.8.4

the requirement for the Service Provider to provide all works and services necessary to comply with Schedule 2 (Output Specification);

4.8.5

the indemnity provided by the Service Provider to the Authority pursuant to clause 55 in respect of breach of statutory duty and any third party claim arising out of the “design, installation, operation or maintenance of the Project Network” - particularly in respect of any failure to update the Project Network Model;

4.8.6

the requirement to provide the Services in accordance with Highways Standards and Good Industry Practice pursuant to clause 20.2.

4.9

The Authority seeks the appointment of an Adjudicator to consider which is the correct contractual interpretation.”

It was indicated in paragraph 5 that the exact quantum of the claim was currently not known. The redress sought is set out in paragraph 6, which is, essentially, in two different forms: (1) declarations; and (2) orders which required ABHL to carry out certain acts as opposed to merely declaring the correct interpretation of the contract terms.

BCC sought seven declarations and five orders. As will be seen in due course, it is only three of the declarations that the Adjudicator was concerned with and the balance were found to be unsuccessful in the Adjudicator's Decision, So far as the orders are concerned, these were simply not sought by BCC and not provided by the Adjudicator in the Adjudicator's Decision.

So far as the relevant declarations are concerned, the three which correlate to Issues 1 to 3 are as follows.

“6.1.1

that the Service Provider's obligation to perform the Core Investment Works and meet the PS1 requirement extend to the Project Network as a whole and not the Project Network as defined by the PNM contained in DRD0626;

6.1.2

that the Service Provider must update the PNM and maintain a PNI which accurately reflects the actual extent of the Project Network - more particularly the Project Road;[…]

6.1.5

that the Certificates of Completion for Milestones 6-9 be set aside;”

Whilst it formed no part of the Adjudicator's Decision, as a matter of record, BCC did seek what appears to be an order for specific performance or mandatory injunctive relief for several matters including the following:

“6.2

The Authority also seeks orders that the Service Provider:

6.2.1

re-calculates the current actual Network Condition Indices through the Pavement Management Model based upon the actual inventory and Condition Surveys and inspections;”

Whether this or a similar dispute may have significance is not a matter for this court.

Following the Adjudication Notice on 7 May 2015, the Adjudicator made directions by consent on 15 May 2015 for provision of the following documents:

Those documents were duly served on similar dates, namely BCC's submissions on 18 May 2015, ABHL's submissions on 29 May 2015, BCC's reply submissions on 9 June 2015 and ABHL's rejoinder on 12 June 2015, together with witness statements from BCC from Clive Betts, Domenic De Bechi, Forbes Johnston, Paul O'Day, Phil Woodhouse and William Moss; for ABHL Barry Wilcox, Graeme Cunningham and Nicholas Woodgate. On 22 June 2015 BCC served a skeleton argument and a hearing before the Adjudicator took place on the next day, on 23 June 2015. I have recourse to review these documents; and, in broad terms, BCC's skeleton argument of 22 June 2015 gives a fair indication of the matters before the Adjudicator which are plainly not all of the disputes contained in the Notice to Refer to Adjudication.

Thus, in the introduction to BCC's skeleton argument before the Adjudicator, the issues are described in this way in the introduction:

“1.

The main issue between the parties is one of construction of the Project Agreement. The core issue can be summarised as follows:

"Is the scope of Services to be provided by ABHL in Performance Standard 1 the same as, or less than, that to be provided in Performance Standards 2-10, and in particular is ABHL obliged to perform Core Investment Works in Performance Standard 1 to the Project Network as a whole or only to the inventory contained in the Project Network Model?"

2.

The parties' updating and maintaining obligations inform the correct interpretation of the Project Agreement and are also in dispute. In light of ABHL's Rejoinder, the remaining issue, as to the effect of the Milestone Certificates, appears now to be more procedural than substantive (although it is still not entirely clear).”

It is clear from that skeleton that the main issue was the scope of ABHL's works, ie Issue 1; and Issue 2 and Issue 3 were described as "secondary issues".

It therefore follows that the orders initially sought by BCC in their Notice to Refer the Dispute to Adjudication no longer formed part of the Dispute before the Adjudicator. In fact, BCC's case on Issue 1 was made under five headings, addressing: (1) the commercial purpose of the Project Agreement; (2) consistency with the remainder of the Project Agreement; (3) that anything else led to practical absurdities; (4) that it reflected the original practice adopted by the parties and (5) it was on that basis the parties entered into and priced the Project Agreement. As far as commercial purpose was concerned reliance was placed on Rainy Sky SA v Kookmin Bank [2011] 1 WLR 2900 per Lord Clarke and Lord Reid in Wickman Machine Tool Sales v FL Schuler AG [1974] AC 235. In respect of the particular wording of the Project Agreement, reliance was placed, in particular, on clause 5.1.1, clause 6.1, clause 20.2, clause 54.4, clause 55 and clause 68.1. The arguments were thus of a more general nature without reference to the Method Statements or further supporting Schedules.

The Adjudicator published the Adjudicatior's Decision on 9 July 2015. The Adjudicator's Decision makes perfectly clear that there were only three issues that the Adjudicator was asked to decide, as apparent from paragraphs 18 to 20, as follows:

"The issues

18.

In summary, the first principal issue between the parties is what is the scope of ABHL's obligation in relation to the Core Investment Works?

19.

The second principal issue is whether ABHL is under an obligation to keep updated the Project Network Model (PNM).

20.

The third principal issue is whether the Milestone Certificates issued by the Independent Certifier can be, and if so, should be, set aside."

One would therefore naturally expect that the decision made by the Adjudicator would limit itself to those three issues and they are essentially two declaratory matters and a third issue that puts into effect the decision on those two declarations in respect of the Milestone Certificates.

The approach taken to the construction of the Project Agreement by the Adjudicator relied upon Investors Compensation Scheme Limited v West Bromwich Building Society [1998] WLR 896 and Rainy Sky v Kookmin Bank (supra). It is apparent that the Adjudicator was able to construe the Project Agreement largely by reference to the main body terms and Schedule 2 without the need to condescend to details of the Method Statements and other such matters which were apparently not developed before the Adjudicator. So far as the witness evidence was concerned, the Adjudicator considered it of "limited assistance" and did not aid the Adjudicator's construction.

Accordingly, the Adjudicator's Decision falls into three quite separate parts dealing with Issue 1, Issue 2 and Issue 3 individually in that order. It is clear from the well-reasoned Adjudicator's Decision, the most important parts in respect of Issue 1 were as follows:

“56.

The primary reason for ABHL's submission that it is the RSL as shown in the PNM that must be used in the NCI calculations is ABHL's interpretation of the contractual definition of RSL. The contractual definition is as follows: “RSL means the individual section lengths of a Project Road between consecutive Nodes in the Project Network Model and “Road Section Lengths” or “RSLs” shall be construed accordingly."

It is apparent from ABHL's submissions that it reads the definition such that "in the Project Model" qualifies the totality of the individual section lengths of a Project Road between the consecutive Nodes".

…

61.

Although the Authority did not express the point in quite these terms, its argument would appear to involve a construction of the definition of RSL that would require that the words 'in the Project Model' are read as qualifying only 'between consecutive Nodes'. Read in this way, an RSL would mean the extent of a part of a Project Road as represented between two consecutive Nodes, which Nodes are set out in the PNM. This alternative construction is suggestive of an RSL having a physical aspect capable of objective measurement apart from its representation in the PNM.

…

113.

I accept, of course, that the parties were free to make any lawful bargain that commended itself to them, and ABHL say that the bargain struck between the parties was that, in respect of the CIP works, ABHL took only condition risk and had a defined scope of works, being limited to the extent of RSLs shown in the PNM. Having such a defined scope of work, says ABHL was commercially necessary to it. However, the result of ABHL's construction strikes me as being commercially unlikely in the context of a PFI upgrade and maintenance contract. For the result of ABHL's construction is that only an arbitrary part of the Project Network is upgraded in the CIP. Whilst, in principle, the Authority could seek to vary the works so as to include further parts of the Project Road which are not in the PNM, this would seem to require the scope of the works to be varied from the commencement date or soon thereafter, which makes little sense. If the intention were as ABHL suggests, I would expect there to be very clear words in the Contract which would drive one to the conclusion that its construction is correct.

114.

In my view there are no such clear words. Rather, what ABHL's preferred construction depends very largely upon is its interpretation of the definition of RSL as meaning an RSL as recorded in the PNM. For the reasons that I have sought to explain in paragraph 56 et seq above, I do not consider that that construction is correct. In my view, the references to RSLs and other Section Lengths in Part 1 and Part 11 of Schedule 2 are references to actual RSLs and other Section Lengths in the Project Network, save where the reference is expressly to RSLs, or other Section Lengths set out or otherwise recorded in the PNM. Once ABHL's construction of RSL as meaning the RSLs as set out in the PNM is rejected, there is little in the wording of the Contract that supports ABHL's construction of its CIP obligations.

…

142.

My conclusion in respect of the issue as to the scope of ABHL's works in the CIP is that ABHL's obligation extends to the Project Network and the Project Road and is not limited to the representation thereof or the representation of RSLs in the PNM. This follows from the proper construction of the definition of RSL and its use in Part 1 of Schedule 2. My conclusion is reinforced by the Contract’s focus on the Project Network and the Project Road and the upgrading thereof and the fact that the Contract does not express an intention to limit the scope of the CIP works to something less than the Project Network but to then expand the scope to cover the Project Network in the post-CIP. I also place reliance on what I consider to be the commercially unlikely result of ABHL's construction and the lack of clear words in the Contract which would justify such a construction.”

By citing these paragraphs I do not lose sight of the fact, and fully acknowledge, that the Adjudicator's Decision on Issue 1 also referred to BCC's contractual argument.

So far as Issue 2 is concerned, the Adjudicator, essentially, and, in summary, alone, came to the following decision based on his construction of the Project Agreement, namely:

“154.

Clause 19.2.1 contains two updating obligations. The first is to update the PNM in accordance with PS 8 of Schedule 2, i.e. where the Authority notifies the Service Provider of a change to the Project Network. The second obligation is to ensure that the information in the PNM is up to date at all times. This is obviously independent of the first obligation as, inter alia, otherwise the words “and shall ensure that the information contained in it is up to date at all times" would be otiose.

155.

I also read paragraph 2.3.3 of PS 8 as being consistent with the second obligation under clause 19.2.1 of the main body of the Contract. And clause 19.2.2 appears to dovetail with paragraph 2.3.3 of PS 8.

…

157.

Accordingly, as a matter of the proper construction of the Contract as a whole, I am satisfied that ABHL are under an obligation arising under clause 19.2.1 to update the PNM and to ensure that it is kept up to date at all times. Such obligation is without prejudice to its obligations under the other relevant provisions of the Contract to update and/or amend the PNM, including those under paragraph 2.3 of PS 8.”

In coming to that conclusion, the Adjudicator also considered clause 6 of the Project Agreement, but it is clear from this part of the Adjudicator's Decision that the process of construction gives rise to a much shorter analysis, which is understandable in view of the way the case was put before the Adjudicator.

So far as Issue 3 is concerned, it is clear from the Adjudicator's Decision that he appreciated that Issue 3 only came into play as a result of the Adjudicator's construction of Issues 1 and 2. Again, this was how the case was put before the Adjudicator in particular by BCC. Thus:

“158.

In light of my decision as to the scope of ABHL's works in the CIP, it follows that I consider that the Milestone Certificates were prepared and issued on an erroneous basis.”

It therefore follows, as a result of the Adjudicator's construction of the Project Agreement on Issues 1 and 2, that it was necessary to go on and consider the arguments on Issue 3. In coming to his conclusions on Issue 3, the Adjudicator considered, amongst other things, the following:

"164

…

This is doubly so when one considers the limited desk-top nature of the certification exercise, as described by Mr William Moss, one of the Independent Certifiers actually involved in the certification of Milestones 1 to 9, and the fact that he was not aware at the time of the production of the Milestone Certificates whether ABHL's calculations were based on the original PNM inventory or on the actual Project Network.

…

174

...

(ii)

It is easily demonstrable without extensive investigation (indeed it is accepted by ABHL) that the decision, alternatively the certificate and the process or procedure leading to its issue, is based upon calculations which (if I am right on construction) are based upon an erroneous interpretation of the Contract."

In light of those findings on Issues 1 to 3, the Adjudicator concluded on those principal issues at paragraph 175 in the following way:

“175.

My conclusions on the principal issues can be summarised as follows:

(i)

ABHL's scope of works in the Core Investment Period is to determined [sic] by reference to the actual Project Network and the RSLs therein, not those recorded in the original PNM.

(ii)

ABHL's performance is to be calculated by reference to the actual Project Network and the RSLs therein.

(iii)

ABHL is obliged to update the PNM and to ensure that it is at all times up to date.

(iv)

Milestone Certificates 6 to 9 inclusive are in error and should be set aside or opened up, reviewed and revised.

(v)

ABHL's completion or otherwise of Milestones 6 to 9 inclusive should be certified by reference to the actual Project Network and the RSLs therein.”

It is clear that the Adjudicator came to conclusions which, on their face, are beyond the actual relief that BCC requested the Adjudicator to grant having regard to the fact that the scope of the Dispute had substantially narrowed to the Issues alone.

The background to this is apparent on consideration of the relief and remedies set out in the Adjudicator's Decision which are somewhat curious. A brief review of the Adjudicator's procedure in coming to the relief and remedies provided in the Adjudicator's Decision shows it is far from clear. The process appears to be this:

“176.

The Authority seeks seven wide-ranging declarations as set out in paragraph 6.1 of Adjudication Notice [sic] and paragraph 5.6 of its Submission dated 18 May 2015. As explained below, I find the terms of some of the requested declarations to be imprecise and their appropriateness questionable. In my view it may have been better to have first determined the principal issues as to construction and the status of the Milestone Certificates and then for the parties to have made submissions as to the most appropriate way forward in terms of the precise formulation of any declarations or orders. That is an option that the parties could still take, but only if it were an agreed course of action.

177.

Paragraph 6.2 of the Adjudication Notice also sought five Orders against ABHL. The request for such Orders was not repeated in the Authority's Submissions dated 18 May 2015. In its Submissions dated 29 May 2015, ABHL concluded that the request for such Orders was no longer being pursued by the Authority, which conclusion was not disputed by the Authority in its Reply Submissions dated 9 June 2015. The remedies sought in the Authority’s Skeleton Argument dated 22 June 2015 are limited to the requested declaratory relief. Accordingly I conclude that the relief sought by the Authority is currently limited to such declaratory relief. I will not, therefore, consider further or make the previously requested Orders. However, as explained below, it is appropriate to order that the NCI calculations be re-done in accordance with my construction of the Contract.

178.

The first requested declaration sought is in the following terms:

That the Service Provider's obligation to perform the Core Investment Works and meet the requirements of Performance Standard 1 extend to the Project Network as a whole and not the Project Network as defined by the Project Network Model contained in DRD0626

179.

For the reasons set out herein I shall grant this declaration in the terms similar to those sought.

180.

The second requested declaration is sought in the following terms:

That the Service Provider must update the Project Network Model and maintain a Project Network Inventory which accurately reflects the actual extent of the Project Network - more particularly the Project Road.

181.

I have found that ABHL is under an obligation to update the PNM so as to reflect the actual extent of the Project Network. It does not appear to be in dispute that the PNI should be updated and should reflect the Project Network. Indeed, ABHL say that this is precisely what they have done and what they do. As such ABHL say that the request for declaratory relief is misconceived.

182.

In my view, given that ABHL does not dispute its obligation in respect of the PNI, and given my decision in respect of updating the PNM, it is appropriate to make the declaration in terms similar to those sought.”

Between paragraph 183 and 186 the Adjudicator declined the further declaratory heads of relief sought in the Dispute and then continued:

“187.

The fifth requested declaration is in the following terms:

That the Certificates of Completion for Milestones 6-9 be set aside.

188.

For the reasons set out herein I have decided that the Certificates of Completion for Milestones 6 to 9 should be set aside, alternatively opened up, reviewed and revised and the relevant calculations performed again by reference to the actual Project Network inventory. I am not aware of what the result of such re-calculation will be. Until this has been done I am not sure on what basis it can be assumed that the relevant Milestones will be shown not to have been achieved. Mr Moss explains that, as one would expect, if the calculations are performed by reference to the Project Network inventory instead of the original PNM inventory, the results could change. However, how the figures would change has not been explored in the evidence or the Parties' submissions.

189.

Accordingly in my view the correct way to proceed is for the calculations to be re-done. I will therefore make the declaration in terms similar to those requested but will also order that ABHL re-calculates the Network Condition Indices relevant to each of Milestones 6 to 9 inclusive by the reference to the actual Project Network inventory. The consequence of such re-calculation is not something that can be dealt with in this Decision. I would expect the Independent Certifier to be able to assist with this process, although it will also require input from ABHL and the Authority.”

In paragraph 190 and 191 the Adjudicator declined the sixth and seventh declarations sought in the Dispute.

What is equally clear, as has been set out above, is that the Adjudicator made no reference to the orders sought in the Dispute and therefore this part of the Notice to Refer to Adjudication by BCC formed no part of the Adjudicator's Decision.

The result of the Adjudicator's Decision is apparent from paragraph 195, which provides as follows:

“195.

Having considered all the evidence and arguments, both oral and written, my Decision is as follows:

1.

I make the following Declarations:

(i)

That ABHL's obligations to perform the Core Investment Works and meet the requirements of Performance Standard 1 extend to the Project Network as a whole and are not limited to the RSLs as recorded in the Project Network Model contained in DRD0626.

(ii)

That ABHL must update the Project Network Model and maintain a Project Network Inventory which accurately reflect the actual extent of the Project Network and the Project Road.

(iii)

That the Certificates of Completion for Milestones 6 to 9 inclusive be set aside, alternatively opened up, reviewed and revised and the relevant calculations performed again by reference to the actual Project Network inventory.

2.

I order that ABHL re-calculates the Network Condition Indices relevant to each of Milestones 6 to 9 inclusive by reference to the actual Project Network inventory.”

As a matter of record, looking at the Adjudicator Decision, it is clear, on the face of the record, when compared to the actual relief sought by BCC in their redress, in their Notice to Refer the Dispute to Adjudication, the following differences are apparent:

Whilst it is appreciated that the Adjudicator was required to construe both the scope of the Core Investment Works and the updating obligations of the Project Agreement, and, as a result of that decision, either accept or set aside the Completion Certificates, the Adjudication Decision appears to have gone well beyond such declarations for Issues 1 and 2 and the consequence for Issue 3 and imposed on ABHL orders for performance of the Project Agreement which, so far as the arguments placed before the Adjudicator went, clearly sought no such relief.

Jurisdiction and Relief

The use of the term "Jurisdiction" is maybe used in this judgment in a somewhat loose way but the purpose is to clearly set out the narrow role this court plays in any dispute resolution between BCC and ABHL together with the particular discretionary relief sought by ABHL as set out in the Claim Form and expanded in the Particulars of Claim.

The jurisdiction given to this court for the purposes of this judgment is exclusively contractual and contained in clause 70 of the Project Agreement. In general terms, BCC and ABHL agreed a dispute resolution process which, following consultation, would then permit a Dispute to go to adjudication and on to arbitration, save for one specific let out clause by which the Courts of England and Wales are permitted to consider questions of law resulting from that process.

To put the matter in context, it is probably necessary to briefly review what it is this court is empowered to do as a result of the parties' agreement; and, conversely, what this court is not empowered to do should any matter be placed before the court beyond the parties' agreement.

Clause 70.1 of the Project Agreement provides as follows:

“70.1.1

Any Dispute arising in relation to any aspect of this Contract shall be resolved in accordance with this clause 70 (Dispute Resolution).

70.1.2

If a Dispute arises in relation to any aspect of this Contract, the Service Provider and the Authority shall first consult in good faith in an attempt to come to an agreement in relation to the Dispute.

70.1.3

If the Service Provider and the Authority fail to resolve the Dispute through such consultation within fifteen (15) Business Days, either party may refer the matter to an Adjudicator selected in accordance with clause 70.2 (Adjudication) below. Without prejudice to clause 70.1.2 above, either party may give the other notice of the intention to refer the Dispute to adjudication and the Adjudicator shall be selected in accordance with clause 70.2 (Adjudication).”

The definitions section of the Project Agreement defines a "Dispute" as meaning:

“any difference or dispute between the Authority and the Service Provider arising out of or in connection with the Contract (including any question as to the validity or interpretation of the Contract and including any dispute arising before or after termination of the Contract or any failure by either Party to perform their obligations pursuant to the Contract)”.

It would therefore seem that any Dispute between BCC and ABHL, should consultation fail, commences by means of a notice of intention to refer that Dispute to an Adjudicator; and it would appear to follow from this that it is only that Dispute which would go to the dispute resolution procedure agreed by the parties and not some other matter beyond that dispute.

So far as the process of Adjudication is concerned, it is clear from clause 70.2.1 that the Adjudicator is to be nominated to consider the Dispute referred to him and thus, again, it was apparent that matters could not go beyond such Dispute as apparent from the Notice of Intention to Refer that Dispute to the dispute resolution process. Clause 70.2.2 refers to the Adjudicator requiring that the parties submit in writing their respective arguments. So far as that is concerned it appears that the parties did, as a result of the Adjudicator's Order, provide their arguments and this, as set out above, had the effect of reducing the potential extent of the Dispute placed before the Adjudicator and therefore the subject of the Adjudicator's Decision. Of particular relevance is clause 70.2.3, which provides:

“70.2.3.

In any event, the Adjudicator shall provide to both parties his written decision on the Dispute within twenty (20) Business Days of appointment (or such other period as the Parties may agree after the reference, or thirty (30) Business Days from the date of reference if the party which referred the Dispute agrees). Unless the Parties otherwise agree, the Adjudicator shall give reasons for his decision. Unless and until revised, cancelled or varied by the Arbitrator, the Adjudicator's decision shall be binding on both Parties who shall forthwith give effect to that decision (save where clauses 70.3.1.2 or 70.3.1.3 apply).”

It is also apparent from clause 70.2.6 that the Adjudicator is required to act impartially and take the initiative in ascertaining the facts and law, and also in fact does have power to open up, review and revise any opinion, certificate, instruction, determination or decision of whatsoever nature given under this Contract. Whilst that power is given to the Adjudicator, it does not appear to follow that such power can be exercised unilaterally by the Adjudicator, as opposed to a party in their Dispute requesting that the Adjudicator undertake such process.

Clause 70.3 is headed "Arbitration" in the Project Agreement; and it is clear from the general reading of that clause that disputes under the Project Agreement would go to arbitration, save for the clauses giving power to the court, as follows:

“70.3.1

If …

70.3.1.2 either Party is dissatisfied with or otherwise wishes to challenge the Adjudicator's decision made in accordance with clause 70.2.3; or

70.3.1.3 both Parties agree;

then either Party may (within thirty (30) Business Days of receipt of the Adjudicator's decision, where appropriate), notify the other Party of its intention to refer the Dispute to:

…

70.3.1.5 the Courts of England and Wales if it relates to a question of law.”

That is the only exit route which would permit such a Dispute to come before the court and otherwise matters go before an arbitrator who, likewise, has powers to open up, review and revise matters should such dispute appear before them.

It thus follows that this court can consider only questions of law and not decide facts in respect of the Dispute which forms the subject of the Adjudicator's Decision. Thus, the jurisdiction given to the court is limited to those particular matters which, as a result of the Dispute, the Adjudicator has been asked to decide and has given a reasoned Adjudicator's Decision, which, so far as a matter of law, is open to challenge by either party. What the dispute resolution process plainly does not provide for is that the court will have power to consider other or further Disputes not contained in the Notice of Intention to Refer such dispute to adjudication. It is, taken in the round, a very circumspect involvement by the court.

It was partly for this reason that it seemed appropriate to review the Dispute commenced by BCC and the Adjudicator's Decision given by the Adjudicator in respect of Issues 1, 2 and 3 and limit this court's role to those matters alone. Thus, to the extent ABHL may seek that the court give further decisions on law beyond that initiated by BCC, that would not be a proper course as a matter of contractual entitlement for this court to undertake.

The power of the court to give declaratory relief is both flexible and discretionary. That discretion is given to the trial judge as to whether or not to grant such relief. Generally speaking, the approach of the courts is that if a party succeeds in an action they should not usually be sent away empty handed. As with all discretions given to the court, they should be exercised judicially and thus the court should not be selective or discriminatory in its manner, arbitrary or idiosyncratic or indeed just decide on the whim of the court. The statutory basis of declaratory relief can no doubt be traced back to the Chancery Act 1850, the Chancery Procedure Act 1852 and the Judicature Act 1873, which now finds itself in the Senior Courts Act 1981 and probably the very broad powers given under section 19 (see Zamir and Woolf "The Declaratory Judgment" 4^th edition (2011)).

So far as procedural rules are concerned, declaratory judgments are specifically dealt with under CPR 40.20 in the following way:

“The court may make binding declarations whether or not any other remedy is claimed.”

It is well acknowledged that this rule simply permits declarations as a sole form of relief. This as such does not in fact arise on the pleaded issues in this case as set out above. To the extent one looks to a rule to empower the court to make a binding declaration, it is clear that even this procedural power is discretionary.

The notes in the White Book under the heading ‘Jurisdiction to make declarations’ under CPR 40.20.2 provide by example as follows:

“The power to make declarations is a discretionary power. As between the parties to a claim, the court can grant a declaration as to their rights, or as to the existence of facts, or as to a principle of law (Financial Services Authority v Rourke [2002] C.P.Rep 14 (Neuberger J.)). When considering whether to grant a declaration or not, the court should take into account justice to the claimant, justice to the defendant, whether the declaration would serve a useful purpose, and whether there are any other special reasons why or why not the court should grant the declaration (ibid)”, at page 1349. And further at page 1350 "In considering whether or not to grant a declaration as to the proper construction of a contract, the court should, at the very least, proceed with caution and in accordance with the principles referred to in the notes and authorities referred to above (Thomas Brown Estates Ltd v Hunters Partners Ltd [2012] EWHC 21 (QB), January 12, 2011, unrep. (Eder J).”

