Imperial Chemical Industries Ltd v Merit Merrell Technology Ltd

This introduction is a high-level summary of the litigation. MMT is a specialist engineering piping manufacturer, based in Cramlington in Northumberland. On 18 December 2012 MMT and ICI entered into a contract, which was executed as a deed, for works associated with the construction of a new paint manufacturing facility for ICI at Ashwood Business Park, Ashington, Northumberland (“the Plant”). The value of the works that it was intended as at that date by the parties that MMT would perform was quite modest in relative terms, being approximately £1.9 million in value. The works the subject of the contract to be done by MMT were the manufacture, construction, installation, commissioning and handover of steelworks and free issue tank offloading and positioning works.

The Plant was to produce almost 2 million litres of solvent borne, and water borne, paint products per week. AkzoNobel referred to the project as “Fresco”. Obviously, such works would require piping in very great quantities, and also in a variety of sizes, and these pipes are joined together by welds. These proceedings essentially concern the quality of the welds performed by MMT. By way of Project Manager’s Instruction No.3 (“PMI03”) the works to be performed by MMT under the contract were expanded very considerably. PMI03 was dated 5 February 2013. There is a dispute about the total value of the works performed by MMT, but it is common ground that PMI03 increased their value very considerably, and as at the date of issue of the Claim Form in these proceedings MMT had been paid £20.9 million. Even on ICI’s case MMT’s works were worth approximately £10 million. Both of these sums are obviously far in excess of the originally contracted works of less than £2 million.

PMI03 therefore was an instruction which had a dramatic effect upon the scope of the contract works. These works proceeded without any particularly notable problems throughout 2013 and until about August 2014. At about that time, the original personnel involved for ICI either left the project or were removed from it, and were replaced by personnel who came to the UK from AkzoNobel. I deal with this point further in the section below “Relations between ICI and MMT”. This change of personnel came when the whole project was very substantially over budget and in delay. The AkzoNobel team took a very different approach to the project, and to MMT, than the ICI team that they replaced. Most of the major decisions concerning the project were taken by the AkzoNobel Steering Committee, a senior management decision making body including directors, which was given the short title “Steer Co”. The steering committee relevant to this project is therefore sometimes referred to as “Fresco Steer Co”. So far as Steer Co was concerned, there was a finite amount of funding available for the whole of Project Fresco and it would be completed within that figure. There was a mechanism available to Steer Co to have that figure increased by the board of AkzoNobel, but unless it was, that figure was a maximum upper limit for expenditure. The figure took account of expenditure on all the contracts which ICI had entered into in relation to the project. This figure was called Capex, short for Capital Expenditure. By December 2014 Capex had been increased to £157.7 million, far higher than the one initially approved by the board earlier in the life of the project. The fact that the figure had been increased was one of the main reasons (the delay being the other) that the AkzoNobel team were sent to site and became so involved. The AkzoNobel team were there to get the project back on track. Capex formed no part of the contractual relations between ICI and MMT. However, given expenditure on the MMT contract (or to put it another way, financial exposure by ICI to MMT) was very much higher than initially intended (predominantly due to PMI03) something of a financial squeeze developed. The amount of Capex still available to be spent overall, was not necessarily the same as the amount to which MMT might be entitled under its contract terms, nor was the amount of Capex still available necessarily sufficient for all the contractual liabilities ICI might have to MMT and other contractors. It is not necessary to make any precise findings about this, but it forms part of the background and puts everything that occurred in overall context.

MMT found that from October 2014 onwards no further payments were made to it. On 16 October 2014, an instruction to stop all welding was issued to MMT. Defects were alleged against MMT by the AkzoNobel team, and the senior management of MMT were involved with some senior personnel from AkzoNobel in attempting to agree a resolution. The independent Project Manager appointed under the contract, PROJEN, resigned. MMT’s explanation – and this is supported to a certain extent by some of the documents obtained on disclosure – for everything that happened is that certain people at AkzoNobel decided to push MMT into insolvency. This was considered in order to achieve a more cost effective outcome for AkzoNobel than would otherwise be the case on this project. ICI’s explanation for what occurred in the autumn of 2014, running into early 2015, is that the work MMT had performed was of quite dreadful quality – one witness spoke of “the worse welding I had ever seen” – and MMT were said to be unable and/or unwilling to resolve such issues. That analysis of the welding quality is advanced by ICI relying upon both evidence of fact and also expert evidence. The allegations by ICI of such widespread defects is challenged strenuously by MMT.