Equally, whilst the court's power to give such declaratory relief as a matter of law under the Project Agreement is contractual, some comparative assistance is also obtained by the authorities referred to in "Coulson on Construction Adjudication" 3rd edition (2015) (at paragraph 16.44 to 16.57) where generally speaking the TCC has been cautious in giving declaratory relief.

Thus, whilst something may have gone wrong as a matter of law in the Adjudicator's Decision, which would entitle ABHL to expect to receive declarations as to the effects of the true and proper construction of the scope and the updating obligations of the Project Agreement, it would not necessarily follow that the court would go further and accede to a declaration that goes beyond that contained in the Dispute as was apparent in the Adjudicator's Decision, in particular given the complex nature of the Project Agreement and the ability of any court to fully and properly understand all aspects of that agreement in terms of its working over the Core Investment Period.

It is common ground between the parties that the process that this court undertakes is not an appeal process but is, in effect, a decision to be made de novo.

Background Facts

Both before the Adjudicator and as a result of the Order of 2 October 2015 of Mr Justice Stuart-Smith, BCC have sought to put in factual matrix to assist in the construction of the Project Agreement. The Adjudicator did not find this of any assistance in his construction of the Project Agreement, but as this decision is de novo and reliance has again been placed on this by BCC, I will set out some of the more central facts both by reference to the Statement of Agreed Facts as ordered and witness statements.

Equally, and secondly, factual evidence was ordered in respect of the contents of the Project Network Model and witness evidence provided by both BCC and ABHL. Prior to construing the Project Agreement and applying rules of law to that construction I will therefore also consider how the witnesses can assist in the court's understanding of the PNM. Evidence is also proffered in respect of Good Industry Practice in the witness statements which was initiated by BCC.

Based on the Statement of Agreed Facts the following appears to be agreed. BCC publicly advertised the contract in the Official Journal of the European Union. In June 2004 BCC published an Information Pack which was issued to ABHL and the Information Pack recorded, amongst other things:

“3.2.

Survey Information and Data Room.

Information on existing conditions will be supplied to all bidders. It will be the bidders’ responsibility to verify the accuracy and adequacy of that information. A data room will be established to enable bidders to access all current available information.

…

3.3.

Service Requirements.

The City Council has prepared a first draft of the Service Requirements for the PFI contract, which are based on meeting key performance standards and adopting a holistic 'back of footway to back of footway' service provision

...”

In July 2005 BCC issued an Invitation to Negotiate to ABHL which stipulated, amongst other things:

"The Service Provider undertakes its final due diligence of the Project Network at Preferred Bidder stage ... and takes the risk in the condition and extent of the Project Network. The Authority does not warrant any part of the information.” (paragraph 12.12).

“The Service Provider is obliged to put in place and accurately maintain a Management Information System and the Project Network Model” (paragraph 12.29).

“The Qualified Bidder shall satisfy itself as to the accuracy of Information given by the Authority relating to the Project, by carrying out such tests, surveys, site investigations and such as the Qualified Bidder considers necessary” (paragraph 16.20).”

On 30 December 2005, ABHL submitted a bid to BCC. ABHL's bid included, amongst other things, the following section under "Risk Allocation Matrix":

“Amey accepts the risk allocation as proposed by the Authority, with no changes required. The Register below is therefore the Project Risk Register." The Project Risk Register (at page 5) included "Accuracy of Inventory and all Surveys.”

On 21 February 2006 ABHL gave a Risk Presentation to BCC. ABHL included in its presentation a table of major risks which it modelled using 'Crystal Ball' software. On 10 April 2006 ABHL gave storyboard presentations to BCC in which ABHL indicated that its submissions were based on adequate due diligence of the asset data made available by BCC and there had been prudent assumptions made in arriving at an asset dataset for pricing. It was anticipated by ABHL that further surveys would be carried out prior to the BaFO to validate or remove those assumptions. Details were given by ABHL in respect of the Pavements and the Walking/Cycling Routes. So far as the BaFO issues were concerned, an inventory and condition update for pricing was also a Funder issue.

BCC provided ABHL with iterations of the database ultimately described as "database document 0626" or "DRD0626" on 14 February 2008, (0569); the first week of April 2008, (0579); and on 22 October 2008, (0626). DRD0626 contains some data which was based on industry averages. ABHL carried out surveys prior to the date of entry into the Project Agreement to verify and supplement the data in DRD0626 and ABHL had used DRD0626 as an element of its pricing but not as the sole basis.

Mr Paul O'Day, in his witness statement on 21 December 2015, indicated that he was the Street Services Manager for Birmingham City Council and had 35 years' experience on major highways scheme project management and maintenance, having successfully delivered several multi-million pound highways schemes, notably the Birmingham Heartlands Spine Road, which was completed in 1997 at the cost of approximately £100 million. He has worked for Birmingham City Council since April 1986 and, before that, for West Midlands County Council from October 1980 to March 1986. He is a Chartered Civil Engineer and he had managed large and complex budgets both for capital infrastructure works and life cycle maintenance activities. Since May 2010 his title was that of Street Services Manager.

In paragraph 25 and 26 of his witness statement he gives details of the Best Value Review process (in which he was engaged as the Lead Technical Officer), during which the use of a potential PFI contract was discussed with Forbes Johnson during 2000. The Best Value Review was conducted in the light of the Local Government Act 1999 and confirmed the unsatisfactory state of the existing highway network services and the need for a major cash injection to rectify the situation. In summary, the difficulty facing BCC was that there was simply not enough money available to rehabilitate the Project Network from its own resources. The stated object of the Best Value Review was to restore the highway to a "fair and reasonable" (but affordable and sustainable) condition whilst acknowledging that a Highways Management and Maintenance Service was to be seen in the wider context of the "street scene". The Outline Business Case ("OBC") was submitted to the Department for Transport, Local Government and the Regions in August 2001. The OBC explained that the network was suffering from a low level of capital maintenance investment, which had resulted in a substantial length of the network being in a critical or failed condition. The Local Authority Associations' Code of Good Industry Practice for Highways Maintenance recommends no more than 7 to 8 per cent of the network should be critical. In fact, 15 per cent of Birmingham's principal network was in a failed condition. He indicates that following dialogue between DfT and BCC regarding how Local Transport Plan capital sums would be handled in the PFI project, the final OBC in August 2003 sought PFI credits of £379 million. Counsel for BCC indicated those had increased to £608 million.

In July 2005 BCC issued the IGB to which Mr O'Day makes comments in respect of the ITN. In particular, he quotes from the following parts of the document. He comments:

"The Service Provider is obliged to put in place and accurately maintain a Management Information System and the Project Network Model” (paragraph 12.29)

from which Mr O'Day considers, therefore, ABHL always knew that it had to maintain both the Management Information System and the Project Network Model.

ABHL submitted its bid on 30 December 2005, which Mr O'Day also quotes from:

“As part of mobilisation, we will install 'state-of-the-art' asset management software. We will populate it with data already in the Authority's possession and taken from other sources. From Service Commencement we will gather data about the assets and update the databases. By the end of the CIP we will have comprehensive knowledge of every element of the Project Network and an accurate register. This knowledge will allow us to plan our work effectively and efficiently” (paragraph 1.2.3).

In this regard, Mr O'Day believed that part of the asset management software referred to by ABHL was the Pavement Management Model and that ABHL recognised in its bid that it would update the databases during the CIP for use in the Pavement Management Model and those databases would enable the work to be planned effectively and efficiently and, in his view, ABHL were not doing that now.

“Our PMM is predictive in nature... In addition to treatment information, the results of routine surveys and inspections will also be input into the PMM, providing regular updates on the rates of deterioration and refining the forecasts” (paragraph 2.5.47).

On this basis, Mr O'Day considered that ABHL recognised that the PMM would be regularly updated with the latest survey data.

“DVI survey data will be collected to comply with our survey procedure... The survey data will be fed directly into the PMM and section...” (paragraph 2.6.17).

From there, Mr O'Day considered that the DVI data would include both condition and inventory data and ABHL accepted that it would feed the survey data into the PMM.

“By the end of the CIP we will have established fully populated and accurate databases of the inventory. Processes will be in place for the effective and efficient management of the asset going forward...” (paragraph 3.1.8).

From this, Mr O'Day considered that ABHL had identified that it would update the inventory databases during the CIP which would then be used for the management of the Project Network. He considered ABHL had not been doing this.

So far as BaFO is concerned, BCC sought BaFOs from two Qualified Bidders of which ABHL was one, on 29 February 2008. There was a commercial response of 9 April 2008 from ABHL which included, amongst other things:

“This project will need significant initial investment (estimated by the Authority at c. £300 million) to rehabilitate the City's highway network during the Core Investment Period” (s.2.1) (page 874).

Reference was made to an Information Pack which set out details of the key issues facing the highway maintenance and management service in the West Midlands and the particular problems of Birmingham in which 12 per cent of the network was in a critical condition, i.e. less than five years' remaining life.

As a result of a request, a copy of the ITN Submission of 30 December 2005 was provided by BCC to the court. It is clear from that document in context that this contains details of a joint document between ABHL and BCC concerning Method Statement 2 for which particular questions and answers are given in respect of Part 1 of the Output Specification, the Performance Targets, NCI and how Part 1B of the Output Specification will be provided. In due course Method Statement 2 was incorporated into the Contract as part of Schedule 3 to the Project Agreement and, in fact, contains a more substantial document than that provided prior to the Contract for the formation of the Project Agreement.

Mr Graeme Cunningham, on behalf of ABHL provided a witness statement dated 18 December 2015 and he is currently the Principal Project Manager for Amey Consulting and Strategic Infrastructure in Doha, Qatar, but he indicated he was the Bid Manager for ALG between February 2005 and April 2010. Having set out the bid process, he also gives evidence on BaFO and BaFO Refresh and the condition data in DRD0569 and 0579 and thereafter. In a second witness statement of 20 January 2016 Mr Cunningham responds to Mr O'Day's statement.

In the Statement of Agreed Facts BCC and ABHL provide some assistance as to the Project Network Model (PNM) in the following way.

It is agreed that DRD0626 is a Microsoft Access database file and the file contains six tables, namely, MSEC, MINV, MSURV, MSECSURV, MCON and MSCRIM.

Taking those individually, and without fully quoting from all the agreed facts, it is clear that 'M' in each of these tables in the PNM probably stands for "March", which may be a shorthand for the "Maintenance Rating and Costing of the Highway" system. Thus, taking these in turn, MSEC is the 'March data' for Road Section Lengths; and the data in MSEC identifies each RSL and contains the following data fields which show the hierarchy of the RSL from H1 to H4, together with the length or the recorded length of each RSL in metres. MINV is the "March Inventory"; and it is this part of the PNM that BCC particularly complain about. The parties agreed that there is a link between MSEC and MINV through the RSL identifier, and that MINV has details of the feature XSP start and end linear chainage and contains an inventory date showing when inventory was recorded in MINV. It also provides details of the width at each chainage and has the ability to record the file number which provided the inventory information. There are other technical parts of MINV.

MSURV records a survey being carried out and contains fields for the type of survey, the name of the survey and other technical detail in those respects.

MSECSURV contains records of the survey dates and sections included in the surveys referring to MSEC and MSURV and contains the start date, end date and textural comment of the survey.

MCON is in respect of the "March Condition" and contains condition records of the survey of sub-sections in various fields, cross referenced to MSEC, MSURV and MINV, by reference to XSP and feature in respect of the latter of those and gives details of start and end chainage and other technical material.

As to MSCRIM, and "SCRIM" stands for a "Sideways force Co-efficient Routine Investigation Machine" and is a way of measuring skid resistance. Each MSCRIM row records the SCRIM threshold measure that has been determined as appropriate for the particular chainage of an XSP. Again, this is recorded by reference to MSEC, MSURV and MINV by reference to the XSP.

It is agreed between BCC and ABHL that the Project Network Model does not expressly contain "Nodes" which are the five figure identifiers as set out in the definitions of the Project Agreement. Equally, ABHL acknowledges that they collect and continue to collect condition and inventory data that "could be" used to update all the tables in the Project Network Model.

As a result of a request, the court was provided with a specimen copy of the PNM contained in DRD0626, and by reference to those specimen pages of each of the six files one can get an idea of the technical material available for all these "March" tables. In particular, looking at MINV it is possible to see that reference is given to a section label, a feature, XSP, the start and end chainage and inventory dates which, on this example, are dates in 2003, the start and end widths, a code, which, in this example, is not filled out, that could contain any references to a survey file which provided inventory information and a set of further headings of a more technical nature.

Witness evidence was provided by both parties which marginally adds further descriptions of the factual contents of the PNM. In particular, Nicholas Woodgate on behalf of ABHL, who first started work on the project in 2008 during the BaFO Refresh stage. In paragraph 14 onwards of that statement he briefly expands on the contents of the Statement of Agreed Facts as follows:

“14.1

MSEC: This table ... lists 14,091 sections of Carriageway or Footpath in Birmingham. These sections are called Road Section Lengths or RSLs in the Project Agreement … MSEC also includes information about each of the RSLs, including a unique reference number, the length of the RSL, and an alphanumeric code … that indicates the Carriage hierarchy of the RSL under the Project Agreement", and then gives details of those codes.

“14.2.

MINV: It is a standard practice in the pavement management industry to characterise pavement assets by reference to their position relative to the centreline of the section of road with which they are associated. This referencing system has been standardised, and is set out in the “UKPMS User Manual” ... For example … a single carriageway might have a left hand lane immediately to the left of the centre line of the road, denoted “CL1”, for traffic flowing forward relative to the chosen orientation, and a right hand lane immediately to the right of the centre line of the road, denoted “CR1”, for traffic flowing in the other direction. ... Since pavement assets are categorised by reference to the centreline of the road, they are referred to as “cross sectional positions” or “XSPs”. The MINV table … contains a list of 105,564 XSPs, along with certain information about each XSP.”

The witness statement proceeds to give details of the MSURV by reference to Coarse Visual Inspections and Detailed Visual Inspections, being a CVI and DVI, which are surveys carried out to assess the surface condition of Pavements. Reference is also given to the SCRIM and how that works and, to a lesser extent, the MSEC, MSECSURV, MCON and MSCRIM.

In responding to that statement Phil Woodhouse's statement for BCC of 25 January 2016 broadly agrees with Nicholas Woodgate's description of MSEC and MSURV, including details of the description of the Detailed Visual Inspection ("DVI") but notes, so far as MINV is concerned, in paragraph 11 the following:

“11

… Mr Woodgate makes no reference to the fact that the inventory recorded in relation to approximately 60% of the RSLs in the MINV table is default data which is not reflective of the actual inventory ...

12.

... ABHL should update the default data in the MINV table after it carries out surveys so that it becomes progressively more accurate throughout the Core Investment Period."

In doing so, he relies upon clause 6.3 of the Project Agreement. He goes on to indicate, having reviewed the data files, that he believes the position is, amongst other things, as follows:

“14.3

surveys which were carried out in August 2008 or after were not incorporated into DRD 0626 ... DRD 0626 was taken from software known as MARCHpms ABHL used different software called Confirm and, because of this, the Authority switched to using Confirm in or around July 2008 in preparation for the Project Agreement. After this switch, survey data was not incorporated into DRD0626 and would instead have been incorporated into a Confirm database.”

However, he does not have access to the Confirm system and was unable to confirm whether the data from BCC was stored there. It therefore appears that so far as Mr Phil Woodhouse is concerned data is still being collected and recorded on Confirm, but he is not in a position to assist as to its working.

In fact, reference to Confirm is dealt with by Mr Nicholas Woodgate when he considers a separate inventory system, namely the Management Information System as opposed to the Project Network Model, in his statement as follows:

"28.

Under the Project Agreement, ABHL is required to develop and maintain an electronic system comprising the Project Network Inventory, or PNI, and various asset management systems defined under the Project Agreement. This system is called the Management Information System, or MIS, which is made up of various computer programmes. One of these programmes, an asset management system called “Confirm”, holds the data about the pavement assets in the Project Network, amongst other things. Confirm is run remotely for us by Pitney Bowes.

29.

... we entered into the contract with Pitney Bowes, and the Authority transferred the data that it held in its own Confirm system to Pitney Bowes to populate the version of Confirm that it was to run on our behalf ... The pavement inventory and condition data so transferred was then supplemented by the DVI survey data we had already collected by that time.

30.

The data about pavement assets in Confirm is separate and distinct from that in the PNM, and is structured in the following way ...”

The witness statement goes on to explain the workings of Confirm, which stores both current and historic inventory and condition data in some cases going back to 2003. Details are set out both as part of the matrix and as a description of the PNM to assist, to the extent that it is relevant or admissible, in the construction of the Project Agreement as a matter of law. It is not intended, by referring to these background facts, to make decisions of fact or prefer the facts of BCC over ABHL or otherwise. Neither party focused on Confirm or provided any consideration as to whether it met good industry practice which in any event may well require the assistance of experts.

In the first statement of Phil Woodhouse dated 21 December 2015 he gives details of these matters and indicates that he is a Highways Information Manager for BCC and has spent 29 years working for BCC. He is a trained civil engineer with an ONC and HNC in civil engineering from Bilston College and Wolverhampton Polytechnic.

He indicates that he can assist the court with: the relevant surveys for the Project Agreement; in order to understand the operation of Condition Indices; databases; and Good Industry Practice in respect of surveys and pavement management systems.

In paragraph 10 onwards Mr Woodhouse indicates as follows:

“10.

I understand that ABHL's position is that, although it carries out surveys in accordance with the Project Agreement, it is not required to update the Project Network Model with the inventory data gathered from surveys. This is nonsensical. In order to explain why, it is necessary to explain how surveys and pavement management systems should operate in practice and in accordance with Good Industry Practice. The pavement management system on this Project comprises the Project Network Model and the Pavement Management Model.

11.

UKPMS details a number of surveys which can be used to record data in respect of “maintenance lengths”. The Project Agreement uses the term Road Section Length (“RSL”) … to divide the Project Roads into manageable sections ...

12.

The most important surveys for the purposes of the dispute are Detailed Visual Inspections (“DVIs”)

...

18.

Once the surveys have been collected, Good Industry Practice requires both the condition and inventory data to be inputted into the relevant pavement management system

...

26.

In summary, Good Industry Practice involves: ... establishing a detailed and accurate inventory ... updating the pavement management system with both inventory and condition data; and … ensuring that the condition data marries up with the inventory data.

27.

Only once both the condition and inventory data have been collected and inputted into the pavement management system, can the pavement management system then ... create a programme of works to enable the efficient rehabilitation, treatment and maintenance of the Project Network; and ... be used to identify the condition of any of the assets on the Project Network including, as appropriate, the calculation of any condition indices.

28.

ABHL's pavement management system comprises the Project Network Model (the database) and the Pavement Management Model (the management tool) ... the Project Network Model is (or should be) a geographical representation of the Road Section Lengths in the Project Network: the failure by ABHL to fully update the Project Network Model is at the heart of the dispute ... the Pavement Management Model is used to calculate condition indices for the Output Specification and determine the rehabilitation, treatment and maintenance programmes for the Project Network. The Pavement Management Model relies on the Project Network Model to produce its outputs.”

Details are given of the United Kingdom Pavement Management System (described in Appendix D to the Code of Practice for Highway Maintenance and defined as 'UKPMS'). The Code of Practice for Highway Maintenance comprises several parts and includes, in part C, the strategy and hierarchy, under section 8, in respect of which both parties individually or commonly referred to section 8.5 concerning highway maintenance management systems; 8.6.7, concerning the need for an asset register or databases as an essential prerequisite for the establishing of a cost effective and adequate maintenance regime; and 8.6.8 and 8.6.9, referring to inventory of information. In addition, under section 9, referring to inspection assessment and recording, reference was made under 9.21 to general requirements of condition surveys, the need for a Detailed Visual Inspection ('DVI') and, under 9.23.3, reference to a flexible approach to UKPMS and the need to collect inventory and how much is required to be collected under 9.23.4.

The UKPMS User Manual was also referred to under the Pavement Condition Information Systems and this document in its October 2009 edition gives more technical details of inventory items and details of surveys and maintenance of inventory data. It was ABHL's position that if matters of this sort were to be properly considered by the Court then assistance may be needed from experts. Nothing of this sort was provided for by court order and this would in any event go well beyond matters commonly considered in a Part 8 construction summons.

Project Agreement

Construction of the Project Agreement firstly reviews the structure of this PFI contract (which is commonly encountered) and then reviews the main body clauses and schedules and Method Statements before considering the more important clause 6 and Method Statement 13. The Court has had available much more detail than the Adjudicator.

The conformed copy of the Project Agreement dated 6 May 2010 between BCC and ABHL is entitled, "Project Agreement relating to the rehabilitation, maintenance, management and operation of the roads and street lighting network in the City of Birmingham pursuant to the Government's Private Finance Initiative".

The contents page provides an index to parts A to O of the Project Agreement, only some of which have been relied upon by BCC and ABHL in their respective arguments as to the true and proper construction of this document in respect of the scope of the Core Investment Works and updating of the PNM.

Under Part A (Introduction), reference was made to clause 1 (Definitions, Interpretation and Construction); clause 2 (Commencement and Expiry of this Contract); and clause 4 (Appointment of an Independent Certifier). Under Part B (Condition of the Project Network), reference was made to clause 5 (Condition of the Project Network); and clause 6 (Surveys and Inspections). Under Part C (Core Investment Period), reference was made to clause 9 (Milestones). Under Part E, Certification, Inspection and Authority Access reference was made to clause 13 (Certification). Under Part F (Property), reference was made to clause 19 for the Management Information System and Project Network Model. Under Part G (Services), reference was made to clause 20, (Obligation to Provide the Services and Performance Standards). Under Part J (Change), to clauses 37 and 39 referring to Accrual and De-accrual of Project Network Parts and Changes to the Service respectively; under Part K (Financial), to clause 43 concerning Monitoring and Reporting; under Part L concerning Corporate General, clauses 54 and 55, for Warranties and Undertakings and Indemnity; Under Part M (Step in, Expiry and Termination), to clause 68 for Handback Procedure; and lastly, under Part O (General Provisions), clause 95 concerning Sole Remedy.

The contents also make clear that the Project Agreement includes Schedules of which, again, a limited number were referred to by the parties. The Project Agreement has 36 Schedules attached to it, of which reference was made to Schedule 2 (Output Specification); Schedule 3 (Method Statements), within which reference is made to Method Statements 1, 2, 3, 10 and 13; Schedule 4 (Payment Mechanism); Schedule 11 (Monitoring); Schedule 15 (Milestone Completion Criteria); and Schedules 18 and 19 concerning Change Protocol and Accrual and De-accrual of Project Network Parts. Reference is also made to the annexes attached to the Contract, of which there were 17. In particular, Annexure 12 which lists the Project Documents; Annexure 14, the Sole Remedy List; and Annexure 16, the Pavement Management Model.

The Project Agreement contains recitals A to K, which includes reference to the following:

“(A)

In accordance with the Government's Private Finance Initiative and pursuant to a notice published in the Official Journal of the European Union on 25 May 2004, the Authority invited expressions of interest from appropriately qualified consortia for services relating to the rehabilitation, maintenance, management and operation of the Project Network for a period of 25 years from the Planned Service Commencement Date.

…

(C)

The Service Provider has submitted proposals to the Authority setting out how it will meet the Authority's requirements relating to the rehabilitation, maintenance, management and operation of the Project Network.

(D)

The Authority has selected the Service Provider for the rehabilitation, maintenance, management and operation of the Project Network pursuant to this Contract.”

It is by reference to these recitals amongst others that some of the pre-contract process contained in the Statement of Agreed Facts arises, but only to the extent that it exists or is relevant to the particular matters that have to be decided by this court.

Part A in the introduction provides definitions and makes clear, in respect of interpretation and construction, that the contract comprises three different parts. Firstly, the main body; secondly, Schedules; and, thirdly, annexes, which, together, make up the contract. Clause 1.2, in terms of priority provides:

“This Contract shall be construed and interpreted as a whole provided that in the event of any conflict or inconsistency between the provisions of the Main Body, the schedules and annexures, or between any of the schedules, or between any of the annexures, then, save as expressly provided for by clause 1.3, the conflict or inconsistency shall be resolved according to the following descending order of priority:

1.2.1.

the Main Body and schedule 1 (Definitions, Interpretation and Construction);

1.2.2.

schedule 2 (Output Specification);

1.2.3.

schedule 4 (Payment Mechanism); and

1.2.4.

all other schedules and annexures.”

Therefore, the approach to be taken to this PFI Contract, as with many similar contracts of this kind, is to consider, first of all, the Main Body clauses and Schedule 1, which provides the definitions for the meaning of those words on the basis the parties have agreed a detailed lexicon which lists definitions for the construction of the Project Agreement; then consider Schedule 2, which provides details of the Core Investment Period, the subject of this particular Dispute; then consider Schedule 4, which concerns payment, and which is also the subject of the Dispute so far as those certificates are concerned; and then, to the extent necessary, which, in this case, it is plainly necessary, consider the other Schedules where, as with many of these PFI contracts, the devil lies in that detail. Therefore, to get an understanding of the Main Body clauses reference will be made to the detail of the operations, both in particular and in respect of the scope of the work.

So far as duration of the contract is concerned, clause 2.2 indicates that the contract shall terminate on the earlier of the Expiry Date or the Termination Date. This case does not concern the Termination Date at present and therefore the Expiry Date, as defined, means the 25th anniversary of the Planned Service Commencement Date, and the Planned Service Commencement Date is defined as 7 June 2010, which means the completion of this Project Agreement, in the absence of termination, is 7 June 2035.

Part G describes the services under clause 20 headed, "Obligation to provide the Services and Performance Standards", and clause 20.1 of the Project Agreement entitled, "Commencement of the Services" provides as follows:

“The Service Provider shall commence delivery of the Services from the Service Commencement Date and shall provide the Services for the remainder of the Contract Term in accordance with the terms of this Contract.”