Although welding was restarted by MMT upon instruction from ICI in January 2015 for isolated parts of the works called the ammonia or pigging line, AkzoNobel remained unhappy. By a letter dated 17 February 2015, ICI on AkzoNobel branded notepaper wrote a letter to MMT accepting what was said in that letter to be the repudiation of the contract by MMT, and thereby terminated MMT’s employment under the contract. MMT’s solicitors, Mills & Co, in a letter of the same date, replied on MMT’s behalf and disputed the factual and legal basis upon which that action had been based, and itself raised the issue of repudiation by ICI. It was also said in that letter of reply to be “ridiculous” to assert a repudiatory breach by MMT when the majority of welding work had been formally suspended months earlier. This is therefore a classic “who repudiated the contract?” scenario, although there are contractual complexities involved too, as ICI also rely upon what is said to be a valid contractual termination.

The effect upon MMT’s business, and its commercial viability, of the events between August 2014 and February 2015 have been very profound. A number of adjudications have taken place between these parties on this contract, and in the first one a payment of approximately £7 million was ordered to be paid by the adjudicator to MMT, which was the amount of the interim payment applied for by MMT in November 2014. However, the delay in receipt between November 2014 and March 2015 (when, following the adjudicator’s decision and issue of court proceedings by MMT, it was paid by ICI) of such a substantial sum meant that MMT’s bank had lost confidence in it, and without notice removed all of its lending facilities the very day that the sum was received by MMT. In early 2017, MMT went into creditors’ voluntary liquidation. The liquidator is funding the litigation and no issue arose as to whether the discretionary stay of proceedings should be imposed. Both parties wanted the litigation to continue to reach a resolution of what has been, thus far, an intractable dispute.

A split trial of liability and quantum was ordered by Coulson J and the liability trial was held before me. In general terms therefore, the main issues between the parties concern the contractual terms, the quality of the welding, which of the two parties repudiated the contract (and also the alternative claim by ICI that it validly terminated the contract pursuant to its terms) and whether ICI can in principle recover any overpayment. There are also issues between the parties about the contractual documentation that MMT were contracted to provide. That is a broad summary and the detailed issues now follow.

These were agreed by the parties following the 2^nd Pre-Trial Review on 26 April 2017. They are as follows.

It is well known that decisions by adjudicators must be complied with, and will be enforced by the courts, as they have the status of what is called “temporary finality”. This means, therefore, that even if a decision is wrong in fact and/or law, a losing party must comply with the decision, as long as the adjudicator decides the dispute that has been referred to him or her, and has not made material breaches of natural justice in reaching their decision. The jurisprudence concerning enforcement of such decisions is well developed in this jurisdiction. The nature of the decisions themselves therefore is not material to any of the issues before the court on the substantive proceedings. However, on a project such as this, adjudications – in particular the first one concerning an interim payment for such a substantial sum – do form part of the historical background to the project, and also explain the existence of other court proceedings that were instituted to enforce such decisions.

On 27 January 2015 MMT served a notice of adjudication seeking payment of the sum claimed in its Interim Payment Notice of 21 November 2014 in the sum of £7,559,514.76. Payment by ICI had simply stopped the month before that. The November application was Application for Payment No.22. This adjudication was contested by ICI before the adjudicator, Mr Sliwinski. During the same period that this adjudication was being conducted, the repudiation letter of 17 February 2015 was sent by ICI and MMT left site. I shall refer to this as Adjudication No.1. The adjudicator found for MMT and ordered in his decision of 4 March 2015 that ICI pay this sum by 11 March 2015. ICI did not do so. The sum was finally paid in April 2015, but not until after proceedings had been issued in the Technology and Construction Court by MMT seeking summary judgment on the decision for enforcement. Resolution of those proceedings was recorded in a consent order of 16 April 2015.

On 29 April 2015 ICI served its own notice of adjudication seeking an order of entitlement to certain project documents, and delivery up of those documents, and this adjudication was again dealt with by Mr Sliwinski (“Adjudication No.2”). In his decision dated 15 June 2015, he decided that ICI was entitled under the contract to the documents identified in Appendix 1 to his decision, but he declined to order delivery up. ICI issued proceedings in the Technology and Construction Court seeking declarations in terms of enforcement and also delivery up. After a hearing on 23 October 2015, Edwards-Stuart J declined to order the latter, and his judgment is at [2015] EWHC 2915 (TCC).

On 29 June 2015 MMT served a further notice of adjudication, in relation to the propriety or otherwise of the repudiation events of 17 February 2015, namely seeking a declaration that it was ICI who had repudiated the contract with MMT. This initiated Adjudication No.3. That dispute was also dealt with by Mr Sliwinski, who issued his decision dated 3 August 2015 declaring that by its letter dated 17 February 2015 it was ICI who had repudiated the contract.

On 9 November 2015 ICI issued these substantive proceedings, the effect of which (inter alia) is to seek the Final Assessment under the contract terms, and return of a claimed overpayment of some £10.906 million from MMT, or in other words in excess of half the sum paid to MMT as interim assessments for the works, those interim assessments (with the exception of Applications for Payment No.22 and No.23) having been done by the independent Project Manager appointed under the contract, PROJEN. MMT issued its own set of court proceedings at about the same time, covering much the same ground, and it was agreed by the parties that the set of proceedings with ICI as the claimant would be the one that would be progressed. The proceedings commenced by MMT, HT-2015-000379 were therefore stayed.

On 5 August 2016 MMT referred another dispute on the project to adjudication, this time in relation to the application for payment that had been made by it on 19 December 2014, namely Application for Payment No.23. That application had been for a gross sum of £8.375 million, but this amount included the sum included in Application for Payment No.22 of £7,559,514.76, which had been ordered to be paid by the adjudicator in Adjudication No.1, and which had been paid. Taking account of that, the sum due under Application for Payment No.23 became £816,093. The adjudicator for this adjudication, Adjudication No.4, was Mr Wright, and in his decision dated 11 September 2016 he found that the sum claimed by MMT in the adjudication was due and payable by ICI and he ordered that this be done forthwith.

In both Adjudication No.1 and Adjudication No.4, the issue or issues were essentially confined to the issuing and/or validity of payment notices and/or pay less notices by ICI. Such adjudications are sometimes referred to – and in some of the material before the court in these proceedings, were referred to here – as “smash and grab” adjudications. The origin of this phrase in this context appears to be submissions by counsel in an earlier case, namely CG Group Ltd v Breyer Group Ltd [2013] EWHC 2722 (TCC) per Akenhead J in [25], who explained that counsel had recited the phrase used as “the statutory ‘smash and grab’ regime”. In a recent case, Coulson J described it as “an unhappy expression”. In Hutton Construction Ltd v Wilson Properties (London) Ltd [2017] EWHC 517 (TCC) he said, in describing what such disputes are, the following at [6]:

“What, I think, nobody could have predicted at the time of Caledonian Modular was the proliferation of what I understand are (unhappily) called 'smash and grab' cases: those adjudication claims (usually, but not always, brought by contractors) based on the contention that the other party has failed to serve proper or timeous applications for payment or payment/pay less notices, thereby automatically entitling the claiming party to the sums claimed, no matter how controversial. The significant increase in these sorts of claims seems to me to arise principally from the ill-considered amendments to the 1996 Act, and the over-prescription of the payment terms included in the standard forms of contract, which have led to provisions of unnecessary complexity.”

The earlier decision to which the judge referred in that passage is Caledonian Modular Ltd v Mar City Developments Ltd [2015] EWHC 1855 (TCC).