To give meaning to that obligation:

“‘Services’ means the works and services which are necessary for the Service Provider to undertake (or to procure the undertaking of) in order to comply with the provisions of schedule 2 (Output Specification) and the other provisions of this Contract”.

Schedule 2 entitled "Output Specification" comprises Part 1A in respect of the Network and Infrastructure Condition during the Core Investment Period and Part 1B concerns performance of the Network and Infrastructure Condition post the Core Investment Period. This case is only concerned with the Core Investment Period and therefore, in particular, with standard 1A.

From the index to Schedule 2, it is apparent that Part 2 concerns Network Performance and Part 8 concerns the Contract Management and Customer Interface and particularly provides details of the Management Information System and the Project Network Model and Part 11 concerns the calculation of the condition indices. These, in particular, are the more important parts of the Schedule that appear to assist in the construction on Issue 1. The introduction of the Output Specification contains two paragraphs which provide:

“1.

The Service Provider shall supply the Services continuously throughout the Contract Term in accordance with the specifications set out in each part of this schedule 2 (Output Specification).

2.

Each part of this schedule 2 (Output Specification) details the overall aspirations of the Authority in the sections headed Required Outcomes. For the purposes of determining whether or not any Adjustments are to be made to the Monthly Unitary Charge pursuant to schedule 4 (Payment Mechanism)] of this Contract the performance of the Service Provider shall be measured against the Service Delivery Outputs and their corresponding Performance Targets set out in this schedule 2 (Output Specification) in accordance with the Monitoring Procedures set out in this Contract.”

Part 1 concerns the Network and Infrastructure Condition which, under clause 1, refers to the required outcomes, and paragraph 1.1 provides:

“The Service Provider shall comply with the provisions of this Performance Standard 1 and ensure that at the end of the Core Investment Period and thereafter until the expiry of the Contract Term in relation to the Project Network:”

To give meaning to this required outcome, the Core Investment Period is defined as:

“‘CIP’ means the period of time commencing on the Service Commencement Date and ending on the date on which a Certificate of Completion in respect of the final Milestone is issued pursuant to clause 13.4.1 ... or the Service Provider is deemed to have achieved Milestone Completion in relation to Milestone 10 pursuant to clause 9.4.7 […]”

It is, therefore, a fixed period of time by reference to the first ten Milestones and does not concern the full 25-year term of the Project Agreement.

Part 1A – Network and Infrastructure Condition during the Core Investment Period -- of Schedule 2 to the Project Agreement refers, in clause 1.3, to Milestone District Targets in the following way:

“The Service Provider shall complete each Milestone in accordance with clause 9 ... of this Contract and the Milestone District Targets are set out in paragraphs 1.4 to 1.13 below.”

To give meaning to the word "Milestone", the definition means: "each of the ten (10) milestones listed in clause 9.1 (Milestones)" and Schedule 2 then proceeds to set out what is expected on each of those ten Milestones. Thus, in clause 1.4 entitled, 'Milestone 1 District Targets', it is apparent from clause 1.4.1 that the PFI District 12 has at least the applicable values for Condition Indices as set out in table 1.1 and under clause 1.4.2 that the PFI Districts 1 to 11 inclusive have a completion rate for the Programme of Surfacing Works ('PSW') for Year 1 Requirements of at least the applicable value set out in Table 1.1.

Table 1.1 is a summary of Milestone District Targets and it is divided by reference to requirements for NCI, FWCI, VGCI, KBCI, CTCI and the Programme of Surfacing Works for the First Year. Across the top of the page in Table 1.1 there is reference to the PFI District which shows 12 entries and which is populated in a very limited number of areas but overall shows a 40 per cent requirement.

For Milestone 2, paragraph 1.5.8 of Schedule 2 provides that condition data is to be used to calculate Milestone targets for Milestones 3 to 9 and determined by calculating the difference between the Milestone 10 target condition for each index in paragraph 1.5.7 and the Milestone 2 condition. The table provided, in table 1.2a, for Milestone 2 is similar in terms of its set out to that of table 1.1 for Milestone 1 but in respect of the First Year programme shows 100 per cent complete, generally, and the percentages for PFI Districts 1 to 12 are slightly increased for the NCI, VGCI, KBCI, CTCI.

So far as Milestone 3 and District Targets are concerned, paragraph 1.6.1 provides that each of the PFI Districts, 1 to 12 inclusive, has at least the applicable values for the Condition Indices set out in Table 1.3 for which, again, when one considers this table, it is clear for the first time that this table is populated with precise percentages in respect of each of the 12 PFI Districts. So, by way of example, looking at the NCI requirements, Table 1.3 for Milestone 3 requires 11.2 per cent for the Secondary Distributor Network for the NCI and 17 per cent for the failed RSLs (at XSP level) completed.

A similar table, 1.4, is provided for Milestone 4 in which one notes that the NCI requirement for the Secondary Distributor Network is increased to 13.1 per cent and by reference to each of the tables those percentages increase towards Milestone 10. It may be of significance in this particular Dispute, that Table 1.6 (which is the summary for Milestone 6 District Targets) so far as the NCI requirements are concerned, maintains a 13.1 percentage and for Poor or Failed FWCIs, a 63 per cent requirement. This process continues to Milestone 10 in table 1.10, which, for the NCI requirements, shows that the Secondary Distributor Network is required to have a score of 9.9 completed across PFI Districts 1 to 11 inclusive.

What is clear from Schedule 2, Part 1 is that between Milestones 1 to 10, during the Core Investment Period ABHL had increasing obligations, essentially commencing with Milestone 3, to provide increasing levels of performance, such that by Milestone 10 the parties agreed precisely what percentages and scores were required before Part 1B of Schedule 2 set out expectations post the Core Investment Period. Different requirements were required for Carriageways, Footway Section Lengths, Verge Section Lengths, Cycle Track Section Lengths and Kerb Section Lengths, in terms of the requisite percentages.

Looking then to the Core Investment Period and Part C of the Project Agreement, the concept of Milestones is explained by clause 9. It provides as follows:

“9.1

The Service Provider shall achieve Milestone Completion by the relevant Planned Milestone Completion Date. The Milestones and their respective Planned Milestone Completion Dates are set out in the table ...”

The table gives reference to Milestones 1 to 10 and specific dates for Planned Milestone Completion. Milestone Completion and Planned Milestone Completion Date being six months apart for the first and 60 months later for the tenth.

The definition of "Milestone Completion" means “in respect of each Milestone, the completion … by the Service Provider of the Services necessary to meet both the relevant Milestone Completion Criteria, the relevant Targets for Milestone Completion in all Districts and the requirements of part 2 of schedule 2”. Where “Milestone Completion Criteria” means, in respect of each Project Network Part, those criteria set out in schedule 15.

Clause 9.2 of the Main Body under the Core Investment Period provides for Certificates of Completion as follows:

“Where the Independent Certifier has issued a Certificate of Completion in respect of a Milestone, pursuant to the provisions of clause 13 ... that Milestone shall, from the relevant Milestone Completion Date, be taken into account for the purposes of calculating the Monthly Unitary Charge in accordance with paragraph 1.4 of the Payment Mechanism”.

The meaning given to "Certificate of Completion":

“...means a certificate issued by the Independent Certifier pursuant to clause 13 ... certifying that, in respect of the Milestone in question, it is satisfied that Milestone Completion has been achieved in all Districts;”

Thus, taken as a whole, the services provided by ABHL were not only under a measurable percentage completion for each of the ten Milestones, but at each stage the Independent Certifier would certify satisfaction with achievement of those requirements.

The role of the Independent Certifier was apparent from the Project Agreement (in addition to the terms of appointment) by which, under clause 5 (of Annexure 3), it was declared that:

“The Independent Certifier shall not:

5.1

make or purport to make any alteration or addition to or omission from the Output Specification ...” [i.e Schedule 2 to the Project Agreement].

Accordingly, the Independent Certifier was obliged to put into effect the details of the Milestone Completion targets for Milestones 1 to 10 by reference to those specified percentages for completion throughout the Core Investment Period and certify accordingly.

The procedure was set out in clause 13.2 of the Project Agreement, by which the following was agreed for certification of these Milestones:

“13.2.1

The Service Provider shall notify the Independent Certifier and the Authority five (5) Business Days before the date upon which the Service Provider requires the Independent Certifier to assess whether it has achieved Milestone Completion or Partial Milestone Completion in respect of each Milestone.

13.2.2.

Following notification pursuant to clause 13.2.1 above, the Independent Certifier shall assess whether Milestone Completion or Partial Milestone Completion has been achieved by the Service Provider, and shall, within ten (10) Business Days of the date of the assessment referred to in clause 13.2.1, issue to the Service Provider (with a copy to the Authority):

13.2.2.1 a Certificate of Completion; or

13.2.2.2 a Certificate of Partial Completion ...; or

13.2.2.3 a Certificate of Non-Completion ...”

Schedule 15 of the Project Agreement provided details of the Milestone Completion Criteria by means of a schedule. That Milestone Completion Criteria Schedule set out across the page details of the criteria, by reference to the NCI, FWCI, VGCI, KBCI, CTCI and SRI, and then the test which would be applied to each of those, the subject of that test and the test procedure. Taking the first example, the NCIs, the test was:

“Verify that the NCI at District level meets or exceeds the values set out in the relevant Milestone District Target tables contained in schedule 2, Performance Standard 1A”.

The subject of the test was "Carriageways", and the test procedure was as follows:

“The Service Provider shall notify the Independent Certifier in accordance with clause 13.2.1 when it considers Milestone Completion or Partial Milestone Completion has been achieved together with details of all the works undertaken in respect of the Carriageways relevant to such Milestone Completion or Partial Milestone Completion. The Independent Certifier shall notify the Service Provider within two (2) Business Days of the data it intends to inspect as part of the 5% sample audit. The Service Provider shall provide such additional information, as the Independent Certifier considers reasonably necessary to support the notice, to the Independent Certifier.”

Thus:

“The data entered into the approved Pavement Management Model is delivered from two streams and may consist of ... updated PCI, SCI and SRI survey data and/or

...

re-setting of PCI, SCI and SRI following completion of interventions to individual RSLs.

For updated survey data the Independent Certifier shall validate through a 5% sample check of data that any updated survey results were obtained as follows:

... PCI - Deflectograph Falling Weight Deflectometer

...

SCI - DVI data collected in accordance with the latest version of the UKPMS Survey Manual using accredited DVI inspectors

SRI - collected using a SCRIM

…

The Independent Certifier shall run a report from the PMM to confirm that the most up to date data has been input to the PMM.

Where re-setting of the PCI, SCI and SRI following completion of interventions to individual RSLs has been undertaken. [sic] The Independent Certifier shall carry out a desk top audit to verify that the RSLs which have been treated are correctly reset to 'excellent' (in accordance with part 11 of schedule 2) within the PMM.

Having validated the input data the Independent Certifier shall verify that the output from the PMM meets or exceeds the individual Milestone District Targets for NCI as set out in the tables contained in schedule 2, Performance Standard 1A.

The Independent Certifier shall issue the appropriate certificate pursuant to clause 13.”

Thus, the role of the Independent Certifier required consideration of Schedule 2, the Performance Standard, for each of the Milestones, and, having selected a sample audit, the Independent Certifier had to run a report from PMM to confirm the up-to-date data.

The Payment Mechanism contained in Schedule 4 to the Project Agreement gave details for the calculation of the monthly payments that ABHL would receive from BCC. It is a highly formulaic document with a mathematical criteria for Monthly Payments ("MP") and specifically, under clause 3.10, refers to Performance Standard 8 of Schedule 2 to the Project Agreement. In particular, clause 3.10.1 under the heading, "Operability of the Management Information System ('MIS')" gives details of what happens if the Service Provider fails to comply with the particular paragraphs in Part 8 of Schedule 2 and the necessary adjustments are set out in clause 3.10.1.1. And, furthermore, reference is made in clause 3.10.2 to the Accuracy of each MIS sub-system. Clause 3.10.2.2 refers to the MIS sub-system accuracy as is tested monthly for the first six months following the Service Commencement Date. Clause 3.10.2.3 refers to the testing of the MIS sub-system accuracy in respect of a fully functioning MIS.

To give some meaning to Performance Standard 8 of Schedule 2 of the Output Specification entitled, "Contract Management and Customer Interface" it has certain specific required outcomes, in particular, so far as material, under 1.1.2:

"create and maintain a Management Information System".

Under 1.1.3:

“establish and maintain an accurate, auditable and efficient system for collecting, maintaining and reporting data".

Clause 2.2, under the heading, "Management Information System", provides as follows:

"2.2.1

The Service Provider shall procure a Management Information System in accordance with clause 19.1 of this Contract.

2.2.2

The Service Provider shall ensure that such Management Information System comprises without limitation those sub-systems detailed in paragraphs 2.2.2.1 to 2.2.2.11 below, and that all sub-systems which comprise the Management Information System are at all times interoperable and capable of interface with one another.

2.2.2.1 Project Network Inventory

(a)

The Service Provider shall have in operation a Project Network Inventory.

(b)

The Service Provider shall update the Project Network Inventory within five (5) Business Days of the time at which the Service Provider becomes aware or should have become aware of the replacement, addition or removal of the assets in or on the Project Network.

(c)

The Service Provider shall ensure that the Project Network Inventory is accurate

...

2.2.3

The Service Provider shall ensure that all parts of the Management Information System are capable of being accessed at all times by the Authority

…

2.2.8.

The Service Provider shall ensure the Management Information System ... interfaces with those systems of the Authority it is required to interface with ... is transparent; and ... is capable of audit.”

Part 11 of Schedule 2 is entitled "Calculation Of Condition Indices Relating To Network Infrastructure Condition". The first two paragraphs divide themselves between calculating Network Condition Index at Road Section Lengths under paragraph 1, and calculating Network Condition Index at PFI District Level, and each of those two separate parts required for calculation of the Network Condition Index show how the NCI is mathematically calculated by reference to the appropriate formulae. The first part of paragraph 1 deals with the Strategic Route and Main Distributor Network, and the second part of paragraph 1 deals with the Secondary Distributor Network whereby for the NCI_main for the Strategic Route and Major Distributor Network the calculation equals the addition of the Pavement Condition Index, the Skid Resistance Index and the Surface Condition Index, and in respect of the Secondary Distributor Network the calculation for the NCI is the addition of the Skid Resistance Index and the Surface Condition Index. A different calculation is provided for the PFI District Level and the formula set out under 2.1.2 provides the district NCI is the sum of the NCI multiplied by the length of the applicable Road Section Length as set out in the Project Network Model, and then divided by the TLSDN which means the Total Length Secondary Distributor Network in the relevant PFI District as set out in the Project Network Model. Thus, reference is made for this calculation to the Project Network Model which contains the basic data. Specific and narrow provisions are made under paragraph 3.2.4 in respect of the Pavement Condition Index ("PCI") where the length of the relevant RSL is more than 5 per cent or less than 10 per cent as recorded in the Project Network Model. Then, if the accuracy of its measurement can be demonstrated by ABHL to BCC, the Project Network Model shall be amended. Similar references are made to the Surface Condition Index under paragraph 5 which likewise refers to the Project Network Model in those specific instances. Table 8 attaching to the Schedule provides details of the Surface Condition Index of the Secondary Distributor Network and by reference to scores of the SCI between excellent, via good, fair, poor, critical, down to failed. Details are given as to percentage deterioration. A similar table is provided in respect of the Footway Condition Index under Table 11A by way of further example.

Schedule 11 of the Project Agreement also concerns monitoring. It is clear that the monitoring obligations tie back to clause 6 Surveys, and the Method Statement 13 in the following way:

“1.

The Service Provider shall carry out those inspections, surveys, tests and assessments that it is required to carry out during the Contract Term, pursuant to clause 6 (Surveys and Inspections) of this Contract and in accordance with Method Statement 13 (Inspections, Assessments and Monitoring);

2.

This schedule 11 sets out the specific Monitoring Methods required to monitor performance of the Services described in schedule 2 (Output Specification). In respect of each Monitoring Method set out within schedule 11, the Service Provider shall carry out monitoring against the Performance Targets as set out in schedule 2 (Output Specification). In addition, in respect of certain Performance Targets as set out below, the Service Provider shall carry out monitoring as specifically described in this schedule 11.

3.

Monitoring Method A

The Service Provider shall carry out those inspections, surveys, tests and assessments to enable the Service Provider and the Authority to run the NCI Calculation Methodology, the FWCI Calculation Methodology, the KBCI Calculation Methodology, the VGCI Calculation Methodology and the CTCI Calculation Methodology at least once by 1 November of each Contract Year.”

So far as the definition of the first of these is concerned by way of example, the NCI Calculation Methodology means "the NCI calculation methodology set out in paragraphs 1 and 2 of part 11 of schedule 2 (Output Specification)". Similar provisions are made in further paragraphs of Schedule 2 Part 11 to FWCI, KBCI, VGCI and CTCI.

Attached to Schedule 11 is Appendix 1 that refers to the MIS subsystem. By way of example, in respect of the Project Network Inventory, it lists the critical fields by reference to Project Network Part descriptions, the initial accuracy tests which during the mobilisation period in the first Contract Year indicate that the data collection shall bring it up to 99 per cent and where the data fails to meet the 99 per cent accuracy requirement it was to be rejected. Further detail in the Schedule is given for the Monthly Accuracy Tests by means of an audit process. Thus, Schedule 11 in terms of its monitoring method and details makes reference to the MIS and the Project Network Inventory which is part of that system and requires ABHL and BCC to run the calculations required by Part 11 of Schedule 2 of the Project Agreement. Returning to Schedule 2 Part 11 of the Project Agreement and the calculations required, it is clear that the source of the defined terms used for the purpose of these calculations, in particular the Road Section Length, the Secondary Distributor Network, the Skid Resistance Index, Surface Condition Index and the XSP are all terms that can be directly traced back through section 2 of the Project Agreement to defined terms, all of which have their source in the Project Network Model. The indices that make up the pavement condition, skid resistance and surface condition for the Secondary Distributor Network and the Strategic Route and Main Distributor Network are all matters which by definition and of necessity refer one back to the Project Network Model which is the source where these indices can be obtained from.

Part F, of the Project Agreement entitled, "Property" specifically dealt, in clause 19, with the Management Information System and the Project Network Model, which are plainly quite separate systems. Clause 19.1 sets out the Main Body contract clauses for the Management Information System ("MIS"), and clause 19.2 does likewise for the Project Network Model.

Dealing first with the Management Information System, the Project Agreement defines it as:

“‘MIS’ means the electronic system comprising of the Project Network Inventory, Powered Apparatus Inventory, Underground Apparatus Inventory, Routine Maintenance Management System, Bridge Management System, Tunnel Management System, Structure Management System, Street Lighting Management System, Street Work Management System, Tree Management System and the Customer Care Management System to be provided and maintained by the Service Provider in accordance with this Contract”.

So far as this particular Dispute is concerned, the only relevant electronic system is the Project Network Inventory.

In respect of the Management Information System or MIS the following clauses are relevant:

"19.1.1

The Parties agree and acknowledge that, on or before the date of this Contract, the Authority has provided to the Service Provider all the data it holds on Confirm and BMX to enable the Service Provider to develop a Management Information System.” (Confirm is defined as meaning “the proprietary software produced by Pitney Bowes for the maintenance and management of public infrastructure and assets”).

“19.1.2

The Service Provider shall, from the Service Commencement Date until the MIS Upgrade Date, provide a Management Information System in accordance with the provisions of Table 8.1 in part 8 of schedule 2 ...

19.1.3

Subject to paragraph 2.2 of part 8 of schedule 2 ... with effect from the MIS Upgrade Date, the Service Provider shall procure that there is a Management Information System which complies with the provisions of column 5 of Table 8.1 in part 8 of schedule 2 ... that is fully operational in place for use in relation to the Project which shall:

19.1.3.1 accurately identify all of the Project Network Parts on the Project Network Inventory ...

19.1.3.2 comprise of the following systems:

(a)

Project Network Inventory...

19.1.3.3 comply with the requirements of schedule 2…

Reference to the Project Network Inventory means, in the Project Agreement:

“an electronic records system which records the following information in respect of all Project Network Parts (with the exception of Powered Apparatus and/or Underground Apparatus) and all other above ground assets pertaining to the Project Roads (whether maintained by the Service Provider or otherwise or owned by the Authority or a Third Party):

(a)

data in relation to the nature of all current and historical faults and details of the steps taken in relation to the repair of such faults and all relevant response times;

(b)

all other information which may be of relevance to the Authority having regard to any of its statutory responsibilities and functions (whether as Highway Authority and/or Lighting Authority under the Highways Act 1980, Best Value Authority under the Local Government Act or otherwise); and

(c)

all other information required in accordance with this Contract;”

It is therefore clear from the Project Agreement that the Project Network Inventory is part of the MIS and forms an electronic record covering a wide range of matters as described in its definition. The MIS is required to comply with Schedule 2, namely the Output Specification, which is relevant to the Core Investment Period as well as the post Core Investment Period but certainly covers the period in question in this case and has to comply with the provisions of Schedule 2, Part 8, to which reference has already been made.

Clause 19.2 of the Project Agreement refers quite separately to the Project Network Model in the following way:

“19.2.1

From the Service Commencement Date the Service Provider shall accurately update the Project Network Model in accordance with Performance Standard 8 of schedule 2 (Output Specification) and shall ensure that the information contained it is up to date at all times.

19.2.2

The Authority shall, from time to time and at the reasonable request of the Service Provider, provide any necessary information reasonably required to update the Project Network Model”.

Reference must thus be made to the Schedule 2 Part 8 to get an appreciation of what the Project Network Model's role is under the Project Agreement. Schedule 2, Part 8, paragraph 2.3, under the heading, "Project Network Model", provides the following express provisions:

“2.3.1

Where the Authority notifies the Service Provider of a change to the Project Network in accordance with this Contract, the Service Provider shall ensure that all information provided to the Service Provider by the Authority relating to such change is input into the Project Network Model within five (5) Business Days of the date of such notification unless otherwise agreed between the parties.

2.3.2

On each occasion where the Project Network Model is updated in accordance with paragraph 2.3.1 the Service Provider shall provide the Authority with an electronic copy of the updated Project Network Model within one (1) Business Day of the date on which the Project Network Model is altered in accordance with paragraph 2.3.1 above.

2.3.3

The Service Provider shall, from the Service Commencement Date, notify the Authority on a monthly basis of any amendments it would recommend to be made to the Project Network Model specifying all details and the reasons for such recommendation.”

It is clear from this that the function of the Project Network Model is circumscribed to a system which is required to record any changes that BCC notify to ABHL, though there is an ability for ABHL to recommend to BCC as to what amendments could be made to the Project Network Model and the reasons for such proposed amendment. The inference from this is that whilst ABHL can make such recommendations, BCC are not required to accept them, and, therefore, the Project Network Model could or could not change depending on what approach BCC takes to such recommendations. However, there is an obligation that in the event of notification of a change ABHL are under a mandatory obligation to put that into effect so far as the Project Network Model is concerned.

What seems perfectly clear from a comparison and contrasting of the Management Information System or MIS and the Project Network Model is that the former has been created and comprises the Project Network Inventory amongst other inventories. As set out above, it is the PMM which is reviewed by the Independent Certifier and forms the basis of checks required prior to certification of Milestones. Conversely, the Project Network Model has a very limited and specific role which, in the absence of change, on the basis of the Main Body clauses of the Project Agreement could be a static system.

So far as change is concerned, which would require inputting to the Project Network Model , Part J of the Project Agreement, under the heading, "Change", comprises clauses 37 to 42A, including Accrual and De-accrual of Project Network Parts under clause 37; amendments to Method Statements under clause 38; Changes to the service under clause 39; Changes of Law under clause 40; Changes to Highway Standards under clause 41; and Changes to Authority policies under clause 42. The two particular changes the subject of the Dispute focused on clause 37 and 39, namely Accrual and De-accrual of Project Network Parts and Changes to the Service. By a combination of these two (and no doubt the others) the scope of the services provided by ABHL to BCC could change and such change, if notified by the Authority, would have to be recorded in the Project Network Model.

Turning briefly to how those changes would come about, reference can be made to Part J of the Project Agreement where Clause 37 provides as follows:

“The Authority may use the provisions of schedule 19 ... to Accrue or De-Accrue Project Network Parts except in the case of Structures ... The Parties agree and acknowledge that the Authority is not obliged to use the provisions of schedule 19 ... and may, if it requires, (at its sole discretion) change the Project Network Parts pursuant to schedule 18 …”

So far as Change to Service is concerned, clause 39, under that heading, provides:

“39.

Either Party may request a Change in accordance with the provisions of Schedule 18 ...”

So far as part K of the Project Agreement is concerned, which refers to financial matters under clause 43 entitled, "Monitoring and Reporting" and, in particular, 43.1, the general monitoring and reporting obligations, details are given as to the operation of the MIS, as follows:

“43.1.1.2 maintain and update the Management Information System in accordance with clause 19 … and schedule 2 ...”

No reference is made to the Project Network Model.

Returning then to the earlier parts of the Project Agreement, and, in particular, Part B, which is concerned with the condition of the Project Network and clauses 5 and 6, which respectively concern the condition of the Project Network and surveys and inspections, with a view to get an appreciation of how these clauses align themselves to the Management Information System and the Project Network Model. Clause 5, so far as material, provides two specific clauses as follows:

“5.1.

The Service Provider confirms that subject to 5.2, it has satisfied itself as to:

5.1.1.

the condition and extent of the Project Network at the Pre-Commencement Survey Date (including the volume and type of Apparatus and Highway Trees); and

5.1.2.

the work that it needs to carry out on the Project Network in order to comply with the requirements of schedule 2 …”

Consideration has already been given to the requirements of Schedule 2 in respect of the Core Investment Period; and so far as the condition of the Project Network is concerned, details are contained in Method Statement 2, entitled "Network and Infrastructure Condition".

Method Statement 2 provides, by an introduction, that ABHL shares with BCC their vision, aims and objectives for the Major Highway Maintenance and Management Service Contract. The parties believed the project would be for the benefit of all stakeholders in Birmingham, in particular the employees transferred from BCC. Under the heading "Service Delivery Statements", it is apparent from Method Statement 2 that the Service Delivery Statements had been structured to clearly explain how ABHL would comply with the requirements of PS1A of the contract, i.e. how they would comply with the requirements during the Core Investment Period. A Process Map 2 for the Carriageway and Network Condition provides a drop-down flow chart which starts with the development of the Pavement Management Model which then is populated by the current condition data, and is subsequently updated by means of the Project Network Model in accordance with Performance Standard 8 of Schedule 2, which refers back to clause 2.3.1 and clause 2.3.2, set out in Part 8 of Schedule 2, as referred to above. The result of that procedure would give rise to a clause 37 Accrual and De-accrual of the Project Network Parts, ie change which is what the Project Network Model was intended to record.

Details are given of the Service Delivery Statement for the Network Infrastructure Condition as detailed in Method Statement 2 and clause 2.1 provides that ABHL is required to comply with PS1A, ie those requirements for the Core Investment Period to which reference has been made above. The structure of this Method Statement, as with other Method Statements, is that before details are given the Method Statement indicates which clauses are referable, and therefore it is possible to go back to the Main Body clauses for which these Method Statements give details.

In respect of Carriageways, Footways, Verges, Cycle Tracks and Kerbs, reference is made back to PS1A contained in Schedule 2 for the Core Investment Period. The following paragraphs provide the details:

“2.60

The Service Provider shall appoint the Service Provider's Street Services Manager... who will have overall responsibility for delivery of PS1A

...

2.62.

The Service Provider shall ensure that its Pavement Lifecycle Manager... shall report to the Service Provider's Highway Design Manager... and shall provide the key function of operating, updating and maintaining the Service Provider's Pavement Management Model (PMM). The PMM, as described below and in Method Statement 13: Inspections, Assessments and Monitoring, will be the Service Provider's main tool for calculating all Condition Indices in accordance with the Output Specification. The Service Provider shall use its PMM to I [sic] determine the annual investments required to upgrade and maintain those Project Roads held in the Project Network Model...

2.64.

The Service Provider shall ensure that its Asset Manager shall report to the NM and work closely with the Pavement Lifecycle Manager. The Asset Manager shall provide the updated Detailed Visual Inspections (DVI) data and inventory updates necessary to run the PMM.

2.65.

As set out in the strategy and methodology for Project Roads, the Service Provider has established what works it shall undertake during the CIP to meet the requirements of PS1A... the Service Provider shall direct its Planning Manager to use this information to develop the Annual Programme, Two Year Programme, the CIP programme and the Five-Year Indicative Programme and any other relevant Service Provider Programme. The Service Provider shall use the PMM to predict the work... As its knowledge of the Project Network increases and the CIP work proceeds, the Service Provider's Pavement Lifecycle and Asset Managers shall keep the condition of the Project Roads under continual review ... As soon as work is completed, the Service Provider shall update the various Inventories, models and systems in the MIS in accordance with contractual requirements.

…

2.67.

The Service Provider shall direct that its Pavement Life cycle Manager shall ensure that the PMM is continually updated throughout the Contract Term ... The Service Provider shall run the PMM monthly during the CIP to confirm current Condition Indices ..."

Reference to the Pavement Management Model or PMM is a defined term in the Project Agreement, which means as follows:

“the Pavement Management Model agreed between the parties at the date of this Contract (a copy of which is annexed at Annexure 16) excluding the predictive functions of that model (including all related rules, functions and date) as updated from time to time in accordance with this Contract”.

Annexure 16 to the Project Agreement is entitled, "Pavement Management Model" and simply states "see separate CD". During the course of the hearing BCC has provided, as exhibit D7, a document which made reference to MCON, MINV, MSCRIM, MSEC, MSECSURV and MSURV. This shows a set of headings across the page and then details populated in the body of the document. The headings across the page give reference to section label, survey number, XSP, Feature, Pavement, Basic Defect, Start Chain, End Chain, the name and the amounts of VAL and the name and amounts of OPT, and Rated.

From a comparison of exhibit D7 it is apparent that the headings are identical with those in the Project Network Model. Equally, and possibly more importantly, so far as MINV is concerned the headings across the page start with Section Label, Feature, XSP, Start and End Chain, Inventory Date, Start and End Width, Code, Reverse ID, Cons, Feature Hierarchy, FW Status, No joint and Lateral extension (lat ext). Again these headings are identical to those the Project Network Model and thus would include an inventory date which, on this example, shows details in 2003 which can be correlated directly to the dates contained in the Project Network Model provided by counsel for ABHL. Exactly the same is true for the MSEC, MSCRIM, MSURV and MSECSURV, which directly and precisely correlate to the Project Network Model.

By way of consideration of possibly the more important part of Method Statement 2, reference is given to Carriageway and Network Condition, which, in its heading, shows a correlation to Schedule 3 (Method Statements) of the Contract. Under that heading details are given of the "Project Network Model Road Section Length", "Methodology -- General Approach" and "In Contract Methodology."

Looking at the particular paragraphs under these headings, the following was apparent:

“2.75.

The Service Provider has taken the network information contained in the UKPMS database (document reference 0626) to be the definition of the Project Roads.

…

2.81.

During the bid period the Authority provided Deflectograph, SCRIM, Grip Tester, CVI and DVI data for parts of the Project Network within document 0626 'Latest UKPMS Tables" dated 23^rd October 2008. …

2.82.

The most current of these datasets ... has been used to populate the Service Provider's PMM. These data sets have been supplemented by additional data collected by the Service Provider. Additional Deflectograph, Grip Tester and DVI data has been collected during the bid process. This additional data collection resulted in complete coverage for Districts 2, 8, 11 and 12 and in excess of 25% coverage in all other Districts. …

2.83.

The Service Provider has used its PMM (as described in Method Statement 13) to calculate the NCI and establish the long-term programmes of work and investment required as part of the Service Provider Programmes for the Project Network.

2.84.

The PMM calculates the current condition of every section and sub-section against the Authority’s performance criteria. This results in the production of a current pavement condition index (PCI), surface condition index (SCI), Skid Resistance index (SRI) and NCI at Road Section Length (RSL) level. It also calculates the NCI for each road hierarchy within each PFI District.

…

2.86.

As described in Method Statement 13: Inspections, Assessments and Monitoring, the Service Provider's PMM not only calculates the current indices but it is also predictive, making use of deterioration modelling to predict future pavement performance without interventions. Where a pavement sub-section does not fail, the Service Provider has deteriorated the relevant NCI data in accordance with NCI Data Deterioration Principles as set out in Part 11 of Schedule 02 (Output Specification). This methodology allows the Service Provider to predict when a failure will occur and plan preventative maintenance ahead of that failure.

2.87.

Through its planning processes, the Service Provider has grouped together failed sub-sections to varying extents, as appropriate, to determine the most suitable treatment over a contiguous section length. The grouping of sub-sections into contiguous treatment lengths will ensure that the resulting surfacing is generally uniform in nature, reducing the visual impact of works in the built environment.

2.88.

The Service Provider has used its PMM to assess the full extent of the work it shall carry out, based on detailed analysis of PFI Districts 2 and 8 and PFI Districts 11 and 12 only. From this the Service Provider has determined the likely pavement performance and necessary investment profile required for the Contract Term. These PFI Districts are the ones for which the Authority has provided most complete datasets, particularly in terms of DVI data, and the Service Provider has supplemented this with DVI data of its own during due diligence to in excess of 99% coverage for PFI Districts 2 and 8 and PFI District 11. The Service Provider considers that these data sets provide greatest confidence in terms of likely starting conditions. There is sufficient network coverage provided from these PFI Districts for the Service Provider to consider the outputs to be representative of the whole Project Network. Using this extrapolation for the remaining PFI Districts, the Service Provider has calculated Condition Indices and investment works for the full Contract Term.

…

2.90.

The Service Provider has developed its Programme of Surfacing Works for Year 1 Requirements for Carriageways, Footways, Verges and Kerbs based on the Authority's Programme of Surfacing Works for Year 1 (data room document 0627). The Service Provider has incorporated the data, collected from the additional surveys described above, into the PMM. This has enabled the Service Provider to identify additional schemes to be incorporated into its Annual Programme for Year 1.

…

2.92.

The Service Provider shall direct its Pavement Lifecycle Manager to oversee the update of all condition data in line with the requirements of clause 6 … of the Contract. The Service Provider shall ensure that machine data is collected and pre-processed by accredited and quality assured data collection Sub-Contractors, Sub-subcontractors or supply chain partners. Teams of inspectors working for the Asset Manager shall collect Detailed Visual Inspection data in-house. The collection of a complete dataset will eliminate the use of CVI data from the PMM and will reduce to an absolute minimum the use of data 'filling' techniques.

…

2.94.

After the Service Commencement Date, the Service Provider shall apply updates to the PMM for the Authority's works actually carried out prior to Service Commencement. If any amendment is required arising from changes to actual works undertaken when compared against the Carriageway and Footway indicative maintenance programme 2009/2010 (data room doc 0647)... the Service Provider shall make application for any Unitary Charge adjustments in accordance with clause 5 … of the Contract. During this period, the Service Provider shall work with the Authority to incorporate any Project Network changes arising from the New Build and Third Party Works, and assist in providing information for any change required in accordance with clause 37 … of the Contract. The Service Provider shall update any changes to the Project Network Model carried out at this time, or at any time during the Contract Term, and provide them to the Authority in electronic format in accordance with paragraph 2.3, Part 8 … Schedule 2 ...”

Insofar as unrepresentative survey data is concerned, further provision was made as follows:

“2.169.

Definitions of 'raw data', 'processed data', 'unrepresentative data' and 'survey data' have been included in the Table of Definitions at the beginning of this Method Statement.

2.170.

Throughout the Project, the Service Provider shall collate condition data in accordance with clause 6... of the Contract and Method Statement 13 ... so that data can be used to monitor network performance and to calculate the condition indices in accordance with Part 11 … Schedule 2 … of the Contract.

…

2.712.

The Service Provider shall undertake various validating processes to ensure that data is representative of the condition of the network which shall include:

(a)

checking survey lengths against network lengths to ensure that the data meets the requirements of paragraphs… of Part 11… Schedule 2… of the Contract …

(b)

confirming that the data is in the correct format and structure to be loaded into the MIS and PMM ...”

A similar approach is given to other parts of the network in addition to the carriageway and network condition in Method Statement 2 and the main body Project Agreement clause 5 which deals with the condition of the Project Network provides a reasonably clear and consistent provision of details.

The second part of Part B, "Condition of the Project Network", of the Project Agreement is contained in clause 6 and the requirements for surveys and inspections. Again, having considered the main body of clause 6, details can be provided in the Method Statements to get an ascertainment of what it was the parties agreed should happen to those surveys and inspections during the course of the Core Investment Period.

Clause 6 is divided into several sub-parts: firstly a general part, then a safety inspection strategy and safety inspections, condition survey and skid resistance strategy and skid resistance surveys and further clauses. So far as material to this case, it is the general and the condition survey to which reference is required. The general provisions for surveys and inspections are as follows:

“6.1.1.

The Service Provider shall undertake all inspections, surveys, tests and assessments and provide strategy documents and reports in accordance with 6.1... and clause 41.6 … of the Highways Maintenance Code ... so that all the unprocessed data provided as a result of undertaking the inspections, surveys, and tests and assessments are available to:

6.1.1.1 the Authority to enable it to support a defence under section 58 of the 1980 Act …

6.1.1.4. the Service Provider to run the NCI Calculation Methodology and the FWCI Calculation Methodology, the VGCI Calculation Methodology, the KBCI Calculation Methodology and the CTCI Calculation Methodology using the Pavement Management Model (and, for the purposes of this Contract, solely the Service Provider shall perform such calculations and such calculations shall only be performed using the Pavement Management Model).

6.1.1.A. The Service Provider may update the Pavement Management Model from time to time:

6.1.1.A.1. in accordance with any changes made to the Project Network Model pursuant to this Contract...

6.1.3.

The Service Provider shall update the Service Provider Programmes to take into account:

6.1.3.1. the results of all inspections, surveys, tests and assessments ...”

What is apparent from this Main Body clause is that the Pavement Management Model is the vehicle to be used to run the various calculation methodologies required by, amongst others, the NCI as a result of those general surveys, inspections and tests and assessments; and that so far as the Project Network Model is concerned it is those changes that may be incorporated into the Pavement Management Model.

It would appear from the face of these clauses that 6.1.1A was inserted, in a sense, as an amendment or a later insertion and included the use of "A" to keep consecutive numbering going between clause 6.1.1 and 6.1.2. What one does not see in this Main Body clause 6.1, in general terms, is that the parties agreed that so far as inspections, surveys and tests and assessments were concerned that that information should be included in the Project Network Model.

So far as the condition surveys are concerned, set out in clause 6.3 of the Main Body provisions of the Project Agreement, the following particular terms are relevant:

“6.3.1.

The Service Provider shall carry out Condition Surveys on all Project Roads annually for the duration of the Contract Term in accordance with this clause 6 … and any applicable Highways Standards. …

6.3.3.

The Service Provider shall carry out Deflectograph Surveys … annually during the Core Investment Period.

6.3.4.

Following completion of the Core Investment Period, the Service Provider shall carry out Deflectograph Surveys...

6.3.5.

The Service Provider shall ensure that the Deflectograph Surveys required to be carried out... are carried out in sufficient time ... so that the data is available to be used by the Service Provider to calculate the NCI using the Pavement Management Model and in accordance with the NCI Calculation Methodology ...

6.3.6.

The Service Provider shall carry out DVI on a half of all:

6.3.6.1. Carriageways;

6.3.6.2. Footpaths;

6.3.6.3. Kerbs; and

6.3.6.4. Verges,

within the Project Network annually (so that a DVI is carried out on all Carriageways, Footpaths, Kerbs and Verges every two (2) years).”

Again, so far as any reference is made in clause 6 to the use of a data system, it is exclusively to the Pavement Management Model and there appears no express reference to the Project Network Model.

Details of clause 6 of the Project Agreement are to be found in both Method Statement 3 concerning Network Performance and, in particular, and importantly, Method Statement 13 concerning inspections, assessment and monitoring. Dealing, therefore, briefly with Method Statement 3, so far as it is applicable, the following are to be noted:

“2.171.

The Service Provider shall take into account the results of tests and inspections pursuant to clause 6 ... of the contract in the Annual Programme.

2.192.

The Service Provider shall adopt a … 'fence to fence' maintenance approach methodology for completing Routine Maintenance activities. Dedicated district maintenance teams shall co-ordinate a number of works activities into a single visit, maximising delivery output, minimising disruption and providing best value.”

[It is noted that the Project Agreement does appear to have reference to a 'fence to fence' but limited to the context quoted above]

“2.232.

The Service Provider shall include in the MIS the following that makes up the Project Network Parts Register:

(a)

Project Network Inventory

(b)

Power Apparatus Inventory

(c)

Underground Apparatus Inventory

…

2.235.

The Service Provider shall create a programme of data collection to ensure all decision-making and review is carried out with correct information in order to give the Authority confidence in data consistency and that records management is completed within the asset database.

…

2.259.

The Service Provider shall upload DVI survey data every day from the PDA either remotely or by docking with a computer on the Service Provider's network. The Asset Manager shall validate the data for Project Network fit and data integrity and converted to an HMDIF file using UKPMS accredited conversion software. Once validated the data shall be loaded into the Confirm PMS and the Service Provider's PMM.

…

2.664.

The Service Provider shall use the results of tests and inspections pursuant to clause 6 ... of the Contract to inform the Annual Programme”.

So far as Method Statement 3 is concerned, and to the extent it correlates or assists in the understanding of clause 6 of the Project Agreement, it is clear that all reference are to the MIS and, as part of the MIS, the Project Network Inventory and that DVIs are required to be loaded into the Confirm PMS and PMM. Once more, no reference is apparent to the use of the Project Network Model in these particular parts of the Project Agreement relied upon by the parties.

Method Statement 13, entitled, "Inspections, Assessments and Monitoring" is, so far as the BCC developing submission goes, probably the most important single document in terms of the detail and understanding of the workings of clause 6 of the Project Agreement and will require some extensive citation in order to put those matters into context and get an appreciation of what BCC and ABHL agreed with respect to the details.

As with other Method Statements, Method Statement 13 has an introduction in terms already quoted above, namely that ABHL shares BCC's vision, aims and objectives for this major Highway Maintenance and Management Service Contract which was considered high profile and innovative; and that ABHL believed that the project will benefit all the stakeholders in Birmingham, in particular the employees transferred from BCC. Under the heading, "Holistic Service Delivery", the Method Statement provides that ABHL will include details of the whole service. Thus far, as the introduction indicates, it is a guide to the reader of Method Statement 13. So far as what the Service Delivery Statement requires for Method Statement 13, section 2 provides, under an introduction, as follows:

“2.1.

This Method Statement 13, Inspections, Assessment and Monitoring sets out how the Service Provider shall comply with the requirements of clause 6 ... and how the Service Provider shall use the data collected as a result of the monitoring and reporting obligations set out in clause 43 ... and Schedule 11 ... This Method Statement also set out [sic] the Service Provider's response to the Authority questions contained in schedule 3…

2.2.

The Service Provider shall use the information arising out of all surveys, inspections, tests and assessments to draw up and update the Service Provider Programmes to bring the Project Network up to the required standards defined in schedule 2 ... and to continue to maintain the Project Network at the required level during the Contract Term to ensure safe passage for users of the Project Network.

…

2.4

The data from the various surveys and inspections will be key to managing the Project Network in line with Good Industry Practice and to inform the investment programmes.”

As such, the introductory Service Delivery Statement agreed between BCC and ABHL is descriptive only and in terms of standard does refer to Good Industry Practice but little more.

Of more importance, and maybe critical to the Dispute between the parties, is details of what is called "Network Condition Index Data", which, it is plain from this heading, provides details of clause 6.1.1.4 which has been quoted above and, as will be recorded, made specific reference to the Pavement Management Model. As a matter of record there does not appear to be anything in Method Statement 13 which gives further details of clause 6.1.1A which, as indicated above, permitted ABHL to update the Pavement Management Model having regard to changes in the Project Network Model. This may not be surprising, in view of the fact that 'A' appears to be an amendment. Two particular paragraphs are of significance and importance and, unfortunately, when one reads them, the language leaves something to be desired and also contains what must be a typographical error. They are as follows:

“2.45

In order to enable the Service Provider to calculate the NCI during August of each Contract Year in accordance with Monitoring Method A, schedule 11 ... and … each Contract Year in accordance with paragraph 6.3.5, clause 6 ... the Asset Manager shall ensure the Service Provider has programmed, carried out and processed all the Condition Surveys required. The Service Provider shall undertake a DVI survey in Contract Year (1) one for all Project Roads, including Carriageways, Footpaths, Cycle Tracks, Kerbs and hardened Verges, and then on each Project Road every two (2) Contract Years for the remainder of the Contract Term (so that after Year 1 the DVI is carried out on all Carriageways, Verges, Footpaths and Kerbs every two years). The Service Provider shall undertake Skid Resistance Surveys of all 'hierarchy 1 and 2' roads and Deflectograph Surveys on the Strategic Route and Main Distributor Network. Each inspections process is described in detail below.

2.46.

The Service Provider shall ensure that all of the survey data referred to in paragraph 2.46 above is stored and referenced to the Project Network Model held as the Confirm UKPMS module forming part of the MIS. The Service Provider shall extract the required data from the UKPMS module to populate the PMM which shall be updated with data on a regular basis and the NCI shall be calculated no less frequently than required in the Contract and to support Milestone completion demonstration during the CIP. The NCI process is described in more detail in paragraphs 2.370 to 2.401 of this Method Statement”.

The reference to 2.46 must, it appears, be to 2.45. Equally, it will be necessary to consider the relevant parts of 2.370 to 2.401 of Method Statement 13 to get a proper and fuller appreciation as to what this sub-clause means.

Before considering the Network Condition Index, details are provided in Method Statement 13 as to Detailed Visual Inspections (DVI) as referable to clause 6.3.6 of the Project Agreement, in particular:

“2.109.

The Service Provider shall use DVI surveys as the primary method to collect surface condition data in order to calculate: the Surface Condition Index ('SCI'); the Footway Condition Index ('FWCI'); the Verge Condition Index ('VGCI'); the Cycle Track Condition Index ('CTCI') and the Kerb Condition Index ('KBCI') in accordance with Part 11 … of schedule 2: …

2.115.

The Service Provider shall carry out DVI surveys in accordance with the current UKPMS User Manual and the latest Department for Transport Guidance for the calculation of National Indicators.

2.116.

The Service Provider shall ensure that DVI survey data is uploaded every day from the PDA either remotely or by docking with a computer. The data shall be validated by the Asset Management Team for Project Network fit and data integrity and converted to an HMDIF file using UKPMS accredited conversion software. The Asset Manager shall investigate any anomalies with the relevant DVI Inspector. If these cannot be resolved then any problem data shall be resurveyed. On passing validation the data shall be loaded within one (1) Business Day into the Confirm UKPMS module and then the PMM.

2.118.

The Asset Manager shall run the PMM regularly during the CIP with the most current survey data to demonstrate the Service Provider's compliance with the Milestone District Targets in Part 1A … of Schedule 2 ... The Service Provider shall use the most recent DVI surveys to inform and produce adjustments to the Service Provider's Annual Programme for the forthcoming Contract Year.”

From these further references, it is apparent that clause 6.3.6, which gave details of DVI, required such information to be loaded on to the PMM during the CIP in order to meet the requirements of Schedule 2 of the Output Specification.

Method Statement 13 provides details of the Network Condition Index, also known as the NCI. The term "Network Condition Index" is defined in Schedule 1 of the Project Agreement viz: “the index representing the condition of RSL’s in the Project area that is calculated in accordance with the NCI Calculation methodology” . Method Statement 13 gives details of both how and when ABHL were to calculate the NCI values. Specific reference is made to Part 1A of Schedule 2, namely the Core Investment Works, amongst other clauses under the heading of "NCI" in Method Statement 13. Several of these clauses require citation, but without reciting all of the clauses 2.370 through to 2.401, the more important appear to be as follows:

“2.370.

From the date of the Contract the PMM shall be the Service Provider's tool for the calculation of the Network Condition Indices. The PMM has been verified by the Authority to correctly calculate NCI and FWCI at both Project Network and Road Section Length (RSL) levels.

2.371.

The Pavement Manager shall have overall responsibility for the maintenance and operation of the PMM and the duties shall include:

(a)

Maintenance of the Project Network Model;

(b)

Ensuring the quality of any survey data entered into the PMM;

(c)

Operation and maintenance of the PMM in accordance with this Method Statement

…

2.373.

The Service Provider shall procure that the PMM is an SQL Server based suite of programmes which shall calculate all of the condition indices for this Project ...

2.374.

The PMM shall use the Project Network Model as its base. The Project Network Model shall be the base, containing the Road, Footway, Verge, Cycle Track and Kerb Section Lengths, against which all condition data shall be referenced. The Project Network Parts shall hold records of the necessary definition data to permit allocation of each Road Section Length to its corresponding PFI District and Network Route Hierarchy or Footway Hierarchy.

2.375.

The Service Provider shall maintain the Project Network Model throughout the Contract Term and [it] shall be updated from time to time in accordance with paragraph 2.3 …Part 8 … of schedule 2.

2.376.

The Service Provider shall ensure that all survey data is collected in accordance with clause 6 ... of the Contract in order to enable the calculation of the condition indices ...

2.377.

The Service Provider shall ensure that all surveys are loaded into the PMM as soon as practicable after results have been collected, processed through an appropriate and or [sic] accredited data management system ... This shall be an ongoing process throughout the Contract Year. However, the Service Provider shall ensure that annual survey programmes are completed in sufficient time to so [sic] that the data is available to calculate the Network Condition Indices using the PMM on the 1^st November each year pursuant to clause 6.4.10 …

2.378.

The Service Provider shall ensure that the PMM is programmed such that the calculation of current condition indices can be performed quickly and at any time. This functionality facilitates the calculation of indices at the six (6) Monthly Milestone step-up points during the Core Investment Period (CIP).

2.379.

While the Milestones and annual Contract dates are key to performance monitoring, the PMM shall be undergoing almost continual updates as new survey datasets are collected throughout the Contract Year and as the outcomes of works (or treatments) are entered.

…

2.384.

The PMM shall be programmed to compute all outputs required to demonstrate compliance with the Contract.

…

2.386.

Additionally for Part 1A the PMM shall be used to calculate:

(a)

Number of failed road section lengths (RSLs) at XSP level

(b)

Number of poor or failed Footway, Verge, Cycle Track and Kerb section lengths at XSP level”.

These clauses taken together indicate that, so far as the Network Condition Index is concerned, it is the PMM that is the source for inputting updates and updating on a continuous basis. However, as is well understood, the PMM was to use the Project Network Model as its base, and that all condition data contained in the PMM shall be referenced back to that detail contained in the Project Network Model, which covered Road, Footway, Verge, Cycle Track and Kerb Section Lengths. That aside, the only reference under the Network Condition Index is that ABHL's Project Manager is required to maintain the Project Network Model. There is, of course, a difference between maintenance of the Project Network Model and the use of the PMM as a sole source for survey data which records the Network Condition Index of the Network in the Project Agreement.

The latter parts of Method Statement 13 give details of evidence of the correct calculation of the NCI. In this regard, the Project Agreement does refer back to some historical basis and puts in context accurately the relation between that and the PMM under the pre-contract negotiations. The particulars are given as follows:

“During BaFO refresh, Amey has attended a number of meetings with representatives of the Authority to demonstrate that the Service Provider's PMM calculates condition indices which are correct. At these meetings some very minor differences were noted, but these differences have only occurred due to slightly different approaches to the way in which defects or condition measures are related to the underlying network. The Service Provider believes that both approaches are equally merited, and that it has demonstrated to the Authority's representatives that the Service Provider's calculations are therefore wholly valid. The Service Provider believes that the Authority's representatives are satisfied that the Service Provider's calculations are therefore correct, that they accurately describe the condition of the Assets and that they shall therefore provide legitimate reports of the levels of service achieved by the Service Provider as the Contract intends.