As a term for this type of dispute or adjudication, in my judgment the phrase “smash and grab” is best avoided. The phrase has clearly pejorative overtones. Parliament, both in the original legislation, the Housing Grants, Construction and Regeneration Act 1996, and now as amendedin the Local Democracy, Economic Development and Construction Act 2009, has decided that certain timing requirements must be met so far as interim payment applications, and decisions to pay less than the amount applied for, are concerned. If employers or third party certifiers fail to comply with those legal requirements, then the party seeking payment (usually the contractor) becomes entitled to the sum (as an interim payment) for which application has been made. To describe an attempt, or the adjudication itself, by a party to enforce these legal rights as a “smash and grab” entirely misses the point. An adjudicator in such a dispute has a more straightforward task than in other adjudications on other more complicated facts – he or she will usually only need to consider the timings and contents of certain notices. However, because of some paragraphs of the Amended Defence and Counterclaim in these proceedings (which aver that the decisions are “finally binding”) it is necessary to return to this point further. This arises on the issue of any recovery by ICI of any over-payment, which for these purposes (given this is a liability trial) I am asked to assume.

The trial of these proceedings was ordered by Coulson J on 12 February 2016 to be a split trial, with liability and quantum being determined separately. Originally the liability trial was to be heard in November 2016. Neither party prepared for that trial either effectively or, so far as I can tell, at all. For litigation in this specialist list, it is surprising to recount that by October 2016 it was clear that many of the court’s clear directions had not been complied with. The parties had however continued to be contentious with one another; disclosure in particular was a vexed issue, and this is a topic to which I shall return in the section of this judgment headed “Disclosure” below. Regardless of that, the court found itself in October 2016 faced with an agreement of the parties that the liability trial be adjourned, a position with which the court reluctantly agreed. That trial date was therefore vacated and another provided in the spring of 2017, when it had originally been intended to hold the quantum trial.

It was necessary to hold two Pre-Trial Reviews, as at the first on 6 April 2017 (less than a month before the new trial date) it was clear a variety of steps remained to be performed by the parties even at that stage. For example, the experts had not had a joint meeting and MMT had only very recently served its own expert report. At this point it is appropriate to record that counsel for ICI at the trial, Mr Bowdery QC, was the fourth specialist leading counsel to be instructed for ICI, and he did not make an appearance in the proceedings until the second Pre-Trial Review on 26 April 2017, which was less than one week before the trial. However, notwithstanding this late involvement, both counsel had an admirable grasp of the voluminous material and provided considerable assistance throughout the whole trial for which I am grateful. The reason that I refer to the change of counsel for ICI – Mr Mort QC represented MMT throughout, and settled the Defence and Counterclaim – is because certain earlier steps in the litigation came under scrutiny during the trial. It emerged that ICI had been far from frank, if not downright misleading, in terms of what the court had been told at an interlocutory stage concerning disclosure. Mr Bowdery QC had been wholly uninvolved contemporaneously with any of these unsatisfactory affairs, but was in the firing line in terms of explaining and apologising to the court, for what had occurred very much before his watch (to mix one’s metaphors).

Coulson J had also given the parties permission for up to two experts in respect of the defects issues, namely welding and the field of non-destructive testing. These two areas overlap, hence each party had the ability to choose one expert to deal with both, or two experts, each dealing with one area. ICI chose two experts, Mr Millwood and Mr Consonni. MMT instructed one expert, Mr Parry. Due to the extent of overlap in their expert reports, ICI were ordered at the 2^nd Pre-Trial Review to identify which expert was dealing with each of the issues for which expert evidence was permitted. ICI did so prior to the trial and stated that Mr Millwood was to give expert evidence on Non-Destructive Testing (or “NDT”) and Mr Consonni on welding defects.