If required, during preferred bidder, the Service Provider shall liaise with the Authority to further confirm the compliance of the Service Provider's PMM.

2.396.

Prior to the date of this Contract, the Authority tested and verified that the Service Provider's PMM correctly calculates the condition indices. At the date of this Contract each Party has a certified copy of the Service Provider's PMM …

2.400.

No changes shall be made to the certified copy of the Service Provider’s PMM without the agreement of all interested parties to the Contract in accordance with the Contract. Should each Party agree to a change then, following software changes and compliance testing, a revised certified copy shall be issued to each Party. If subsequent to the change the Service Provider's PMM is found to incorrectly calculate the condition indices then the previous certified and agreed version of the software will be reinstated and the condition indices recalculated.

2.401.

Throughout the Contract Term, the Authority ... may audit the PMM or undertake parallel calculations using its own model or systems.”

It does therefore appear, in accordance with Method Statement 13, that prior to the Contract it was indeed the PMM that the parties considered as the basis for calculating the condition of the Project Network; and strict terms were put in place to ensure that document was maintained and usable and could be changed by agreement of the parties and indeed permitted BCC to audit the PMM. Returning then to the Main Body of the Project Agreement, Part L under the heading "Corporate General" provides in clauses 54 and 55 warranties and undertakings and indemnities on behalf of ABHL. Clause 54.4, under the heading, "Service Provider's Due Diligence" provides, so far as material, as follows:

“54.4.1.

The Service Provider shall be deemed to have:

54.4.1.1. satisfied itself as to the assets to which it will acquire rights and the nature and extent of the risks assumed by it under this Contract; and

54.4.1.2. gathered all information necessary to perform its obligations under this Contract and other obligations assumed, including:

(a)

information as to the nature, location and condition of the Project Network …

54.4.2.

Save as expressly set out in clauses 54.4.1.3 to 54.4.1.5, the Service Provider shall not in any way be relieved from any obligation under this Contract nor shall it be entitled to claim against the Authority on grounds that any information, whether obtained from the Authority or otherwise ... is incorrect or insufficient and shall make its own enquiries as to the accuracy and adequacy of that information.”

Such undertakings are quite usual in contracts of this type and are of a general nature. It, in a sense, converts a general obligation set out above into a warranty to avoid ABHL from escaping their obligations contained in the Project Agreement, and nothing in this clause appears to lend weight either way to the matters set out above.

The indemnity provisions under clause 55 of the Project Agreement provide in 55.1 under the heading, "Matters indemnified by the Service Provider", the following:

“The Service Provider shall, subject to 55.2 ... be responsible for and shall release and indemnify the Authority, its employees, agents and contractors on demand from and against, all liability for:

55.1.1.

death or personal injury;

55.1.2.

loss of or damage to property ...;

55.1.3.

breach of statutory duty; and

55.1.4.

third party actions, claims, demands, costs, charges and expenses ...;

which may arise out of, or in consequence of:

55.1.5.

the design … installation, operation or maintenance of the Project Network excluding Privately Maintainable Public Rights of Way; or ...

55.1.7.

the performance or non-performance by the Service Provider of its obligations under this Contract …

and (without limitation to the generality of clauses 55.1.5 to 55.1.8 inclusive) which may specifically include:

55.1.9.

the failure by the Service Provider to keep the Management Information System and/or the Project Network Model up to date at all times”.

Thus while the indemnity provisions make a general reference to updating, no details or indication is given as to what this requires of ABHL.

In construing the Project Agreement the approach taken by this court goes beyond the main body clauses and Schedule 2, which was the approach taken by the Adjudicator, and, in fact, seeks to give meaning and effect to the main body clauses by reference to a range of Schedules, Method Statements (in particular) and Annexes.

As a general matter, PFI contracts such as this require consideration of the detailed Schedules in order to get a better meaning of the more general clauses. Typically, the Project Agreement being a complex PFI contract requires such an approach. This is not as such a criticism of the Adjudicator who, as far as is apparent from the submissions made, sought to put the case at a more general level as opposed to appreciating the detail. The case before this court has developed both on a general level and by reference to the detail, as a brief review of the pleadings set out above makes clear. It may also reflect the fact that the dispute resolution procedure provided by the Project Agreement gave a relatively short period of time between notifying a Dispute, giving written submissions within five days with the appointment of an Adjudicator, and then a reasoned decision from the Adjudicator 20 days thereafter. This court is permitted to consider the true and proper construction of the Project Agreement as a matter of law; and, with a contract quite as complicated as this one this, that of necessity requires a detailed consideration of the Project Agreement as a whole.

Subsequent Facts

The order of Mr Justice Stuart-Smith of 2 October 2015 also permitted the parties to provide witness evidence both in respect of the practical effects of their different interpretations of the Project Agreement and as to the role, powers and obligations of the Independent Certifier and the process followed by him as a matter of fact in relation to the issue of Certificates of Completion 6 to 9. Both of these two matters are set out below by reference to the witness evidence which, in particular, illustrates the complaint that BCC have about the way ABHL or its Sub-Contractors are performing the Project Agreement. The factual evidence from the Certifier is relevant to Issue 3 and, whilst this issue has not been adumbrated upon in this judgment reference is made in order to appreciate what assistance, if any, be obtained from the certifier whose role it was to carry out those contractual obligations that make up the dispute in Issues 1 and 2.

BCC and ABHL appear to agree very little in respect of the practical effects of the different interpretations of the Project Agreement. Such matters as they have managed to agree can largely be traced back to the pleadings and is limited to the calculation of the Condition Indices as set out in PS1A, as follows:

“21 …

(1)

The Network Condition Index or NCI. This means the index representing the condition of RSLs in the Project Area …. There are 4 separate NCI calculations for Carriageways: NCI_main (which relates to the Strategic Route and Main Distributor Network); NCI_sec (which relates to the Secondary Distributor Network); NCI_link (which relates to the Link Road Network) and NCI_local (which relates to the Local Access Road Network). NCI_main is calculated by reference to 3 other indices: the Pavement Condition Index or PCI; the Skid Resistance Index or SRI; and the Surface Condition Index or SCI. … Each of those indices is to be calculated in respect of, and by reference to, a Road Section Length or RSL. [Similar agreements arise in respect of the Footway Condition Index, the Verge Condition Index, the Kerb Condition Index and the Cycle Track Condition Index.]

(2)

The Footway Condition Index or FWCI. This means the index representing the condition of Footways in the Project Area …. There are 2 separate FWCI calculations: for FWCI_pres (which relates to the Prestige, Primary and Secondary Footway Network); and FWCI_link (which relates to the Link and Local Access Footway Network). Each of those indices is to be calculated in respect of, and by reference to, a Footway Section Length or FSL ….

(3)

The Verge Condition Index or VGCI. This means the index representing the condition of Verges in the Project Area …. VGCI … is calculated in respect of, and by reference to, a Verge XSP Length. …

(4)

The Kerb Condition Index or KBCI. This means the index representing the condition of Kerbs in the Project Area …. KBCI … is calculated in respect of, and by reference to, a Kerb XSP Length. This is the same as a Kerb Section Length or KSL (or KBSL).

(5)

The Cycle Track Condition Index or CTCI. This means the index representing the condition of Cycle Tracks in the Project Area …. CTCI … is calculated in respect of, and by reference to, a Cycle Track XSP Length. This is the same as a Cycle Track Section Length or CTSL.

22.

XSP means cross-sectional position. This is a standard industry term which is used to describe inventory items (such as carriageways, footways, verges, kerbs, etc.) by their position relative to the centreline of a carriageway ….”

The parties agree that there are occasions when the condition data obtained by ABHL does not marry up with the inventory data. That then is the extent of the agreement between the parties. As such, it does not appear to take the parties' respective arguments over the Project Agreement very much further.

Clive Betts of BCC, in a statement dated 21 December 2015, set out details, amongst other things, of the practical impact of ABHL's approach to the performance of the Project Agreement. He was the Asset Manager and is now the PFI Contract and Performance Manager for BCC. He has an HNC in civil engineering which was obtained from Wolverhampton Polytechnic and has worked in the highway maintenance industry for 30 years. It is clear from paragraph 79 of his statement that he takes the view that the problems that he perceives will persist for so long as ABHL refuse to update the inventory data in the Project Network Model. His complaint, therefore, focuses on the use or misuse of the Project Network Model which he considers to be at the centre of the problems he has witnessed on the streets of Birmingham. It is apparent from paragraph 4.2 of his witness statement that he believes problems with the need to carry out surveys by ABHL has a contractual basis in clause 6.3 of the Project Agreement.

The problems came to Mr Betts's attention in the following way as he explained in his witness statement:

"9.

ABHL's change in approach after Milestone 5 first came to light in or about February 2014 when Sharon Lee (who worked as a Strategic Director for the Authority at the time) asked my team to investigate why work on a particular cul de sac (Moor Leasow) had been done in a particularly strange way.

10.

ABHL had only been treating the left footway on Moor Leasow, even though both Footways … were in a very similar condition. This was puzzling …

11.

The difference between the default inventory and the actual inventory can be seen from the following photograph of Moor Leasow [and he attaches a photograph to his witness statement

…

17.

Mr Wilcox [at ABHL] emailed me that morning (still 11 February) with his response:

“You are spot on with your observation of the length of R1 as only the frozen default inventory data is being used for the model calculations at the moment. This, as you have pointed out, will water down the effect of the defects found in R1 and consequently will give R1 an artificially high FWCI value...”

…

19.

I have accessed DRD 0626 to check the default inventory for Moor Leasow ... in the default inventory in MINV, both Footways are recorded as having a length of 238 metres (with a default width of 1.8 metres). The default inventory always assumes that each Carriageway has corresponding right and left Footways of the same length and the Carriageway has standard widths

…

22.

ABHL has sought to take advantage of this difference:

22.1.

By relying on the static DRD 0626, ABHL classifies the non-existent 109 metres of Footway on the right side of the road as always being in excellent condition, i.e. no deterioration is recorded since the Footway does not exist. This is because the Pavement Management Model only looks for data which shows deterioration in calculating indices. If there is no data, because (i) there is no deterioration, or (ii) there is no Footway in existence from which to collect it, it will treat the section of Footway as having no minor or no major deterioration;

22.2.

The condition indices for the right side Footway are therefore calculated on the basis that 109 metres of the 238 metres is in excellent condition. This in turn means that the condition indices for the whole 238 metres are skewed, as even when the remaining 129 metres is in poor condition the overall condition of the Footway is artificially inflated by the non-existent section being in 'excellent' condition;

22.3.

ABHL's performance is accordingly falsely over-stated by the Pavement Management Model, which in turn impacts on the Pavement Management Model's ability to predict future treatment works and produce appropriate programmes”.

Mr Betts considered that until Milestone 5, which was certified on 26 November 2012, BCC understood that ABHL was (rightly) performing works to the actual inventory on a 'fence to fence' basis. Thereafter, ABHL changed its approach to limit the works to a default inventory.

Further examples are then given of the impact of the approach of ABHL in respect of Gayhurst Drive and Crowhurst Road; the former is where the default inventory is less than the actual inventory and the latter is where the condition data has been dropped. Thus, he says as follows:

“45.

Gayhurst Drive is an example where the default inventory is less than the actual inventory ... Gayhurst Drive is a cul-de-sac with turning heads where ABHL has failed to resurface the corners of four turning heads at the end of the cul-de-sac. The works were carried out by ABHL between 14 and 15 July 2014. [The relevant monitor sheets and photographs were then provided.]

…

52.

Crowhurst Road is an example where on ABHL's approach the condition data inputted into the Project Network Model does not marry up with the inventory data which leads to the condition data being 'dropped' from the Project Network Model and the Pavement Management Model as ABHL refuses to update the inventory data.

53.

This is directly contrary to UKPMS guidance ...”

He provides photographs of Crowhurst Drive to illustrate the point. Blown up versions of those photographs became exhibits D1 to D3 inclusive.

“56.

The following is a diagrammatical representation of Crowhurst Road based on the actual inventory as collected by ABHL through DVI surveys”.

That document then became exhibit D5 and shows across the highway, including the Verges, the relevant measurements.

“58.

The following is a diagrammatical representation of Crowhurst Road based on the default inventory data included in DRD 0626 [That then became exhibit D4 which, again, illustrates the relevant measurements across the road] …

60.

On ABHL’s current approach, it is only required to treat features L1 and R1 and not the actual Footways (which are features L2 and R2). This is what ABHL has done ...”

The photographs given to illustrate that became exhibits D3 and D4.

“61.

It can be seen that the hard Verge has been resurfaced whilst the cracked flags all along the Footway of L2 have been ignored despite their obvious need for remediation. This not only looks very unattractive but has led to a complaint from a resident about the trip hazards caused by the cracked flags …”

Accordingly, Mr Betts considers that ABHL's approach is illogical in respect of its treatment on the ground and it results in certain parts of the Project Network never being treated. This appears to explain his conclusion that if ABHL are required to update the inventory data in the Project Network Model then the entire Project Network will be correctly treated and such an illogical approach as shown in the photographs will no longer take place on the Roads and Verges in Birmingham.

Mr Nicholas Woodgate, on behalf of ABHL, and employed by Amey Consulting, responds to the statement of Mr Betts in his witness statement of 25 January 2016. He confirms that Mr Betts is wrong in asserting that ABHL is required to rehabilitate all the pavement assets in the Project Network, and this holds irrespective of whether the source of the assets is the PNM or the "actual inventory", and, thus, ABHL did not have to rehabilitate the entirety of that inventory in order to meet the obligations of the Output Specification. He sets out detailed calculations of how measurements are made by reference to Milestone 10 at District level under the provisions of the Project Agreement.

In respect of Moor Leasow, Mr Woodgate takes issue with Mr Betts as follows:

“22.

Mr Betts is incorrect to say that “ABHL has sought to take advantage” of the fact that the PNM records default data for XSP R1 at Moor Leasow ... we are simply calculating the Condition Indices by reference to the PNM.

23.

Mr Betts is also incorrect that the FSL at L1 at Moor Leasow “will be treated more regularly” than that at R1 … As Mr Betts points out, the L1 FSL already has a score of 6.68, which means that it is in fair condition and would not contribute negatively to ABHL's meeting the relevant District level FWCI target of 6.6 for Milestone 10. Since the PMM does not algorithmically deteriorate condition data for FSLs, assuming that the Major and Minor deterioration found during subsequent DVI surveys did not bring the FSL into poor or failed condition or threaten the relevant District level FWCI, the FSL might never be treated during the remaining life of the Project Agreement. It is worth mentioning in this regard that the main source of deterioration of off-Carriageway XSPs is when heavy vehicles mount the kerb and drive over them ... This means that an FSL, say, in fair condition can be instantaneously put into failed condition if driven over by an HGV for any significant distance. This equates to an [sic] sudden extreme rate of deterioration that cannot be predicted at all.”

Mr Woodgate then proceeds to deal with Gayhurst Drive and Crowhurst Road in the following way:

“31.

As I have explained ... the SCI calculation for an RSL is a length weighted average over the length of all Carriageways XSPs within the RSL. The XSPs "-R1" and "L1" are Carriageway XSPs that can be used to describe turning heads ... Therefore, if the area shaded in blue in Mr Betts' depiction ... were recorded by reference to those XSPs ... then given their size relative to the remainder of the Carriageway, and as Mr Betts himself points out ... any omission of condition data for those areas in the calculation of the SCI for Gayhurst Drive would have only a minimal effect on its outcome.

32.

Mr Betts refers to the live inventory data ... However, that is a combination of data dated 31 July 2014 and (for one line entry) dated 30 January 2014. I append the whole of the data for 30 January 2014 and 31 July 2014, which shows that the configuration of Gayhurst Drive has been treated slightly differently in those two surveys …

33.

Mr Betts' comments about the quality of the work on Gayhurst Drive are irrelevant to the issues in dispute ... It is not the function of the PNM inventory to determine the required standard of the work under the Output Specification”.

He then deals with Crowhurst drive in the following way:

“34.

Mr Betts is incorrect that hard Verges and Footways can be distinguished by the materials used to construct them ...: they can both be surfaced with flagstones or bitumen ... and thus … the defects that can affect them are the same... The decision whether to classify something as a Footway or a hard Verge is at the discretion of the inspector who conducts the survey. A good example of something that might be classified as a hard Verge is an area surfaced in bitumen at XSP R1, say, that has a wider area surfaced with paving slabs to the right of it at XSP R2.

35.

Mr Betts' analysis of the position as regards ABHL's approach to Crowhurst Road is inaccurate in the following respects:

35.1.

Trip hazards are dealt with following resident complaints and/or safety inspections of the Footway in accordance with our obligations under Performance Standard 2 …

35.2.

Condition data recorded as relating to one inventory type during a DVI survey cannot be recorded in either CONFIRM or the PMM against inventory data of another type …

35.3.

The Footway at L2 and R2 is subject to safety and service inspections and maintained in accordance with our obligations under Performance Standard 2 …

35.4.

Where there is no condition data recorded at all for an FSL during a DVI inspection, the PMM reverts to the latest available DVI data. If there is no DVI data available at all for the FSL, then the PMM assigns the District average to the FSL. This means that in Mr Betts' hypothetical example where there are actually grass Verges in positions L1 and R1 'on the ground', but default data for those XSPs in the PNM …

35.4.1.

there would be no previous DVI data available in the PMM for the FSLs recorded in positions L1 and R1 in the PNM, because DVI inspectors do not record defect data at all for grass Verges during condition surveys ...

35.4.2.

therefore the PMM would assign the District average condition to the FSLs recorded in positions L1 and R1 in the PNM, not "excellent condition”.

There is therefore a fundamental dispute of fact between the parties as to the workings of the Project Agreement. It is ABHL's position that they have in fact not been paid all achieved Milestones by reason of the matters set out and illustrated in these examples.

As indicated above, it is not for this court to make findings of fact as to how ABHL have performed the Project Agreement, but simply construe the scope of their works and their obligations to update and, as a result of that, form a view on whether certification should be set aside. What is not clear to this court, from the evidence, is how, by operation of clause 6.3 of the Project Agreement, an update of the Project Network Model will somehow cure the defects that BCC complain of in the streets of Birmingham.

In regard to the subsequent facts concerning the role, powers and obligations of the Independent Certifier, the Statement of Agreed Facts provides some further level of agreement but is supplemented by witness evidence.

BCC and ABHL agree that the Independent Certifier's powers and obligations in relation to issuing Certificates of Completion are set out in, amongst other documents, the Independent Certifier's Deed of Appointment and that they both jointly instructed the Independent Certifier to adopt revised criteria for certain Project Network Parts when performing the certification process for Milestones 3 to 9. It is accepted that the Independent Certifier issued Certificates of Completion for Milestones 1 to 9.

It is clear from Annexure 12 to the Project Agreement that the project documents include, amongst other things, the Independent Certifier's appointment. That document dated 2010 is between BCC, ABHL and Atkins Limited and is entitled, "Appointment of Independent Certifier relating to the rehabilitation, maintenance and operation of the Project Network pursuant to the Government's Private Finance Initiative". Clause 5 of that deed provides as follows:

“The Independent Certifier shall not:

5.1.

make or purport to make any alteration or addition to or omission from the Output Specification (including, without limitation, the setting of performance standards) or issue any instruction or direction to any contractor or professional consultant employed or engaged in connection with the Project; or

5.2.

unless both the Authority and the Service Provider consent in writing consent or agree to any waiver or any release of any obligation of the Authority or the Service Provider under the Project Agreement or of any contractor or professional consultant employed or engaged in connection with the Project;

for the avoidance of doubt, the Independent Certifier shall not express an opinion on and shall not interfere with or give any advice, opinion or make any representation in relation to any matters which are beyond its role or responsibilities under this Deed”.

As set out above, the Project Agreement provides, in Part A (Introduction), for the appointment of an Independent Certifier under clause 4. Equally it has been set out above details of how Milestone Completion is achieved and the criteria by reference to Schedule 15 of the Project Agreement which make specific reference to the PMM but do not, on their face, refer to the PNM.

The actual certificates issued by Atkins Limited are similar in respect of all nine Milestones achieved and therefore reference to one should be sufficient to illustrate the document provided. The document is headed, "Birmingham City Council Highway Maintenance & Management Service PFI Project Agreement Clause 13.2.2.1 and Schedule 15 " and it is entitled, " ‘Certificate of Completion’ Milestone 6 Achieved". It is addressed to BCC and ABHL and this example is dated 30 May 2013.

“Dear Sirs

Birmingham City Council Highways Maintenance & Management Service PFI

With reference to (a) the Project Agreement entered into between the Authority and the Service Provider dated 06/05/2010 (the "Project Agreement") (b) the Deed of Appointment entered into between us, the Authority and the Service Provider, we hereby as Independent Certifier having exercised reasonable skill and care do hereby certify and confirm that the Condition Indices achieved for Milestone 2 are shown in Table 1.2b and the Milestone 6 targets are shown in Table 1.6 "Summary of Milestone 6 District Targets". The actual condition achieved is shown in the Table 1.6b "Summary of Milestone 6 Performance with Figures Actually Achieved".

These work totals have been completed subject to those Minor Snagging Items detailed in the zip file 5071401/MS6/001.

In accordance with clause 13 of the Project Agreement and Schedule 15 (Milestone Completion Criteria), Milestone Completion (Milestone 6) has therefore been achieved."

The attached tables included with the letter comprised Table 1.6 "Summary of Milestone 6 District Targets"; Table 1.6b "Summary of Milestone 6 Actual Condition Indices Achieved"; and Table 1.2b "Summary of Milestone 2 District Targets and Actual Condition Indices Achieved". The format of these documents plainly is based on Schedule 2 of the Project Agreement so far as the Table 1.6 summary of Milestone 6 Districts Targets is concerned. That is to say that the left-hand column refers to NCI requirements, FWCI requirements, VGCI requirements, KBCI requirements, CTCI requirements and further matters and across the page there is reference to PFI District numbers 1 to 12. The document is populated for each of those matters with the requisite numbers. In particular, so far as failed RSLs are concerned, at the XSP level for NCI requirements the figure is 57, and that entirely accords with the summary table in Schedule 2 to the Project Agreement. Similar percentages arise for the FWCIs at 63 per cent, VGCIs likewise and equally so for KBCIs and CTCIs. The difference between these target tables is that the Independent Certifier's table attached to the certificate has scores whereas the summary table in Schedule 2 had simple percentages which were on an ongoing increasing amount as set out above. Comparison between the Milestone 6 target tables and Milestone 6 actual Condition Indices achieved sets out a different population of numbers both by reference to the percentages and the actual figures used.

The last page of the certificate asserts as follows:

"This certificate is issued in accordance with Clause 13.2.2.1 of the Project Agreement. Issue Date of Certificate of Completion 30^th May 2013

Signature of Independent Certifier".

This particular document is signed by Mr IA Paterson.

Mr William Frank Moss of Atkins Limited provided a witness statement of 18 December 2015 on behalf of BCC which gives evidence on the issue of these Milestone Certificates including Milestone 6, which has been specifically referred to as an example above. He indicates that he is employed by Atkins Limited and retained as the Independent Certifier and that he is one of the Independent Certifiers who was involved in certification of Milestones 1 to 9; and that the content of his witness statement has been checked by Mr Paterson, the Project Director, and that Mr Paterson informed him that he agrees that the contents of this statement represent the approach taken by the Independent Certifiers generally on the project. He specifically cites from clause 5 of the Deed of Appointment of Atkins Limited and then says this:

“8.

In light of clause 5 and in particular Milestone Completion Criteria set out in Schedule 15 of the Project Agreement, I did not, and still do not, believe that it was within the scope of the Independent Certifier's authority to consider or determine

(i)

whether or not ABHL was obliged to perform the services under PSI in accordance with the default inventory or the actual inventory; or

(ii)

whether ABHL was contractually obliged to update the Project Network Model (and thus the Pavement Management Model) using the actual inventory.

9.

By "actual inventory" I mean the real features of the relevant asset, obtained by direct survey. By "default inventory" I mean any industry averages which have been entered against an asset in a database but have not been obtained by a direct survey of the asset.”

Mr Moss therefore does not appear to purport to assist the court in the obligations of the Project Agreement in respect of the Project Network Model and the need for its updating or otherwise. Mr Moss then proceeds to explain how the certification process took place, which is described in the following:

“10.

When I perform (and have performed) the milestone certification process I seek to undertake this in accordance with the Milestone Completion Criteria in Schedule 15 of the Project Agreement.

11.

The process starts upon ABHL notifying the Independent Certifier when it believes Milestone Completion or Partial Milestone Completion has been achieved. ABHL produces a QITP Certificate (an internal quality assurance document) which confirms that the works have been completed and that ABHL is satisfied with those works. In practice, ABHL and the Authority wrote jointly in order to confirm any practical variations which had been agreed so that any agreed variations required to meet Milestone Completion were clear to the Independent Certifier. The Independent Certifier then notifies ABHL of the data it intends to inspect as part of the 5% sample audit.

12.

In accordance with Schedule 15 I am not required to carry out any site inspections on carriageways, footways, verges, kerbs or cycle tracks (after Milestones 1 and 2). In order to carry out the milestone certification process, I audit a sample of the data on a desktop basis.

13.

As such, I check the input data as defined in Schedule 15 within the model provided to me by ABHL (which may have been produced on a default or live basis) to consider the Network Condition Indices. However, I did not certify the position regarding the inventories used as I did not believe we were required to do so.

14.

Pages 4-5 of the Milestone Completion Criteria (in Schedule 15 of the Project Agreement) deal with the NCI criteria and sets out the test procedures to be followed …

15.

This data therefore includes PCI, SCI and SRI survey results and any agreed resetting of the PCI, SCI and SRI values following the completion of interventions based on revisions after the survey was done: i.e. where ABHL have carried out works after the original survey was done. Although the inventory data was collected as part of the survey, the inventory was not checked to see whether it was the default or live inventory as I did believe that was not part of the Independent Certifier's role under Schedule 15.

…

17.