This case was originally case managed with the liability phase of the split trial ordered to take place in November 2016, and quantum to be heard in April and May 2017. The parties jointly sought an adjournment in October 2016, and this was agreed by Jefford J who also granted MMT summary judgment to enforce the decision of the adjudicator in Adjudication No.4. Prior to that, in September 2016 ICI had served further disclosure of a very large quantity of documents (ordered by Edwards-Stuart J in July 2016) on MMT, numbering approximately 30,000 documents. Some of these had previously been argued by ICI as being privileged. When a review of the assertion of privilege was ordered by Edwards-Stuart J, this led to a realisation on behalf of those advising ICI that these documents were not privileged and should be disclosed. Jefford J found that this late and substantial disclosure by ICI put MMT in an “impossible position” so far as preparing for the trial in November 2016 was concerned.

Disclosure was very much therefore a live issue, or at least had been previously highly contentious in the summer of 2016. The 1^st Pre-Trial Review was held on 6 April 2017 and an order was made requiring ICI to comply with paragraph 2 of the Order of Edwards-Stuart J dated 15 July 2016, which required review of the claim of privilege by ICI’s then leading counsel (not at this stage Mr Bowdery QC). At the 2^nd Pre-Trial Review, which was held on 26 April 2017, ICI relied upon the 5^th witness statement of Mr Leadbetter, a solicitor at Clyde & Co for ICI, in respect of (amongst other things) disclosure, as MMT were still seeking disclosure. In particular, MMT was seeking specific disclosure of notes made by Ms Trudy Schoolenberg, who was a member of Steer Co and who had been at all the relevant meetings leading to the decision to dismiss MMT from site, including a meeting held by telephone conference on 21 January 2015. It was at this meeting that the decision was taken to remove MMT from site (by accepting what were said to be repudiatory breaches by MMT) but that decision was not implemented until 15 February 2015. An order that Steer Co meeting minutes be disclosed had already been made by the court. ICI challenged the disclosure of Ms Shoolenberg’s notes, and said that she was no longer an employee of AkzoNobel in any event and such notes were no longer in ICI’s possession or control. Mr Leadbetter described MMT’s stance as being one of “meritless criticisms of ICI’s disclosure.” I made an order on 26 April 2017 that any minutes of the telephone conference meeting of 21 January 2015, and any notes taken by Ms Schoolenberg, be disclosed by 2 May 2017, alternatively that ICI were to provide a short witness statement if none could be located. I also made it clear that the order made by Edwards-Stuart J was expected to be complied with, in so far as it may not have been by that date. I should also record that Edwards-Stuart J had been told at the disclosure application before him, in Mr Leadbetter’s 1^st witness statement, that Mr Blythe (of whom more later) of ICI was not relevant to the issues in these proceedings.

However, during cross-examination of Mr Boerboom at the liability trial, it became clear that a number of Steer Co meeting minutes, namely for the months of February to September 2013, April 2014, June 2014 and July 2014, did exist but had still not been disclosed. However, Mr Leadbetter in a further witness statement, this time his 7^th statement, (explaining how this occurred) said that Ms Schoolenberg was not aware of these other minutes, and that was why they had not been disclosed. This turned out not to be true. At the end of the first week of the trial therefore, further witness evidence had to be served by ICI in relation both to its disclosure (which had obviously been deficient) and also explaining the circumstances in which factually incorrect evidence had been given to the court. This was in the form of the 3^rd witness statement of Mr Morris; the 8^th witness statement of Mr Leadbetter; and the 1^st witness statement of Mr Drucker. In fact, two of the sets of minutes had in fact been provided to Clyde & Co by ICI prior to October 2016 but had gone “missing” and had never been disclosed. This was said to be either because they had been mislaid, or because they had been sent to ICI’s then leading counsel for the review of privilege, and then “lost” on the way back to ICI’s solicitors’ offices from counsel’s chambers (a different set of chambers to those of Mr Bowdery QC). It was also confirmed by Mr Boerboom during his cross-examination that the decision to terminate MMT’s contract was taken by Ms Schoolenberg, as “decision executive”. This, again, was contrary to what the court had been told by ICI in the long disclosure saga. Given the highly contentious issue between the parties about the contractual specification agreed for testing – which was conceded by ICI in its written Closing Submissions – and given this had been agreed by ICI, with the knowledge of Mr Blythe, it can be seen that what the court had been told in Mr Leadbetter’s 1^st witness statement regarding Mr Blythe was not factually correct either. These are troubling factual inaccuracies by ICI in what the court was expressly told during the interlocutory stage of this action; these simply should not have occurred.

It should go without saying that witness statements to the court should be factually accurate in any event. This is as important for those served for interlocutory applications. The evidence adduced by the parties for such applications forms the basis upon which the court makes interlocutory orders. If the contents of those statements are not true, then the court is making interlocutory orders on the wrong basis. Such orders may directly affect the outcome of litigation. Here, I am satisfied that the accurate account of Ms Schoolenberg’s involvement, the decision by Steer Co, and the discussions within Steer Co leading to the decision made on 17 February 2015, was finally aired. I am also satisfied that eventually MMT obtained all the disclosure to which it was entitled. However, getting to that point was somewhat more convoluted than it ought to have been. It should also go without saying that orders of the court are meant to be complied with, and orders in respect of disclosure are no different. If, as here, orders for all meeting minutes of a particular committee are ordered to be disclosed, and that committee meets monthly, and such minutes (which are to be disclosed) refer to minutes of meetings in other months (which are not), it should not be too difficult a task for the party giving disclosure (in this instance ICI and its solicitors) to realise that its exercise is deficient. Further, if the involvement of any particular executive is played down – as here, in my judgment, Ms Schoolenberg’s was – yet that person turns out to be the specific individual who made the actual decision to dismiss MMT for repudiatory breaches, that is hardly likely to assist that party’s case. On Day 3, one of the features of the case that had featured in applications for disclosure made in July 2016 was put to Mr Boerboom by Mr Mort QC in his cross-examination about Ms Schoolenberg:

“Q: The application last summer, we were told in a witnessstatement that she only became involved at SteeringCommittee level at around February 2015. You are saying that is wrong; is that right?
A. Correct. She was in a number of Steering Committeessince August 2014.
Q. For six months basically?
A. Yes.”

MMT are justified in being aggrieved at the way in which ICI has conducted some aspects of this litigation. Given part of the discussions at the time, at the AkzoNobel decision making level, considered pushing or encouraging MMT towards insolvency, the lingering doubt remains that such an attritional approach spilled over into the litigation too.

During the cross-examination of Mr Wells by Mr Bowdery QC, a class of documents were concentrated upon called monthly contract review documents. These were produced monthly on different projects by MMT to demonstrate their profitability, in terms of expenditure on labour and materials and other heads of cost. They were an internal management tool. At the end of the fourth day of the trial, and part of the way through the cross-examination of Mr Wells, Mr Bowdery QC made an unheralded application for disclosure. Such disclosure had not been sought before by ICI, even those these reports were referred to in the annual accounts that were publicly available. They were described as “internal project cost detail reports” in the oral application. I refused the application ex tempore and said further explanation would be provided in the judgment.

Such documents are not relevant to the issues of liability in this case. Mr Bowdery identified the issue as follows: “If their internal cost reports or project cost detailed reports show that they had no funds and that's why they couldn't produce any adequate plan for further testing and/or rectification, then we would suggest that is relevant. It gives the motivation, the explanation, why they are simply unable to produce any adequate plan to actually rectify their own defective work.” However, inability to produce an adequate plan for testing and/or rectification, which was a pleaded breach, is not affected in any way in my judgment on the facts of this case by the monthly profitability to MMT of the actual project. That could only be said, in my judgment, to be in the furthest distance on the horizon of relevance, even on the most favourable view to ICI of the matter. It simply does not arise on the pleaded issues, and it does not arise on the agreed issues before me to decide. A plan was either required from MMT, and either was or was not produced by MMT, or it was not. If one was required and was not produced, the reasons why MMT did not produce it are not relevant. Mr Bowdery QC frankly accepted that he was basing his claim for disclosure for the existence of the documents on reference to them in the annual accounts. Such an application was made very late in any event, and although that is not a reason not to order disclosure documents if they are relevant, it is a practical factor that did require some weight to be given to it. Those accounts were freely and publicly available prior to the trial and the application could have been made at any time in the months leading up to the trial, or at either one of the two Pre-Trial Reviews at the very latest.