There is a reference above to the Independent Certifier running a report from the PMM (Pavement Management Model). For the sake of completeness, I should confirm that it was not possible for the consultant working for ABHL to run such a report from the PMM and so the Independent Certifier attended the consultant's offices in Nottingham to review the data. This revised process was agreed between the parties prior to Milestone 1. As above, although the actual inventory data had been collected as part of the surveys, I did not consider that it was part of the Independent Certifier's role to check that part of the data.

18.

In my view, the reference to up to date data having been put onto the PMM is referring to the surveys and any resetting data (for example as set out in page 4 of Schedule 15 as quoted above). However, I do not believe that I had to check whether default or actual inventory was used in the PMM (or whether updated actual inventory was inputted into the PMM) as I do not consider that there is a requirement for that inventory to be checked by the Independent Certifier.

19.

The role of the Independent Certifier was designed by the Project Agreement to be a relatively high level role. Given the information provided to the Independent Certifier and my understanding of the scope of the role set out in Schedule 15, it was never the Independent Certifier's intention or role to determine the matters currently in dispute between the parties.”

From this description procedure, it is quite apparent that the Independent Certifier appreciated the workings of Schedule 15 as a criteria and the need for a 5 per cent review; and also that in carrying out that exercise reference was made to the PMM, which is what Schedule 15 refers to. In that regard it does not appear that the Certifier was asked or indeed did consider the Project Network Model as the basis for his certification process.

Since then, and as referred to in the Statement of Agreed Facts, and indeed Mr Moss's witness statements, letters have passed between BCC and Mr Paterson of the Independent Certifier. In particular, a letter from Mr John Blakemore of BCC of 24 November 2014 and the reply from Mr Paterson of the Independent Certifier on 1 December 2014. Briefly quoting from those parts of the letter relied upon, they contain the following statements:

“24 November 2014 …

4.

The Authority's view is that the Contract requires the Network Condition Indices to be calculated using the Project Network Inventory, which reflects the actual inventory of Project Network Parts. The Service Provider is using the original inventory (including default inventory, rather than the actual Carriageway and Footway widths and areas) in the Project Network Model to input to the Pavement Management Model. This results in incorrect outputs from the Pavement Management Model in respect of measurement of current NCIs and therefore also the consequential works required to be carried out. If you need further information to explain the issue, please let me know and I will be pleased to provide further details.”

“1 December 2014 …

I have considered your representation (in accordance with clause 13.1.3) that Atkins, as the Independent Certifier (IC), consider whether we are able to certify the NCIs as part of Milestone 9. From our commercial review of the Deed of Appointment of the Independent Certifier, our contractual obligations are to evaluate Milestone 9 and make an independent judgement on whether this milestone has been achieved in accordance with the Milestone Completion Criteria defined in Schedule 15 of the Project Agreement. Not proceeding with the evaluation and the issuing of the certification could result in Atkins breaching our contractual role as an Independent Certifier …

Clause 2.3 requires that Atkins provides the Services independently, fairly and impartially and 2.2.1 requires Joint Notice from the Counterparties to request any Varied Services. Not certifying on the basis of a dispute could be in breach of our obligations.

Limitations on Authority in clause 5 of the Deed state that the IC [the Independent Certifier] shall not express an opinion on and shall not interfere with or give any advice, opinion or make any representation in relation to any matters which are beyond its role and responsibilities under the Deed.

With the lack of any specific clause relating to the obligations of the IC in a dispute situation Atkins feel we are obliged to proceed with the evaluation of Milestone 9 following the scope of services defined in our Deed of Appointment.

Nevertheless, bearing in mind the ongoing dispute between the Authority and the Service Provider, I propose to add the attached note to the front page of the Certificate for Milestone 9:

Note: The actual indices achieved shown in Table 1.9b are calculated using the original Pavement Management Model. The Independent Certifier recognises that the Authority and the Service Provider are in dispute regarding the validity of the Project Network Model and Project Network Inventory and any change to the Project Network Model or Project Network Inventory could change the numbers in Table 1.9b”.

The use of this note and, indeed, the letter makes it reasonably plain that the Independent Certifier appreciated that they had to use the Pavement Management Model as the basis for certification, but that changes in the Project Network Inventory or the Project Network Model "could" change the numbers contained in table 1.9b, that is to say the summary of Milestone 9 Actual Condition Indices Achieved. It has been noted that reference is made to the Project Network Model, in the alternative to the Project Network Inventory, and therefore it will be a matter of construction of the Project Agreement as to which, if any, of those have relevance or are required for the purposes of certification.

As set out above, under clause 19 of the Project Agreement the Project Network Inventory forms part of the Management Information System or MIS and is separate from the Project Network Model. Therefore it is right to consider the Project Network Inventory as an alternative to the Project Network Model as the two systems perform a different function under the Project Agreement.

Law

In their skeleton argument dated 22 June 2015 before the Adjudicator BCC placed specific reliance on the commercial purpose of the Project Agreement by reference to Rainy Sky SA v Kookmin (supra) per Lord Clarke and the need for the court always to prefer a construction that is consistent with business common sense and reject any other circumstance; and Wickman Machine Tool Sales Limited v Schuler (supra) per Lord Reid at page 251 as quoted in paragraphs 20 and 21 of BCC's skeleton argument. The Adjudicator's Decision relied specifically, in paragraph 22, on Investors Compensation Scheme v West Bromwich (supra) and Rainy Sky v Kookmin and the concept of business common sense in particular to the reasoning in Issue 1. Since then reference has to be made to the more recent decision in Arnold v Britton [2015] 2 WLR 1593 in the Supreme Court, which provides further assistance in both reliance that can be placed on surrounding circumstances and the invocation of retrospective facts when it comes to applying commercial common sense.

Before this court there were two bundles of authorities upon which reliance was placed by the parties in respect of the legal argument, including reliance on Prenn v Simmonds [1971] 1 WLR 1381, and Chartbrook Limited v Persimmon Homes [2009] 1 AC 1101.

It is generally acknowledged that the starting point for construction of contracts is the decision of Lord Hoffmann in ICS v West Bromwich, in particular the five propositions at page 912 and 913 of the Weekly Law Reports. These are sufficiently well-known to not require citation in this judgment.

It is, however, noted that the fifth proposition cited by Lord Diplock in Antaios Compania Naviera SA v Salen [1985] AC 191 at 201, which confirmed that if a detailed and syntactical analysis of the words in a commercial contract was to lead to a conclusion that flouts business common sense then it should yield to business common sense.

In Chartbrook Limited v Persimmon (supra) Lord Hoffmann repeated the starting point for the construction of contracts as follows:

“14.

There is no dispute that the principles on which a contract (or any other instrument or utterance) should be interpreted are those summarised by the House of Lords in Investors Compensation Scheme v West Bromwich Building Society [1998] 1 WLR 896, 912-913. They are well known and need not be repeated. It is agreed that the question is what a reasonable person having all the background knowledge which would have been available to the parties would have understood them to be using the language in the contract to mean. The House emphasised that "we do not easily accept that people have made linguistic mistakes particularly in formal documents" (similar statements will be found in Bank of Credit and Commerce International SA v Ali [2002] 1 AC 251 ...) but said that in some cases the context and background drove a court to the conclusion that "something must have gone wrong with the language". In such a case, the law did not require a court to attribute to the parties an intention which a reasonable person would not have understood them to have had.”

Lord Hoffmann then continued, between paragraphs 16 and paragraph 26, to review the decision of the Court of Appeal and, in particular, agreed with the dissenting opinion of Lawrence Collins LJ he thought that to interpret the definition of "ARP" in accordance to the ordinary rules of syntax would make no commercial sense.

In Rainy Sky v Kookmin Bank (supra) Lord Clarke summarised the correct approach to construction in paragraph 14 as follows:

"14.

For the most part, the correct approach to construction of the bonds, as in the case of any contract, was not in dispute. The principles have been discussed in many cases, notably, of course, as Lord Neuberger of Abbotsbury MR said in Pink Floyd Music Ltd v EMI Records Ltd [2010] EWCA Civ 1429, para 17 by Lord Hoffmann in Mannai Investments Co Ltd v Eagle Star Life Assurance Co Ltd [1997] AC 749, passim, in Investors Compensation Scheme Ltd v West Bromwich Building Society [1998] 1 WLR 896, 912F to 913G, and in Chartbrook Ltd v Persimmon Homes Ltd (Chartbrook Ltd Part 20 defendants) [2009] AC 1101, paras 21-26. I agree with Lord Neuberger (also at para 17) that those cases show that the ultimate aim of interpreting a provision in a contract, especially a commercial contract, is to determine what the parties meant by the language used, which involves ascertaining what a reasonable person would have understood the parties to have meant. As Lord Hoffmann made clear in the first of the principles he summarised in the Investors Compensation Scheme case [1998] 1 WLR 896, 912H, the relevant reasonable person is one who has all the background knowledge which would reasonably have been available to the parties in the situation in which they were at the time of the contract."

Lord Clarke then went on to consider what the proper approach was between paragraphs 21 to 30 inclusive, and in particular in paragraph 21 noted that the language used by the parties would often have more than one potential meaning. He accepted the submissions made on behalf of the appellants that the exercise of construction is essentially one unitary exercise in which the court must consider the language used and ascertain what a reasonable person, that is a person with all the background knowledge, which would reasonably have been available to the parties in the situation in which they were at the time of the contract, would have understood the parties to mean. In doing so, the court must have regard to all the relevant surrounding circumstances. And if there are two or more possible constructions the court was entitled to prefer the construction which is consistent with business common sense and reject the other.

As noted by counsel for ABHL the starting point of the correct approach to interpretation of contracts essentially commenced with Prenn v Simmonds [1971] 1 WLR 1381 in which Lord Wilberforce indicated, at page 1348 to 1386, why it was that the courts preferred relying upon the language used in contracts as opposed to pre-contract negotiations which were unhelpful. Again, the dicta of Lord Wilberforce is sufficiently well known to not require further citation in this judgment.

In Arnold v Britton Lord Neuberger, with whom Lord Sumption and Lord Hughes agreed, took the opportunity, in a somewhat unusual set of facts, to emphasise how contract provisions were to be interpreted having regard to the authorities set out above (and one or two additional ones), in a case in which interpretation was critical to the result. The facts of Arnold v Britton are set out in the headnote to the case which refers to the annual 10 per cent compound increase in the annual service charges which had risen to over £2,700 as opposed to only £282 which, if interpreted under the language of the leases, would provide an absurdly high annual service charge. The decision on the interpretation of the contractual provisions so far as relevant to this dispute is set out in paragraphs 14 to 21, which provide as follows:

“14.

Over the past 45 years, the House of Lords and Supreme Court have discussed the correct approach to be adopted to the interpretation, or construction, of contracts in a number of cases starting with Prenn v Simmonds ... and culminating with Rainy Sky SA v Kookmin Bank ...

15.

When interpreting a written contract, the court is concerned to identify the intention of the parties by reference to "what a reasonable person having all the background knowledge which would have been available to the parties would have understood them to be using the language in the contract to mean, to quote Lord Hoffmann in Chartbrook Ltd v Persimmon Homes Ltd … para 14. And it does so by focussing on the meaning of the relevant words, in this case the clause 3(2) of each of the 25 leases, in their documentary, factual and commercial context. That meaning has to be assessed in the light of (i) the natural and ordinary meaning of the clause, (ii) any other relevant provisions of the lease, (iii) the overall purpose of the clause and the lease, (iv) the facts and circumstances known or assumed by the parties at the time that the document was executed, and (v) commercial common sense, but (vi) disregarding subjective evidence of any party’s intentions. In this connection see Prenn v Simmonds 1384-1386; Reardon Smith Line Ltd v Yngvar Hansen-Tangen (trading as HE Hansen-Tangen) [1976] 1 WLR 989, 995-997, per Lord Wilberforce; Bank of Credit and Commerce International SA v Ali ... para 8, per Lord Bingham of Cornhill and the survey of more recent authorities in Rainy Sky …, paras 21-30, per Lord Clarke of Stone-cum-Ebony JSC.

16.

For present purposes, I think it is important to emphasise seven factors.

17.

First, the reliance placed in some cases on commercial common sense and surrounding circumstances (eg in Chartbrook …, paras 16-26) should not be invoked to undervalue the importance of the language of the provision which is to be construed. The exercise of interpreting a provision involves identifying what the parties meant through the eyes of a reasonable reader, and, save perhaps in a very unusual case, that meaning is most obviously to be gleaned from the language of the provision. Unlike commercial common sense and the surrounding circumstances, the parties have control over the language they use in a contract. And, again save perhaps in a very unusual case, the parties must have been specifically focussing on the issue covered by provision when agreeing the wording of that provision.

18.

Secondly, when it comes to considering the centrally relevant words to be interpreted, I accept that the less clear they are, or, to put it another way, the worse their drafting the more ready the court can properly be to depart from their natural meaning. This is simply the obverse of the sensible proposition that the clearer the natural meaning the more difficult it is to justify departing from it. However, that does not justify the court embarking on an exercise of searching for, let alone constructing, drafting infelicities in order to facilitate a departure from the natural meaning. If there is a specific error in the drafting, it may often have no relevance to the issue of interpretation which the court has to resolve.

19.

The third point I should mention is that commercial common sense is not to be invoked retrospectively. The mere fact that a contractual arrangement, if interpreted according to its natural language, has worked out badly, or even disastrously, for one of the parties is not a reason for departing from the natural language. Commercial common sense is only relevant to the extent of how matters would or could have been perceived by the parties, or by reasonable people in the position of the parties, as at the date that the contract was made. Judicial observations such as those of Lord Reid in Wickman Machine Tools Sales Ltd v L Schuler AG ... 251 and Lord Diplock in Antaios Cia Naviera SA v Salen Rederierna AB (The Antaios) ... 201, quoted by Lord Carnwath JSC at para 110, have to be read and applied bearing that important point in mind.

20.

Fourthly, while commercial common sense is a very important factor to take into account when interpreting a contract, a court should be very slow to reject the natural meaning of a provision as correct simply because it appears to be a very imprudent term for one of the parties to have agreed, even ignoring the benefit of wisdom of hindsight. The purpose of interpreting is to identify what the parties have agreed, not what the court thinks they should have agreed. Experience shows that it is by no means unknown for people to enter into arrangements which are ill-advised, even ignoring the benefit of wisdom of hindsight, and it is not the function of a court when interpreting an agreement to relieve a party from the consequences of his imprudence or poor advice. Accordingly, when interpreting a contract a judge should avoid re-writing it in an attempt to assist an unwise party or to penalise an astute party.

21.

The fifth point concerns the facts known to the parties. When interpreting a contractual provision, one can only take into account facts or circumstances which existed at the time that the contract was made, and which were known or reasonably available to both parties. Given that a contract is a bilateral, or synallagmatic, arrangement involving both parties, it cannot be right when interpreting a contractual provision, to take into account a fact or circumstance known only to one of the parties.”

The reference in paragraph 19 of Lord Neuberger above to Lord Carnwath JSC at paragraph 110 of that judgment is as follows:

"He illustrated the other side of the coin by quotations from Lord Reid in Wickman Machine Tools Sales Ltd v L Schuler AG ... 251: “The fact that a particular construction leads to a very unreasonable result must be a relevant consideration. The more unreasonable the result, the more unlikely it is that the parties can have intended it, and if they do intend it the more necessary it is that they shall make that intention abundantly clear.” and Lord Diplock in Antaios Cia Naviera SA v Salen Rederierna AB (The Antaios) ... 201: "If detailed and syntactical analysis of words in a commercial contract is going to lead to the conclusion that flouts business common sense it must yield to business common sense."

It will be noted that the quote from Lord Diplock was relied upon in proposition 5 by Lord Hoffmann in ICS v West Bromwich referred to above; and equally the quote from Lord Reid in Wickman Machine Tools v Schuler is the very quote relied upon by counsel for BCC in their skeleton argument before the Adjudicator.

Thus, on point number 3 set out in paragraph 19 above of Lord Neuberger, invocation of retrospective matters, the law has been clarified or reaffirmed to limit consideration to facts and matters known at the date of the contract and, therefore, reliance upon subsequent matters is not a proper basis for the invocation of commercial common sense.

Moreover, reference to "commercial common sense" forms a central part of the ratio in Arnold v Britton and emphasis was placed on the words used: in proposition 1 which concerns the use of surrounding circumstances; in proposition 3 which concerns, as indicated above, retrospective use of facts; and in proposition 4 in which, in hindsight, a party regrets what in fact their contract provided. Hence BCC now have to and indeed did realign their legal arguments to meet this approach to commercial common sense.

That said, it is equally clear from paragraph 15 of the judgment that commercial common sense is one of the five basic propositions relating to construction of contracts and in so finding Lord Neuberger specifically relies upon Rainy Sky v. Kookmin and the judgment of Lord Clarke in paragraphs 21 to 23 which formed the basis of both the submissions made before the Adjudicator by BCC and the Adjudicator's Decision. The ambit, however, of the application of such business common sense is apparent from the judgment of Lord Clarke, namely that if there are two possible constructions the court is entitled to prefer the construction which is consistent with commercial common sense and reject the other. This case and that legal proposition was common in BCC's argument from the outset, the Adjudicator's Decision and this court. But the real question is whether it arises on a true and proper construction of the Project Agreement.

Issue 1 – Scope of the Agreement as set out in the Dispute

The Dispute brought by BCC and set out above sought a declaration in terms that:

“the Service Provider's obligation to perform the Core Investment Works and meet the PS1 requirement extend to the Project Network as a whole and not the Project Network as defined by the PNM contained in DRD0626”.

The Adjudicator's Decision, also set out above, in fact declared that:

“ABHL's obligations to perform the Core Investment Works and meet the requirements of Performance Standard 1 extend to the Project Network as a whole and are not limited to the RSLs as recorded in the Project Network Model contained in DRD0626”.

The additional words added by the Adjudicator, namely "and are not limited to the RSLs", were included as the result of the construction that the Adjudicator came to as to the true and proper meaning of "RSL", in particular as set out in paragraph 56 and 61 of the Adjudicator's Decision.

That analysis essentially turned on the use of the word "nodes" and the construction the Adjudicator came to, as opposed to a submission made by BCC. In paragraph 70 of their skeleton argument, dated 17 February 2016, ABHL say as follows:

“70.

The point is simply a bad one. It is not a natural reading of the words. It does not fit with the provisions in Part 11 of Schedule 2 (in particular those requiring the use of the length in the PNM). It does not fit with the definitions of the other sections lengths (FSL, VGSL, KSL and CTSL ...), And, most simply of all, it cannot work as a reading of the definition because there are no "Nodes set out in the PNM". The parties agree that the PNM does not expressly contain Nodes, being the five figure identifiers as defined in the Project Agreement ... Had the point been raised by the Adjudicator at the hearing or before he issued his Decision, no doubt this would have been pointed out to him.”

This is an expansion of ABHL's pleaded case set out above.

BCC, in their skeleton argument dated 17 February 2016, set out their position in paragraph 19 as follows:

“19.

The Project Agreement requires ABHL to perform Core Investment Works across the entire Project Network. All the data from surveys (including condition and inventory data) is collected and input into the database, the Project Network Model. The condition data marries up with the inventory data. The survey data is then processed by the Pavement Management Model, which (i) produces condition indices which should reflect the actual condition of the Project Network; and (ii) should enable work to be carried out across the Project Network in an efficient order (e.g. parts of the Project Network in a worse condition are treated first).”

The actual arguments set out in BCC's skeleton argument in respect of Issue 1, between paragraph 32 and 36, do not appear to specifically follow the reasoning of the Adjudicator; and one may be forgiven for thinking that BCC take the view that the Adjudicator got the answer right but proceeded wrongly on a false and novel point and thus prefer to return to their skeleton argument before the Adjudicator as expanded upon in their skeleton argument before this court.

It is right to say that before the Adjudicator Issue 1 was the main issue relied on by BCC whereas before this court BCC's submissions in their skeleton argument are somewhat circumspect. Having said that, it is entirely acknowledged that, so far as the pleadings are concerned, both parties' arguments deal not only with the Main Body clauses of the Project Agreement but descend to the detail contained in the Method Statements and other documents which, apart from Schedule 2, were not arguments developed before the Adjudicator.

The oral submissions of ABHL in respect of the Adjudicator's Decision made on 23 February 2016 are recorded in the transcript at page 88 to 90, in which consideration is given to the approach taken by the Adjudicator to the Road Section Lengths ("RSLs") in the Adjudicator's Decision. The oral submission was as follows:

“Paragraph 56, the Adjudicator sets out the contractual definition of, "RSL". Then in paragraph 61, over the page, page 13, he gives his construction of the term, "RSL", so that he reads the words, 'In the Project Network Model', as qualifying only the words, “Between consecutive nodes”. So he reads it as meaning “RSL would mean the extent of a part of a project road as represented between two consecutive nodes which nodes are set out in the PNM”.

Now, my Lord, that was not an argument which was advanced before him by the Authority, so not an argument to which we had an opportunity to respond. It simply does not work. It is not the natural reading of the words, first.

Secondly, it doesn’t fit with all of the other provisions in Part 11 of Schedule 2 which tie one back to the Project Network Model which I have been through this morning with your Lordship.

Thirdly, it doesn't fit with the definition of the other section lengths which are referred to in the Project Agreement. Those are the Footway Section Length, the Verge Section Length, the Cycle Track Section Length, and the Kerb Section Length. I will just give you one as an example, but the same point applies in relation to each of them. I am going to do that by reference to the definition of Footway Section Length which your Lordship will find in Bundle D2 at page 528. My Lord, in each case, these are the definitions, just as, “RSL”, is used in the calculation of the NCI, so Footway Section Length is used for the calculation of FWCI, verge for VGCI, so on and so forth.

Footway Section Length is defined towards the bottom of page 528 as: "A length of footway associated with a Road Section Length for an individual Cross-sectional Position identified in the Project Network Model".

Again, my Lord, in clear terms, tying back to the Project Network Model, and the Adjudicator didn't grapple with how that definition was to be passed, and you cannot pass it in any way that removes reference to the Project Network Model.

Indeed, finally, and fourthly, even the Adjudicator's reading of, "Road Section Length", cannot work on its own terms. He reads the in the PNM as qualifying only consecutive nodes. My Lord, there are no nodes in the PNM, and that is common ground between the parties. The reference is paragraph 25 of the Schedule of Agreed Facts at B/8/163.”

It is acknowledged that this is not an appeal from the Adjudicator's Decision but a hearing de novo.

It was not apparent from the oral arguments from BCC commencing on 24 February 2016, on day 2 of the trial, that they positively support and explain why it was that the Adjudicator's reasoning was right.

For my part, I am unable to appreciate the reasons relied upon by the Adjudicator to come to the declaration made in the Adjudicator's Decision. Not only am I unable to construe the words and definitions of the Project Agreement in the way achieved by the Adjudicator, but the thrust of his reasoning, which focuses on the Road Section Lengths, does not and cannot carry the meaning he arrived at. I accept ABHL's submissions as being correct and their criticism is well placed in my view. From this point of view I am quite satisfied that the Adjudicator was wrong as a matter of law.

That, of course, is not the end of the matter as the function of this court is to resolve a Dispute in respect of Issue 1 brought by BCC in which they seek to maintain the particular declarations sought in Issue 1,. and it is for this court to consider, as a matter of law, whether BCC should be allowed to be granted such a declaration.

The skeleton argument before the Adjudicator relied upon by BCC and the skeleton argument before this court in large terms rely upon both the recitals and specific clauses in the Project Agreement which, it is asserted by BCC, support their construction of the Project Agreement and makes ABHL's interpretation inconsistent. In this regard, BCC have maintained a consistent case; and it is for those legal reasons, as a matter of construction of the Project Agreement, that they believe the declaration in Issue 1 should be ordered by this court. That wording relied on is at recitals B, C, D, E, F and G and clauses 6.1, 20.2, 54.4, 55 and 68.1. It is right to say, and may not be surprising, that these recitals and Main Body clauses make continuous and consistent reference to "Project Network". As indicated above, the Project Network means, for the purposes of this Dispute "Project Roads", and that:

“‘Project Roads' means those Carriageways, Footways, Kerbs, Verges, Footpaths and Cycle Tracks identified in the Highway Register ...”

Thus, the concept of Project Network goes beyond just that of the Carriageways and the RSLs which appeared to form the basis of the Adjudicator's Decision. As such, ABHL do not attempt to resist the general wording in these clauses. In particular, and in support of the more general clauses relating to the Project Network, BCC rely on Schedule 2 to the Project Agreement in paragraph 32 of their skeleton argument viz:

“32.

The scope of ABHL's Core Investment Works is clearly defined in Performance Standard 1 of the Output Specification (Schedule 2 of the Project Agreement) by reference to the Project Network. Thus paragraph 1.1 of the Required Outcomes in Performance Standard 1 ... stipulates that:

"The Service Provider shall comply with the provisions of this Performance Standard 1 and ensure that at the end of the Core Investment Period and thereafter until the expiry of the Contract Term in relation to the Project Network...””

Again, indeed that is what Schedule 2 provides; and it does, understandably, correlate to the Project Network, but no explanation or analysis is provided in BCC's skeleton argument as to why, as a result of that, the declaration sought in the Dispute should be ordered by this court. Thus, BCC's skeleton argument before this court seeks to rely upon very general clauses without going into detail or explaining the apparent discrepancy between the more general requirements in respect of the Project Network and what appears to be the more limited provisions in respect of the PNM which appears to be the thrust of the declaration required for Issue 1. The reason for this may be that BCC have realigned the emphasis of their case to make the updating clauses in Issue 2 the central part of their argument. Thus, from paragraph 37 to paragraph 47 considerable detail is given as to the further clauses and particular Method Statements which support BCC's case.

In their oral submissions BCC did develop their case on Issue 1 and, as with their pleaded case, they relied upon those detailed provisions.