Further, as the analysis in the decision in Adjudication No.1 showed, a very sizeable sum of money – in excess of £7 million – was due to MMT from ICI due to the failure by ICI to serve the relevant payless notice. Even if analysis of resources/financial depth of MMT were relevant (because the reason for non-production of such a plan could excuse MMT – a point not argued by MMT) such that the documents were disclosable, the point would disappear as the non-payment by ICI of any sums to MMT from September 2014 onwards would inevitably mean that insufficiency of resources would have been something very significantly contributed to, if not directly caused by, ICI. Therefore even if an insufficiency of resources on the part of MMT were to be found, it would not advance ICI’s case at all, in my judgment. It would lead to a wholly distracting and expensive sideshow that would not go to resolution of the Agreed Issues. I formed the view that this application by ICI for disclosure during the trial was being motivated, at least in part, by a desire to demonstrate that there were deficiencies on disclosure on both sides. In my judgment there were not, and the failures by ICI were of a very different order.

ICI called three witnesses of fact. They were (in the order in which they were called) Mr Greg Brownlee, Mr Theo Brugman and Mr Henk Boerboom. No witnesses of fact were called who had been members of Steer Co. It was the members of Steer Co who had been involved in discussing whether to accept what are said to have been the repudiatory breach or breaches by MMT, although it transpired that it had been Ms Schoolenberg who actually took the decision.

Mr Brownlee is a quantity surveyor and works for Blake Newport, a company that provides quantity surveying services. Blake Newport was engaged in February 2015, following the termination of MMT’s contract, the role being (as Mr Brownlee described it in his witness statement) “to support the Project Manager”. By this he meant perform a valuation of MMT’s works for Mr Boerboom. His role was as the lead of a team of consultant quantity surveyors. He was involved in the production of a Final Assessment upon which ICI relied, seeking to demonstrate that MMT had been overpaid. In fact, Blake Newport were originally engaged on 5 February 2015 “to consider the events surrounding a potential dispute with MMT”, to quote from his witness statement. Whether and to what extent that involved any advice to ICI is not clear, nor is it in my judgment important for current purposes. This is because on 11 February 2015 Blake Newport had their “remit…. adapted such that the primary focus was the independent assessment of the works undertaken by MMT”. This was following the referral by MMT to adjudication of a dispute regarding its November 2014 application for payment, which is what evolved into the decision in Adjudication No.1. Mr Brownlee therefore had no contemporaneous involvement in events before February 2015.

This independent assessment became what was entitled the Final Assessment, and it is a document upon which ICI relied in its claim against MMT in these proceedings to demonstrate that MMT had been overpaid. Mr Brownlee, as one might expect from a quantity surveyor (or the lead of a team of quantity surveyors), provided a witness statement that was substantially concerned with quantum. Given both that the Order of Coulson J that there be a split trial of liability and quantum, and that Mr Brownlee had not come to the project until February 2015, his evidence was not therefore of the foremost relevance to the issues in this case. In particular, the parties were agreed that the question of overpayment (the amount of which is disputed) should be assumed for the trial of liability, as one of the issues (Issue 10) poses the question of whether overpayment by ICI to MMT (if there is any) could in principle be recovered. Mr Mort QC adopted a very sensible course and, given the agreement on this assumption of overpayment, chose not to cross examine Mr Brownlee on the detail of his quantum exercise. In any event, that detailed quantum evidence was not relevant. Only certain passages of Mr Brownlee’s evidence were adduced in chief by ICI in any event (identified in Appendix 2 to ICI’s Opening Submissions). His evidence did not therefore, with one exception, in my judgment, impact upon the issues before the court on this liability trial. The single exception is the extent to which Mr Brownlee could not differentiate between Mr Boerboom as the ICI project manager, Mr Boerboom as the Project Manager (in terms of being PROJEN’s replacement as the Project Manager under the contract) and/or Mr Boerboom as being in overall charge of the project for AkzoNobel, the entity who was ultimately paying the bills. This inability to differentiate Mr Boerboom in his various guises should not be taken as criticism of Mr Brownlee. Nobody, least of all Mr Boerboom himself, made any differentiation in terms of his role(s) at any time contemporaneously. I find that there was no such differentiation during the project either. It was simply not possible for MMT to know what “hat” Mr Boerboom was wearing at any particular time, or when he gave any particular instruction.