Both the skeleton argument of ABHL and their oral submissions on Issue 1 set out a detailed and analytical review of the actual language used in the Project Agreement to assist the court in what the function of the PNM was and thus, in effect, what the limitations were of the PNM. The purpose of the argument was to explain, in particular, the function of the PNM in relation to the Condition Indices of the Project Network and on 23 February 2016, at page 75 of the transcript, ABHL summarised the case as follows:

“So, my Lord, in summary, those sixteen references show that it is obvious that the Project Network Model is at the very heart of the Condition Index calculations which must be undertaken pursuant to Part 11 of Schedule 2. Remember, what are they there are for? They are there to determine whether the Milestone District Targets have been achieved, and it is that which determines whether there has been Milestone Completion or not.”

That conclusion requires consideration of Schedule 2 of the Project Agreement and in regard to the fact that this is a core investment dispute one is concerned with only part of that schedule. Consideration of clause 9.1 of the Project Agreement is achieved through the process of Milestone Completion which has certain completion criteria. Those are set out in Schedule 15. Returning to Schedule 2, one sees reference to the Milestones, for example of Milestone 6, the Table 1.6 provides a summary of the NCI, FWCI, VGCI, KBCI and CTCI in which of course the use of the letters "CI" refer to Condition Indices. It is by reference to those figures shown in Table 1.6 that BCC and ABHL have agreed what may be described as a statistical proxy for the condition of those Networks, Footpaths, Kerbs and Cycle Tracks. And it is by reference to that statistical proxy that the Milestone District Targets are to be achieved. That is to say the parties have agreed a contractual measure of performance to achieve Milestone Completion and thus payment. This can be tested by reference to SEC Network Condition Index for the Secondary Distributor Network. The definition of that term makes it plain that it is designated on the Project Network Model. This formed the first of the 16 references to the Project Network Model relied upon by ABHL. One then goes on to the Road Section Lengths, which again is defined (as is apparent from the Adjudicator's Decision) by reference to the Project Network Model which is a second reference back to the PNM. Part 11 of Schedule 2 to the Project Agreement provides details of the calculation of Condition Indices relating to the Network Infrastructure Condition. On the face of it, this is not a document relating to just part of the network but the entire network infrastructure. From those calculations it is clear that the NCI_sec for the Road Section Lengths must, of necessity, refer back to the PNM as, indeed, does the reference to Secondary Distributor Network and thus the calculation provided is a calculation based on the data in the PNM. These are the third and fourth references back to the functioning of the PNM. The fifth reference relates to the Skid Resistance Index, which is also, by definition, part of the Secondary Distributor Network and, therefore, part of the PNM. One follows the matter through to the Secondary Condition Index which, likewise, is part of the Secondary Distributor Network, and gives, between them, the fifth and sixth references back to the PNM and on to the SRI calculations which are another reference back to the PNM as does the SRI, the SCI_sec and so on. Equally, the XSP is defined by reference to the Project Network Model and that is connected with each of the RSLs for the Carriageways, by way of example, and provides a weighted average. The calculation of the Network Condition Index provides details of the sum of the NCI and LRSL, which is to be divided by the TLSDN, which is the total length of the Secondary Distributor Network, which, again, is defined by reference to the Project Network Model and by this mathematical formula a calculation can be made as required by the Project Agreement. Thus, one has, by means of that documentation, an understanding of the Condition Indices, some 16 references which, in terms of their meaning, as defined in the Project Agreement, all relate back to the Project Network Model and thus this is where this information was originally held. There was, in addition, provision made for an amendment of the Project Network Model where, when surveys were undertaken, the length of the relevant RSL was more than 5 per cent but less than 10 per cent over or under the length of the RSL as recorded in the Project Network Model (see paragraph 3.2.4 of Part 11 of Schedule 2). Those recalculations concerned the surface of the Carriageways for skid resistance and the Pavement Condition Index. As a result of that, as shown on table 8 to Schedule 2, Part 11, the conditions, were marked by reference to Failed, Critical, Poor, Fair, Good or Excellent in terms of their condition. The example relied upon in table 8 related to the Surface Condition Index for the Secondary Distributor Network, but similar analysis could be taken for the Footway condition, and so on.

Taken in the round, that detailed explanation, by means of contract definition and terms set out in Schedule 2 of the Project Agreement, made plain what the parties had agreed the basis of and function the PNM was to provide under the Project Agreement.

In their response to this, in their oral submissions BCC made the following comments at page 90 to 91 of the transcript on Day 2:

“ ... Their case hinges entirely on the words "Project Network Model", and then what they do from that is they seek to use that to justify their position.

Now, there are actually not significant differences between the parties in terms of how the Condition Indices operate, so that -- there was a lot of time taken up yesterday with going through how the Condition Indices operate. Much of that is agreed, so just to be clear for the court, the major disagreement between the parties is whether you use actual inventory or default inventory.

We agree that the PMM calculates the Condition Indices using data from the PNM in accordance with the Output Specification. So the 16 or 17 references to the PNM ... are, therefore, not relevant to the issues between the parties.”

In the event, it does not appear that there was much argument between BCC and ABHL as to Issue 1 and how the PNM worked as originally agreed in the Project Agreement. And as BCC made no real attempt to support the Adjudicator's Decision in terms of the reasoning to achieve the first declaration for Issue 1, and, indeed, in broad terms, repeated the very general contract provisions essentially set out in the Main Body clauses of the Project Agreement, with limited citation of Schedule 2, there really was no sustained argument on behalf of BCC which sought to maintain that the declaration given by the Adjudicator on Issue 1 could be supported as a matter of law.

Solely for the purposes of resolution of Issue 1 and no more, I am satisfied that ABHL have sufficiently explained how the parties intended the PNM to work and what its functions were, both in respect of Condition Indices and Milestone Target dates. The scope of those obligations set out in respect of the PNM appear on their face, in particular by reference to Schedule 2 of the Project Agreement, to cover the whole Project Network as is quite apparent from Schedule 2 and this holds good over the entire Core Investment Period.

Equally, the recitals to the Project Agreement in (B) (C) (D) (E) (F) and (I) make reference to the Project Network; it would be surprising if they did not in view of the fact that this contract concerns the Project Network as defined in the Project Agreement, which for the purpose of this dispute in fact means the Project Roads. Moreover, consideration of clauses 5.1, 6.1, 20.2, 54.4 and 68.1 being Main Body clauses equally and again hardly surprisingly make reference to the Project Network in respect of particular obligations contained in those clauses having regard to their application to the Project Network. In contracts of this type and complexity one would naturally expect those types of clauses to refer to the Project Network and the significance of anything in such clauses is what in fact they concern. Thus, clauses 5 and 6 concern the condition of the Project Network and surveys and inspections, clause 20 concerns the obligations to provide the Services, clause 54 concerns warranties and undertakings as part of the corporate general clauses of the Project Agreement, and clause 68 is referable to the handback procedure after the expiry of the term of the Project Agreement. Those clauses do not in fact specifically make reference to the Project Network Model and how the Project Network Model in fact associates itself with clause 5.1, 6.1, 20.2, 54.4 and 68.1 of the Project Agreement. Instead they are recitals or Main Body clauses, the content of which is apparent from reading the words used in each of those recitals and clauses.

To appreciate the actual working of the Project Network Model reference needs to be made to the definition of that concept and its working throughout the various Schedules to the Contract starting primarily with the basic Main Body clauses and then working from the hierarchy of Schedule 2, then Schedule 4, and then the other Schedules, in particular Schedule 11 by way of example. In terms of the detail of the working of these particular clauses relied upon by BCC, both before the Adjudicator and this court in their skeleton arguments, what one might fairly expect is some correlation between such clauses and the Project Network Model as explained in particular in the Output Specification and Payment Mechanism but also the various Method Statements, in particular Method Statements 1, 2, 3, 10 and 13, in which, if those general clauses were of importance and relevance, one would expect to find some more detail and citation of the Project Network Model so that if one worked backwards from the detail up to the Main Body clauses it would become quite apparent that the Project Network Model in fact concerned the Project Network and some explanation would be given as to what was expected as to the scope of the Project Network Model in that respect.

In the absence of such correlation or assistance of Main Body clauses in some detail in respect of the scope of the Project Network Model, the approach taken by ABHL is to be preferred and is one in which, having defined the terms as a matter of Project Agreement private lexicon definition, a more detailed review of the workings in particular of Schedule 2 Part 8 and Part 11 provide a consistent and reasonably clear appreciation of what function, as a matter of language, the parties agreed the Project Network Model was to perform in respect of the Project Agreement as a whole and also indirectly, in the absence of any further wording, what function the Project Network Model was not intended to achieve or perform in respect of the Project Agreement. The approach of the Adjudicator to these particular contract clauses (see paragraphs 89 to 93 of the Adjudicator's Decision) is not an approach favoured by this court, although it is right to record that the detail to which the Project Network Model was explained by ABHL was substantially more robust and full than maybe had been presented to the Adjudicator. ABHL do not "presume what it seeks to prove", as the Adjudicator found in the argument as framed before him but, rather, provides this court a reasonably detailed explanation of the workings of the PNM so far as the parties agreed to the Project Agreement, which in broad terms dictates the scope of the Project Network Model insofar as the parties came to such agreement. There is nothing in the particular clauses relied upon by BCC which permits the parties' agreement to the Project Network Model to be redefined or realigned in a different way to that which had been agreed upon.

Issue 2 -- Updating the Agreement as set out in the Dispute

The Dispute in respect of Issue 2 concerns the declaration which sought:

"that the Service Provider must update the PNM and maintain a PNI which accurately reflects the actual extent of the Project Network - more particularly the Project Road"

as more fully set out in section 3 above of this judgment.

Equally, the Adjudicator's Decision, also set out in section 3, gave a declaration in similar terms:

“That ABHL must update the Project Network Model and maintain a Project Network Inventory which accurately reflects the actual extent of the Project Network and the Project Road”.

The difference between these two wordings, as far as material, is that the Adjudicator seemed to consider the Project Network and the Project Roads were different concepts and therefore they both had to be included. Whereas BCC, in their Dispute, appeared to focus on the Project Roads being a particular part of the Project Network. Whilst this difference would usually not matter, it seems perfectly clear from the definition of the Project Network that, so far as this Dispute is concerned, it only covers the Project Roads and, therefore, they are not composite terms, but, as BCC indicate in their Dispute, a particular part of the totality of the definition of the Project Network. And, thus, for all purposes, the Project Network is the Project Roads.

In their skeleton argument on 22 June 2015 before the Adjudicator, BCC considered that if they were successful on Issue 1 and the first declaration then, as the two issues were closely linked, then ABHL were required to update the MINV database to reflect ABHL's contractual obligations. Reliance was based on Method Statement 10, clause 55.1.9 and Schedule 2, Part 8, paragraph 2.3. The Adjudicator's Decision, having referred to Schedule 2, Part 8, paragraph 2.3, and noting clause 6.1.1A of the Project Agreement essentially focused on clause 19.2.1, which he found consistent with Schedule 2 and found an independent and additional obligation in the last words of clause 19.2.1 of the Project Agreement namely "and shall ensure that the information contained in it is up to date at all times".

As is apparent from paragraphs 154, 155 and 157 of the Adjudicator's Decision, the Adjudicator took the view that unless meaning was given to those words they would be otiose. In their skeleton argument before this court BCC, in paragraph 38, emphasise the use of those additional words and their argument commences with reliance on clause 19.2.1 of the Project Agreement which they assert could hardly be clearer. In addition to that, reliance is placed on clause 6.1.1, 6.1.1A.1, 6.1.3, 55.1.9, which also contained the words "up to date at all times"; schedule 2, Part 11, paragraph 1.3; Schedule 15; and Method Statements 1, 2, 3 and 13 which, under Issue 2, are cited more fully; and the specific language relied upon by BCC. Further reliance is also placed on clause 20.2 and Good Industry Practice, which BCC consider under the Highways Maintenance Code and UKPMS Users' Manual which require an accurate asset inventory and a Pavement Management System that should be updated with the current survey data, including both inventory and condition data, as set out in paragraph 39 and 40, in particular, of BCC's skeleton argument.

BCC's pleaded case specifically on issue 2 in paragraph 52 to 55 of the Defence does not attempt to develop the case much beyond supporting the Adjudicator's Decision at clause 19 of the Project Agreement though it is right to record that BCC’s general case on the construction of the Project Agreement did in paragraph 18.4 refer to Method Statement 13 but cited no particular parts that were be relied on by BCC.

In ABHL's skeleton argument before this court they note that it was the Adjudicator who raised the argument on the wording of clause 19.2.1. In order to respond (for the first time) ABHL advanced ten written arguments why the Adjudicator was wrong on his argument, as set out from paragraphs 142 to 154. An eleventh argument was made orally. In summary, those 11 arguments were as follows:

The arguments on Issue 2 were, in the event, certainly so far as BCC were concerned, more analytical and detailed and went well beyond clause 19.2.1 of the Project Agreement and the arguments placed before the Adjudicator and both parties developed their arguments by reference to the Method Statements in which BCC and ABHL had set out how they proposed to operate the Contract and, in particular, the PNM after the start of the project. In support of their more detailed argument, BCC provided Table D, which contained a table of updating obligations and relied upon Schedule 11, Schedule 15 and Method Statements 1, 2, 3, 13, together with the Highways Maintenance Code and the UKPMS User Manual.

The particular parts of the Project Agreement cited by BCC went beyond their skeleton argument and was a very helpful review of the extent of the relevant express terms agreed between BCC and ABHL that would assist the court in understanding the updating obligations under the Project Agreement. What in fact is apparent from that detailed document is how seldom reference is in fact made to the Project Network Model and the complete absence of any express provision setting out how and when ABHL were required to update the PNM apart from clause 19.2.1 and the indemnity provisions in clause 55.1.9. The numerous Method Statements quoted from on two occasions refer to the Project Network Model in terms of "maintenance" or "maintain"; one reference refers to the Project Network Model in terms of what is set out there; and one reference (which BCC appear to base their case on now) refers to "stored" and "referenced" or probably just "referenced".

However, what happened thereafter, in terms of its performance over the Core Investment Period, and the need for updating the Project Network Model, is a very different matter. If one is, therefore, searching to find some meaning of the words in the last sentence of clause 19.2.1 (or, for that matter, the indemnity provisions in clause 55.1.9), apart from those set out in Schedule 2, PS8, referred to in the first part of clause 19.2.1 then nothing appears in BCC's updating obligations table D in terms of some detailed express provisions as to when and how that will be set about. This is in stark contrast to the many other clauses contained in that table D, which provide very substantial detail as to the workings of the PMM during the course of the project and what material should be provided on that system and how and when it should be updated. The declaration in respect of Issue 2 is not concerned with the PMM.

BCC's oral argument developed in this way by reference to the more important quotations contained in the transcript on day 2, on 24 February 2016 as follows: (pages 112 to 126)

“But the point is this, that the parties contracted, we say, on the basis that that was not a static document, that it was intended to be updated, and you don't see the words "static" or "partially static" in the definition of "Project Network Model.

... If ABHL's interpretation was correct, you would expect to see this Project Agreement littered with the distinctions between those works which were to apply across the Project Network and those which were specifically circumscribed to a historic, inaccurate, partially-fixed database.

... the results of these inspections, the data produced as a result of these inspections and surveys has to be available to allow the Service Provider to run the NCI calculation methodology, the FWCI calculation methodology, the VGCI calculation methodology, etc, using the Pavement Management Model.

... in simple language what the PNM and the PMM are, and what they do, just to remind you of what their functions are. Because the PMM is the one that is used to calculate the Condition Indices, but it relies upon the PNM ...

The PMM, just to remind you, is used to calculate the Condition Indices, and therefore it determines what is rehabilitated, treatment and maintained for the Project Network.

The PMM, and again there is no dispute about this, relies on the PNM to produce its outputs. So it is parasitic on the PNM. So if the PNM isn't updated, the PMM won't be updated either.

… you can't update the PMM without updating the PNM.

... and I think it is important that you understand this point, because it is only one part of the PNM that is not being updated, it is the MINV, and that is very important, because if the other parts weren't updated, you wouldn't have any progress at all in this contract, literally nobody could do anything. So when we talk about static databases it is not -- it is always changing

…

There is then an issue about what is inputted into the database, the PNM. We say that should be condition and inventory data. The condition data then marries up with the inventory data, and then it is that survey data that is processed by the Pavement Management Model. That Pavement Management Model produces the Condition Indices …

I don't think there is a dispute between us that that is how it works, and if you don't update the PNM, the PMM won't be updated either”.

Possibly the high point of BCC's oral argument then followed (page 128):

“We see in 2.45 that that includes all surveys, so it includes clause 6 surveys, it is the DVI survey, all Project Roads, including carriageways, footpaths, cycle tracks, kerbs, hardened verges, etc; and all of that survey data is to be stored and referenced in the PNM, that is to be used to populate the PMM, updated with that data on a regular basis, and then that is supposed to be used to support Milestone Completion demonstration during the CIP.

That really is the end of the claimant's case, because it cannot be right ... what it says about how the PNM works…

Now, we know from the clause we were just looking at, 2.46, that when you say reference in this to "Confirm UK PMS Module", it must mean PNM, because if you look back at 2.46 it says, "Project Network Model held as the Confirm UK PMS module".

Again, Mr. Lewis said to you yesterday, "Well, there is no timeframe within which we have to do any of this". There is. It is set out in the Method Statements. That data has got to be loaded within one day into the PNM and then into the PMM…

Again, it cannot do that unless it has updated the PNM, as we have seen it has an obligation to do”.

BCC returned to this matter on day 3 of their oral submissions. They correlated clause 19.2.1 and clause 55.1.9 to Method Statement 13 in this way (page 15):

“My Lord, the other thing we would say is if you go back to 19.2.1 you will remember that those same words were used again in 19.2.1. If you look at the summary we have done, we have helpfully set that out just above that one. So you can see that we have in repeated places ... the obligation to ensure that the information in the PNM is up-to-date at all times. There is no restriction in 55.1.9 to Schedule 2 or Performance Standard 8. It couldn’t be clearer.

That, my Lord, also ties in with the references we were looking at yesterday, particularly in Method Statement 13. Again, that is page 7 of this document we have produced, 2.46. All the survey data is stored and referenced in the PNM. Then it is used to populate the PMM, which shall be updated with day it on a regular basis, and the NCI shall be calculated. So it was expressly stated that the updated PNM and the PMM are to be used to calculate the NCI, and then to go through Milestone Completion process”.

These submissions ran on to pages 15 and 16 of the transcript.

This really then is the central dispute between BCC and ABHL as to the updating obligations in respect of the Project Network Model in respect of Issue 2. It is BCC's position that the basic obligations to update contained at the end of clause 19 and also in the indemnity provisions in clause 55 of the Project Agreement are detailed in Method Statement 13 in one particular paragraph and, as a result of this, ABHL have no case on updating. Conversely, ABHL consider that this argument is possibly the high point of BCC's case but in fact has no proper basis at all.

The obvious starting point to understand what paragraph 2.45 and 2.46 of Method Statement 13 of the Project Agreement are concerned with is by reference to the heading, the purpose of which, as is systematic throughout the Project Agreement, is to inform the objective reader to which other parts of the Project Agreement reference is to be made to put these paragraphs in context. As this contract has a hierarchy and the Main Body clauses have priority, therefore Method Statement 13 paragraphs 2.45 and 2.46 are expressly stated to be read under the heading of clause 6 of the Main Body clauses referring to surveys and inspections and, to remind oneself, provides as follows:

“the Service Provider to run the NCI Calculation Methodology, the FWCI Calculation Methodology, the VGCI Calculation Methodology ... and the CTCI Calculation Methodology using the Pavement Management Model (and, for the purpose of this Contract, solely the Service Provider shall perform such calculations and such calculations shall only be performed using the Pavement Management Model).”

It is therefore palpably clear that the vehicle used for this calculation methodology is the Pavement Management Model alone.

One reminds oneself what the Pavement Management Model or PMM meant under the Project Agreement which was

“…means the pavement management model agreed between the parties at the date of this Contract (a copy of which is annexed in Annexure 16) excluding the predictive functions of that model (including all related rules, functions and date), as updated from time to time in accordance with this Contract”.

It will be recalled that Annexure 16 to the Contract was a single page and simply referred to a CD. From the background facts set out above in this judgment, Exhibit D7 was requested and considered by the court it is clear from that document from the headings used, that there is a correlation with the Project Network Model so far as the headings are concerned.

Despite the fact that the Project Network Model formed the basis or was a reference for the Pavement Management Model, it was the latter only that was to be used for survey purposes, and about that matter the Project Agreement is mandatory and strictly to be applied as explained in clause 6.1.1.4.

The second document is Schedule 11 to the Project Agreement. It will be remembered that Schedule 11 concerns monitoring and an obligation under paragraph 1 that:

“the Service Provider shall carry out those inspections, surveys, tests, and assessments that it is required to carry out during the Contract Term, pursuant to clause 6 (Surveys and Inspections) of this Contract and in accordance with Method Statement 13 (Inspections, Assessments and Monitoring)”.

Therefore Schedule 11 ties in both to clause 6 and to Method Statement 13 and Monitoring Method A was one of the particular methods provided under Schedule 11. To recall what it required was:

“The Service Provider shall carry out those inspections, surveys, tests and assessments to enable the Service Provider and the Authority to run the NCI Calculation Methodology, the FWCI Calculation Methodology, the KBCI Calculation Methodology, the VGCI Calculation Methodology and the CTCI Calculation Methodology at least once by 1 November of each Contract Year”.

Thus it was that an annual review was required and BCC and ABHL were to jointly run the NCI Calculation Methodology, which, it will be recalled, was defined as "means the NCI calculation methodology set out in paragraphs 1 and 2 of part 11 of schedule 2 (Output Specification)". Accordingly, one therefore goes back to Schedule 2 and Part 11, paragraphs 1 and 2, which contain those detailed calculations for the Strategic Route and Main Distributor Network and the Secondary Distributor Network NCIs as set out in detail above under the review of the Project Agreement.

Paragraph 2.45 of Method Statement 13 refers to this annual calculation required on 1^st November each Contract Year, which it records has to be carried out in accordance with paragraph 6.3.5 and clause 6. That is another Main Body clause and, to remind oneself provides as follows so far as material: "The Service Provider shall ensure that the Deflectograph Surveys required to be carried out ... are carried out in sufficient time ... so that the data is available to be used by the Service Provider to calculate the NCI using the Pavement Management Model and in accordance with the NCI Calculation Methodology on 1 November in each Contract Year". Thus, once again, there is reference to the Pavement Management Model and reference to the NCI Calculation Methodology and by reference to those particular dates ties in with paragraph 2.45 of Method Statement 13. What ABHL had to do for the purpose of paragraph 2.45 of Method Statement 13 was to undertake DVI surveys. The obligation to carry out a DVI survey is also apparent from Main Body clause 6.3.6 which provided "The Service Provider shall carry out DVI on a half of all ... Carriageways; ... Footpaths; ... Kerbs; and Verges, within the Project Network annually". Thus, one sees that these DVI surveys have to be taken across the Project Network and nothing less. Such detailed visual inspections are referred to further on at paragraph 2.109 of Method Statement 13 and provides: "The Service Provider shall use DVI surveys as the primary method to collect surface condition data in order to calculate: the Surface Condition Index ("SCI"), the Footway Condition Index ("FWCI"), the Verge Condition Index ("VGCI"); the Cycle Track Condition Index ("CTCI") and the Kerb Condition Index ("KBCI") in accordance with Part 11 … of schedule 2."

Thus, without understating the language (as defined in the Project Agreement) contained in paragraph 2.45 of Method Statement 13, in short summary, it requires the use of the PMM as the sole basis for these surveys, and this is part of an annual review referred to in the Main Body clauses and subclauses of clause 6 of the Project Agreement, which exclusively, in terms of the model used, is referred to by reference to the Pavement Management Model. That is not to say that when one considers the NCI Calculation Methodology that the basis for that calculation, as set out in Part 11 of Schedule 2, does not, by definition of the particular terms used and the calculations required to be carried out, have its basis in the Project Network Model.

Paragraph 2.45 of Method Statement 13 then indicates that this annual survey process by use of the PMM is described below in paragraph 2.46. Thus, what paragraph 2.45 of Method Statement 13 is describing is the inspection process that has to be carried out to achieve those annual surveys agreed between the parties.

The reference back to survey data in paragraph 2.46 of Method Statement 13 must refer back to the condition surveys which were required to be carried out and the obligation to carry out a DVI survey as defined by the Project Agreement and explained above. That will of necessity provide data, and paragraph 2.46 is the parties' agreement as to what should be done with that data.

That survey data is to be stored and held as the "Confirm UKPMS module" forming part of the MIS. The reference to Confirm (though admittedly not in upper case) is defined as meaning "the proprietary software produced by Pitney Bowes for the maintenance and management of public infrastructure and assets", and reference to UKPMS means the "United Kingdom Pavement Management System as updated or amended from time to time". As set out above the uncontested facts about Confirm accord with this background to the parties’ understanding of Confirm. This was further supplemented by further facts about UKPMS also set out above. The reference to "Confirm UK PMS" as a composite term thus indicates both what Confirm is and the good industry practice that this was expected to achieve under UKPMS. It was that module that was stated by paragraph 2.46 to be part of the MIS. Again, it will be recalled that the MIS or Management Information System meant "the electronic system comprising of the Project Network Inventory .... It will be equally recalled that the Project Network Inventory meant "an electronic records system which records the following information in respect of all Project Network Parts … and all other above ground assets pertaining to the Project Roads ...". The Project Network Inventory was plainly part of the Management Information System, as is apparent from clause 19.1 of the Main Body clause, in particular clause 19.1.3.2 which provided that the MIS "comprise of the following systems: (a) Project Network Inventory ...". The balance of those other inventories is of no relevance to this dispute. This is to be contrasted under clause 19.2 with the Project Network Model which is plainly a different model and a different system to that of the MIS, and the Project Network Inventory.

That is what clause 2.46 of Method Statement 13 is requiring in respect of that survey data, that ABHL were to extract required data from the UKPMS module to populate the PMM. It was that, namely the PMM, that had to be updated with the data on a regular basis. Again, this is entirely consistent with the use of the PMM, as is plain from paragraph 2.45, as the sole basis for that survey material and the source of the updating is the Confirm UKPMS module.

This then describes the Project Network Model as being the reference for that stored and held information on the Confirm UKPMS module. The Project Network Model did provide that reference basis so far as can be ascertained from the words used in this clause, and indeed is the basis for Schedule 2 Part 11 calculations as referred to in paragraph 2.45 as set out above.

To therefore suggest that paragraph 2.46 of Method Statement 13 contains an express provision that the Project Network Model had to be updated even in the context of clause 6.1.1.4 and Schedule 11 of the Project Agreement, is not what the language provides. Not only was the Project Network Model not part of the MIS but it was not the model used to store the survey data which was plainly, by reference to paragraphs 2.45 and 2.46 of Method Statement 13, the PMM. It is right, however, to state that the Project Network Model was the reference basis for this.

Equally, what paragraph 2.46 of Method Statement 13 provides is more details of the Network Condition Index. Both clause 2.45 and 2.46 of Method Statement 13 are concerned centrally with the calculation of the NCI and further details are given in those paragraphs of Method Statement 13, namely 2.370 to 2.401, to which reference should therefore be made. These paragraphs fall under a heading "Network Condition Index". The Network Condition Index or NCI is referable to Part 11 of Schedule 2, and Schedule 3 (Method Statements), as is apparent from the heading of Method Statement 13. The description given in paragraphs 2.370 through to 2.401 inclusive is entirely consistent with the only sensible reading of paragraph 2.46 of Method Statement 13. Thus, it is made plain that it is the PMM which is the tool for calculating the Network Condition Indices and ABHL was required to ensure the quality of any survey data entered into the PMM and ensure its operation and maintenance in accordance with this Method Statement. Thus, once again, survey data is said to be held on the PMM, which was precisely what clause 2.46 of Method Statement 13 was concerned with. The further reference to the Project Network Model is simply to the maintenance of such a model, not an updating, not the basis of survey data.

Further reference to the Project Network Model is apparent (see 2.374) where the parties agree that it is the PMM that shall use the Project Network Model as its base, which is precisely what it was. It was the base containing Road, Footway, Verge, Cycle Track and Kerb Section Lengths against which all condition data had to be referenced and equally (see 2.375) ABHL had to maintain the Project Network Model throughout the Contract Term, and the updating obligations were apparent and limited to paragraph 2.3 of Part 8 of Schedule 2, which in terms simply refers to change and nothing more.

Further details are given as to the collection of survey data which was loaded into the PMM in order to enable calculations of the condition indices from the surveys (see 2.376 and 2.377) and it was the PMM that had to be continually updated as new survey data sets were collected throughout the Contract Year (see 2.379). Further details were provided as to how the PMM should be used to calculate the NCI and the number of failed Road Section Lengths at XSP level (by way of example, 2.385 and 2.386).

All this seems to describe a contiguous and continuous system in terms of updating and use exclusively of the PMM in respect of survey data throughout the contract term, which includes the Core Investment Period. All this directly correlates to a main body contract term, clause 6 in particular of the Project Agreement and gives the basis of how that main body term should be put into operation in respect of surveys as apparent from Method Statement 13. This therefore is a good working example in which reference can be made to a main body contract term and the PMM as contained in a Method Statement and the latter gives more detailed explanation of the former, both of which confirm the parties' agreement as to the working of that Model.

Turning then to paragraph 19.2 and the latter words used in that Main Body clause, if in fact there was some general obligation to update the Project Network Model beyond that expressed in the former words of that clause, one might expect to find something in a Method Statement, a Schedule or an Annexure to the Project Agreement which adumbrated on that matter. This is not the case. It would be curious for a project of this size and complexity that a general obligation of that sort was not somewhere explained and codified so as to show that the parties had put their mind to this matter and it had some real meaning and effect in terms of the working of the Project Agreement. This is simply not the case, and BCC have been unable to provide any updating obligations in respect of the Project Network Model among the Method Statements, Schedules and Appendices. Certainly the intent by BCC to rely upon clause 2.46 is incorrect, both in terms of what that clause is concerned with and the fact that clause 19.2 of the Project Agreement has no other references in the body of the Project Agreement, save for those which can be directly correlated back to the form of words in that clause.

The 11 arguments relied upon by ABHL to explain the latter part of clause 19.2 of the Project Agreement, in my judgment, are rightly formulated as a good and proper basis to reject any attempt by BCC to impose upon ABHL a more general updating obligation as found by the Adjudicator, and one which in particular would require ABHL to update the Project Network Model in accordance with surveys and data. That plainly did have to be carried out during the course of the project and was referable to quite separate models. What is set out below is not intended in any way to detract from my acceptance of all those 11 arguments of ABHL.

Firstly, in respect of clause 19.2.1, I generally accept the submissions made by ABHL in their skeleton argument and orally. I have, in fact, reviewed the oral submissions made by BCC in response and whilst I have not quoted them, I have not found them compelling. The Adjudicator's focus should have been broader and not just the words used in this clause but the Project Agreement as a whole. It would be just as natural to read the wording in clause 19.2.1 to have required two separate provisions on the part of ABHL: (1) "accurately" updating the PNM, and (2) "at all times" updating the Project Network Model, ie one is the standard to which it must be achieved, namely Performance Standard 8; and the second is when it should be done, namely constantly. For a complex contract of this sort, where the parties, as usual in many PFI contracts, agreed detailed and very extensive Method Statements and other Schedules, to make no reference at all to this apparently additional and quite separate obligation would be most unusual and, as a matter of fact, there is nothing in all the detailed documents attached to the Project Agreement which can be relied upon by BCC to achieve their purpose.

The real thrust of BCC's argument having regard to the express contract terms set out in the Method Statement and the Contract as a whole is that ABHL, having collected all the data in the PMM, were required to back engineer that material into the PNM such that it could be updated and then used for the purposes of Milestone Completion and that the parties required this database to be used in that way. If that was the case then one would have expected some express term making that clear which would go well beyond, in particular, the wording in Method Statement 13, paragraph 2.46, which was the high point of BCC's case.

In fact, what the Project Agreement provides is quite the reverse. It provides that the PMM will be the vehicle for future use during the course of the Contract, though no doubt it was based on the PNM, and it is the PMM to which reference is made and checks are made by the Independent Certifier as part of the criteria for certification. Whilst the basis of that document has originated from the PNM, the updating and checking of condition data and inventories by way of a sample is made by reference to the PMM in Schedule 15.

Secondly, reliance is placed on the indemnity provisions in clause 55.1.9, by means of the words "and/or the Project Network Model up to date at all times" that resonate with clause 19.2.1. So far as the latter words are concerned ABHL did have to update the Project Network Model in the way actually agreed by the express terms of the Project Agreement and that had to be done at all times. Therefore, the suggestion that this indemnity provision somehow adds, rather than simply reflects, the true meaning of the Main Body terms or indeed the Schedules or the Method Statements would be most unusual.

Thirdly, clause 6.1.1 on my reading and in my judgment referring to its terms and the Project Agreement as a whole make plain what use it requires ABHL to make use of the Pavement Management Model and no reference is made to the Project Network Model.

Fourthly, equally, clause 6.1.1A.1 does not appear to support BCC's case because it focuses on the updating of the Pavement Management Model, not the Project Network Model. As a matter of record, what appears to be an amended clause received no adumbration or further understanding in the Method Statements. Given the express obligations set out in those Method Statements for the updating of the Pavement Management Model, the probability is that many changes to the Project Network Model would in fact be required to be updated, though one can imagine some may not. As such I do not necessarily disagree with how the Adjudicator dealt with this clause.

Lastly, I find nothing to assist BCC's case by reference to clause 6.1.3 which relates to programming or Part 11, paragraph 1.3 of Schedule 2 or, indeed, Schedule 15.

I therefore consider that the Adjudicator was wrong to give that declaration on the basis of his reasoning; and indeed the further arguments and more detailed arguments submitted by BCC do not support this declaration.

Issue 3 -- Certification Following Issues 1 and 2

The Dispute in respect of Issue 3 simply sought "that Certificates of Completion for Milestones 6-9 be set aside".

The skeleton argument of BCC dated 22 June 2015 before the Adjudicator indicated in paragraph 53 that the Adjudicator was invited to make declarations sought by the Authority which naturally follow from the correct interpretation of the Project Agreement. If Issues 1 and 2 are not accepted as the correct interpretation of the Project Agreement, it would follow that the certificates should not be set aside on that basis.

Likewise, the Adjudicator's Decision provided a declaration "that the Certificates of Completion of Milestones 6 to 9 inclusive be set aside ..." on the basis as set out in paragraph 159 of the Adjudicator's Decision that he had relied upon his interpretation of the scope of ABHL's works in the CIP and therefore the Milestone Certificates were prepared and issued on an erroneous basis.

As this court has decided that the interpretation of both the scope and the updating obligations for Issues 1 and 2 were wrongly decided, it necessarily follows that it can no longer be argued that Certificates 6 to 9 should be set aside. ABHL opened the case on that basis on the 23 February 2016 as follows:

“So in terms of the relationship, if we are right on Issues 1 and 2, then Issue 3 does not arise because on any view there will have been no mistake made by the independent certifier, so it is only if your Lordship were against me on Issues 1 and 2 that one would get into Issue 3”.

That must be the right approach to this case and in their oral submissions BCC did not take issue with this analysis. Indeed, BCC's skeleton argument dated 17 February 2016 before this court noted, at paragraph 63, the converse:

“If BCC's interpretation is preferred then Milestone Certificates 6-9 were issued in reliance on the wrong data and thus the wrong basis ...”

The converse must equally be true, that if Issues 1 and 2 on the interpretation of the Project Agreement are favourable to ABHL, there is no basis on which those certificates should be set aside.

It is therefore unnecessary to review the parties' arguments on Issue 3 or express views on an issue that does not arise so far as the PNM is concerned. This court has not been invited, nor have there been arguments before this court, which support the Issue 3 declaration on some entirely different argument outwith the Project Network Model.

Declarations and discretion

Unlike the Claim Form, the Particulars of Claim and ABHL's post hearing submission sought two declarations and the court thus needs to consider whether it should in its discretion or otherwise concede to this approach.

During the course of the oral submissions there was a level of misunderstanding between the parties as to what, if any, declarations this court should order. As a result of that, I made an order which, in effect, invited the parties to consider their respective positions and provide the orders they sought from this court and an indication was given inviting the parties to narrow the issues that remained between them. In a covering letter of 4 March 2016 two separate draft orders were provided. The draft orders, so far as paragraph 1 in each is concerned, provided two straightforward proposed orders. ABHL declaration 1 was as follows:

"The decision of Andrew Goddard QC dated 09 July 2015 was wrong and is not binding upon the Claimant or the Defendant".

The order sought by BCC in paragraph 1 was as follows:

"The Claimant's claim be dismissed. The declaration and orders of Andrew Goddard QC (set out in paragraph 195 of his decision dated 9 July 2015) do stand".

Each of the parties then added further declarations. In the case of ABHL it was a detailed declaration much in accordance with paragraph 41 of the Particulars of Claim (to which BCC wish to add some further terms) and for BCC it provided an alternative set of wording to that of the Adjudicator for the findings on Issue 1 to 3 set out above. It is only ABHL's declarations that need to be considered in this judgment and I will consider the paragraph quoted above first.

The assumption I have made is that when ABHL seek the "decision" of the Adjudicator to be declared as wrong that, in effect, relates to paragraph 195, paragraphs 1 and 2 inclusive. I take it that they are not seeking to assert that paragraph 3 of that decision, namely that the Adjudicator directed that his costs, fees and expenses should be borne equally by the parties, is no longer binding.

As set out in section 3 of this judgment, which reviewed the Adjudicator's Decision, I found it curious that the Adjudicator saw fit to expand on a declaration in paragraph 1(iii) by reference to the additional words "alternatively opened up, reviewed and revised and the relevant calculations performed again by reference to the actual Project Network inventory". Not only were these words not sought in the Dispute by BCC but, in fact, it was not a declaration but a mandatory injunction requiring performance in the future.

Moreover, paragraph 2 of the order which provided, "I order that ABHL re-calculates the Network Condition Indices relevant to each of Milestones 6 to 9 inclusive by reference to the actual Project Network inventory", was also an order that formed no part of the declarations sought by BCC. It was clear at the outset of the Adjudication, as recorded by the Adjudicator, that the parties were only concerned with three issues, all of which were declarations and not orders for mandatory performance in the future. Whilst neither party has submitted or indeed necessarily focused on paragraph 2 of the Decision of the Adjudicator, it seems to me that it is quite wrong for this mandatory injunction to have been made having regard to the dispute resolution provisions contained in clause 70 of the Project Agreement. In my judgment, paragraph 2 was wrong as a matter of law as the Adjudicator's jurisdiction was limited to the Dispute.

So far as paragraph 1(i), which refers to Issue 1, it has been noted that the Adjudicator added extra words, which explained the basis of his reasoning in respect of the RSLs, to the actual Dispute placed before him by BCC. I am quite satisfied that the Adjudicator's construction of the Contract so far as what is described as the scope of ABHL's works was in law wrongly decided and therefore those additional words were wrong as a matter of construction as was indeed the whole declaration. Equally, I am satisfied that the further arguments placed before the court by BCC, which were largely similar to those already before the Adjudicator, are also wrong as a matter of law. The result of the Adjudicators Decision has given rise to considerable work by ABHL and future problems.

In paragraph 32 of the Particulars of Claim it is indicated what ABHL has done as a result of the Adjudicator's Decision. It indicates as follows:

"… rebuilding the Project Network Model with the data from the Project Network Inventory; obtaining and inputting condition data in respect of the altered features of the Project Network Model imported from the Project Network Inventory; undertaking remodelling to seek to reflect the new data in the Project Network Model and the Pavement Management Model; running the remodelled Pavement Management Model in order to seek to produce the revised condition indices; and seeking to identify the further work which would be required in order to achieve the Milestone Completion Criteria and the relevant Targets for Milestone Completion for Milestone 10 (on the basis of the Decision). In the future, this is likely to involve similar exercises in relation to each Milestone 6 to 9, together with a retrospective assessment (to the extent this is possible, which has not yet been ascertained) to seek to determine when Milestone Completion would have occurred in respect of each of Milestones 6 to 9 (on the basis of the Decision). Depending on the outcome of those exercises and any agreement between the parties, it may also involve the undertaking of additional works on the Project Network."

The problems that ABHL will face in the future are also apparent from paragraph 42 of Nicholas Woodgate's statement of 18 December 2015, in which he says:

"… However, when you come to answer the question retrospectively the position is much more complicated. If (on undertaking the new analysis required by the Decision) the targets have not been achieved at the date when the Certificate of Completion was issued, then it becomes necessary to assess at what later date they were achieved. However, this is a notional exercise, because no such assessment was made at the time (until the date when the next Certificate of Completion was issued). Because the targets could have been achieved at any intermediate date, you have to undertake a process of trial and error, which is complicated by the fact that the process of undertaking works and carrying out condition surveys was also ongoing during the same period".

Both of these two matters seem to this court not just problematic but probably not matters that flowed from the Issues before the Adjudicator.

So far as Issue 2 is concerned, the use of the words "and maintain a Project Network Inventory" on their face go beyond the complaint made by BCC. BCC's case throughout has been that the problem lies with the Project Network Model and not the Project Network Inventory. And the quotes set out above appear to reflect the fact that it is the latter that has to be considered as a result of Issue 2.

Moreover, so far as the evidence before this court is concerned, it is not understood that there is any dispute as between BCC and ABHL that ABHL have, in fact, been maintaining the Project Network Inventory and, on that basis, it would be wrong in law to seek a declaration for a matter which in fact gives rise to no dispute between the parties.

Therefore, taken together, I am quite satisfied that Issue 2 is wrong on the basis of the reasoning of the Adjudicator. Indeed, it is equally wrong on the further arguments relied upon by BCC which went well beyond those considered or placed before the Adjudicator. I make this decision as a matter of law on a true and proper construction of the Project Agreement having regard to the agreement as a whole and the particular words used by the parties which, taken together, in my judgment, are clear and fall within the recent dicta in Arnold v Britton (supra). This is not a case, in my judgment, that could be considered under the ratio in Rainy Sky v Kookmin (supra) where the court has two possible constructions of the Project Agreement and, therefore, is entitled to prefer the one with business common sense and reject the other. In this court's judgment, taking the wording actually used in its natural meaning, and placed in context of the wording of the agreement as a whole only one true and proper construction arises under the Project Agreement.

So far as the second declaration sought by ABHL, this court declines to make such a declaration. The starting point is set out above in this judgment, in which the jurisdiction and relief available to this court as a matter of law are set out. Contractually the role and function of this court is simply to consider whether the actual dispute placed by BCC before the Adjudicator and then the matters raised in the Adjudicator's Decision are wrong as a matter of law. If they are, then the court is entitled, on its true and proper construction of the Contract, to declare that but there has never been a dispute before the Adjudicator or, indeed, between the parties which effectively follows the details set out in paragraph 41 of the Particulars of Claim. Whilst I acknowledge that such arguments were not raised by BCC, declarations given by a court are discretionary and it would be wrong to take the Dispute further than this. To the extent that ABHL wishes to start their own dispute or seek their own declarations by means of a separate Adjudication, as commonly occurs in the construction industry, then that is a matter for them.

Equally, this court's finding on Issue 3 is simply consequential on its findings on Issues 1 and 2 and therefore needs to go no further. It therefore follows this court is not required to consider or declare the meaning of clause 13.5.1 of the Project Agreement as it goes beyond the decision required in order to have justice between ABHL and BCC and whether the declaration will serve a useful purpose or indeed any other special reasons why the court should grant the declaration sought in paragraph 2 by ABHL.

So far as the discretion that this court possesses in respect of the declaration sought by ABHL, it is right to note that the Claim Form correctly limited itself to the "wrong" suffered by ABHL as a result of the Adjudicator's Decision, and it was only in the Particulars of Claim that further and other relief was sought by ABHL. This further relief and the declarations sought by ABHL have still given rise to a dispute with BCC as to the appropriate wording. This is plainly a complicated and detailed Project Agreement and one that may not be fully understood or appreciated either by the court or indeed the witnesses in particular those of BCC. It is one thing to review the Adjudication Decision as a matter of law on three specific questions selected by BCC, but quite another thing to review the Project Agreement in the round and declare for all future purposes what ABHL's obligations are pursuant to the Project Network Model. There does seem some proper arguable basis for the complaints made by BCC in terms of what is taking place around the roads of Birmingham and whilst ABHL dispute this, it is not at all clear to this court what in fact are the drivers which have caused such apparent potential malperformance by ABHL or their subcontractors. Whilst I appreciate that this case does not concern breach of contract but declaration of contractual rights and obligations, this court is not satisfied, either as a matter of expert evidence that may assist on the issue of good industry practice or otherwise (none of which was called) or indeed on the facts so far as they were provided to this court, that it has a proper and full understanding of the complete workings of the Project Network Model and the other Models, including Confirm, which are in operation under the Project Agreement. As the purpose of this decision is to do justice between both ABHL and BCC, it will be necessary to give further and more detailed consideration to matters probably well beyond the particular narrow arguments that this court was concerned with in order to get a full and fair appreciation as to the working of the various models and how they impinge, or otherwise, can be shown to affect the performance of the Project Agreement. The effect of this decision is to reverse the decision of the Adjudicator to set aside Certificates 6 to 9 and therefore allow ABHL to return to a level playing field. Accordingly, as a matter of discretion, the court declines the invitation to give any further declarations as to the true content of the Project Network Model.

Conclusions

The Dispute was initially framed as declarations and orders sought by BCC. The purpose of that was to obtain an Adjudicator's Decision compelling ABHL in the performance of the Project Agreement to carry out their works across the Project Network which in fact meant the Project Roads, namely the Carriageways, Footways, Kerbs, Verges, Footpaths and Cycle Tracks in and around the City of Birmingham which was intended to be rehabilitated, maintained and managed by ABHL under a PFI initiative contract for a 25-year term.

Within the first five year period, BCC appeared to have legitimate concerns as to the performance of ABHL which it was anticipated that this Dispute would resolve. BCC selected certain issues which it required to be declared by the Adjudicator and in effect Issue 1 was believed to be a declaration which would resolve these problems, and to a lesser extent with Issue 2. The consequence was that the certificates for Milestone Completion between Milestones 6 and 9 would be set aside because ABHL had failed to comply with the contractual requirements as declared in Issues 1 and 2 and that made up Issue 3.

In the event, the many heads of relief, both declaratory and by means of orders sought by BCC in the original dispute were not in fact proceeded with before the Adjudicator and, therefore, he published an Adjudicator's Decision which focused essentially on Issue 1 and more shortly on Issue 2 and, therefore resulted in Issue 3. In fact the decision made by the Adjudicator went beyond anything sought by BCC in the Dispute.

This court has a very limited jurisdiction in accordance with the provisions of the Project Agreement and may only consider questions of law in respect of that Dispute which in terms of the Adjudicator's Decision turned out to be of a more narrow compass.

The Adjudicator's Decision, as a matter of law, is, in the judgment of this court, wrong. The Project Agreement did not provide, on its true and proper construction, in particular, in respect of the Project Network Model, that BCC were entitled to the relief sought by means of a declaration in Issue 1. The basis of that decision was probably initiated by the Adjudicator and not the way BCC sought to put their case.

Before this court BCC have made some attempts to uphold the actual declaration given by the Adjudicator for Issue 1, based on a more general legal argument to that specifically favoured by the Adjudicator; which is not to say the Adjudicator did not also consider BCC's general arguments in that context. In the view of this court, that declaration should not be granted because the legal reasons for the general argument relied upon by BCC are simply wrong and this court favours the analysis of ABHL. The reason for this is simply that construing the express terms of the Project Agreement this court is constrained to construe the Project Network Model in the ways submitted by ABHL. The Project Network Model appears to have had a limited function at the commencement of the Project Agreement.

In view of the Adjudicator's Decision on Issue 1, Issue 2, more naturally, fell into place and, again, was decided on the basis that was probably initiated by the Adjudicator but was a secondary issue before the Adjudication.

Before this court Issue 2 has become the central argument for BCC, who not only support the Adjudicator's Decision on the law as to the proper construction of the Project Agreement, but also go further and rely upon more extensive details and explanations of the working of the Project Agreement as apparent from the Schedules, Method Statements and Annexes attached to the Project Agreement not argued before the Adjudicator or part of the Adjudicator's Decision. This gave rise to a very late, new and more analytical argument which BCC also relied upon to sustain the declaration in Issue 2.

A review of both the reasoning provided by the Adjudicator which was supported by BCC and the more detailed arguments of BCC singularly fail to provide any support for Issue 2. It is not tenable that had the Project Network Model to be updated from the condition it was in when provided by BCC to ABHL to be incorporated in the Project Agreement that there would not be some clear, express provisions to require ABHL to perform the Project Agreement in the way sought in the declaration in Issue 2. Indeed, a fair reading of both the Main Body clauses and the Schedules and Annexes provide one clear answer, namely that the PNM formed the basis for other data required to be produced by ABHL under the Project Agreement and, in particular, but not limited to the Pavement Management Model which was to be created and updated and clearly performed an important function under the Project Agreement. These declarations contained in the Dispute as found by the Adjudicator's Decision do not themselves concern the Pavement Management Model which may or may not provide a further dispute between these parties.

In consequence of the legal interpretation of the Project Agreement both in respect of Issue 1 and, as more fully argued before the court, Issue 2, it necessarily follows that Issue 3 is unsuccessful because the two declarations should not be given and therefore it would be wrong to set aside Certificates of Completion for Milestones 6 to 9. Again, that is not to say that there may not be some other basis for complaint by BCC in respect of ABHL's performance of the Project Agreement but, so far as this court is concerned, as a matter of law, it does not arise from Issues 1 and 2.

That is not to say that ABHL could not update the Project Network Model so that it correctly reflected the Pavement Management Model (and indeed the Project Network Inventory), which form part of the Management Information System under the Project Agreement, but there does not appear any express provision to require such reverse engineering. Again, the reason for this could lie elsewhere, but these are not matters that this court is required to consider or indeed entitled to review as a matter of law.

In view of the approach taken by this court to its jurisdiction, having regard that the dispute has substantially narrowed in the Adjudicator's Decision, a limited declaration is only proper. This is both as a matter of jurisdiction and indeed as a matter of exercise of the court's discretion in giving a declaration for Issues 1 and 2, in particular, under the Project Agreement. This is not a dispute which ABHL brought before an Adjudicator and therefore a court, but is BCC's Dispute and, in general terms, a court should be careful in granting declarations beyond those which are necessary to do justice between the parties.

For this court to fully appreciate the working of the Project Network Model outwith that contained in the Dispute it would be necessary to get a much fuller understanding of both the Project Agreement and indeed its workings as a matter of fact and possibly expert evidence. And in view of the fact that these Disputes before the court are, in effect, only concerned with a true and proper construction of the Project Agreement and not its performance or the genuine concerns that BCC appear to have in ABHL's performance, this court is unwilling to go any further.

Order

Accordingly, the court is prepared to make one order only in favour of ABHL as a matter of law pursuant to clause 70 of the Project Agreement as follows, namely:

“It is declared that the decision of Andrew Goddard QC, dated 09 July 2015, (summarised in paragraph 195 (1) and (2)) was wrong and is not binding upon the Claimant or the Defendant”.

The court declines to make a further order sought by ABHL attached to the parties' joint letter of 4 March 2016.

The Order of Mr Justice Stuart Smith on 2 October 2015 providing that:

“The Claimant's claim as pleaded in paragraphs 56 to 59 of the Particulars of Claim be stayed until further order”

will, as a result of this judgment, now require further consideration.

Those paragraphs of the Particulars of Claim sought payment in the sum of £89,653.01 in respect of the works carried out by ABHL as a result of the Adjudicator's Decision. As that decision is now declared to have been wrong, consideration will have to be given to those issues which this court has not been asked to decide. That case is framed under an implied term or in restitution and, which, although it is not a large sum of money, in respect of the very substantial sums which arose as a consequence of the Adjudicator's Decision may, nonetheless, give rise to some further interesting argument.