Mr Brugman worked for AkzoNobel for over 30 years, and left in July 2015. He now lives and works in Thailand. He is a Dutch national; although Mr Bowdery QC for ICI identified at the beginning of his evidence that English is not his mother tongue, he works using the English language generally, both on this project and the others in which he has been involved around the world. There were no difficulties arising from this during his evidence, and his spoken English (and written English too, judging from his e mails and witness statement) is excellent. He was brought to the project in September 2014 to act as the construction manager for ICI, taking over from Mr Mike Hird. He told me that he does not know what had happened to Mr Hird – whether he had been moved elsewhere, or had left the company – but he did not have the benefit of any handover period with, or handover from, Mr Hird. Mr Hird had left the project before Mr Brugman started. Mr Brugman told me that this lack of handover was unusual, and he did not know why this had happened. This change of personnel, and the way it was done, is however consistent with the theme of MMT’s case that the whole of Project Fresco was seen by the hierarchy at AkzoNobel as being off track, and AkzoNobel personnel were simply inserted into it to achieve certain objectives to suit that company’s commercial interests. The predecessors to the AkzoNobel team simply disappear from view, and I have been given no explanation about where they went, or why they were removed. This disappearance includes Mr Blythe.

Mr Brugman as a witness was, in my judgment, highly unsatisfactory. His evidence, both as contained in his two witness statements and his cross-examination, was simply not reliable. I did not find him to be a useful or reliable witness as to what had actually happened. I came to this conclusion for the following main reasons.

Mr Brugman no longer works for AkzoNobel, and despite what he said in his written evidence about being “a former employee of ICI”, was not employed by ICI but was sent there on a short-term consultancy basis from AkzoNobel. He now lives and works in Thailand. The time available for him to prepare a comprehensive witness statement therefore is likely to have been more limited than if he had been still at AkzoNobel, and I have made due allowance for this. However, the points in the preceding paragraph are not fine points of detail, they are substantial and important factual elements of what was going on at the time, upon matters in which Mr Brugman was involved. There can be no excuse for either failing to refer to them at all, or getting them wrong. The 10 Point Letter in particular is crucial to what was going on between the parties during the period mid-November 2014 to February 2015, and in my judgment is central to the entire dispute. Paragraph 51 of Mr Brugman’s 1^st witness statement is similarly crucial to the pleaded allegations of repudiatory breach in paragraph 64(iii), 64(iv) and 64(v) of the Particulars of Claim.

There were other examples of his answers shifting under correctly applied and proportionate pressure from Mr Mort QC, and he seemed very keen always to bring the topic back to his main themes, regardless of the content of the question. A good example of this is the “worst welding I have ever seen” approach to criticism of the work performed by MMT. At face value, such an approach has a certain amount of dramatic impact. However, what transpired is that this comment was aimed at welding internal to the pipework, which the expert evidence (to which I will come in more detail below) effectively agrees could only be seen by radiographic means or inspection by boroscope. Indeed, one of the legal issues is how Table 5 of BS4677 should be approached, if it were agreed by the parties that radiographic NDT would not be done, because some aspects of Table 5 can only be discovered by these means. The “worst I’ve ever seen” approach to the welding is rather put into context by that, and can be seen to be wholly exaggerated.

Mr Brugman was obviously called as one of the factual witnesses for ICI, in order to provide evidential support for the main allegations against MMT. He adopted this role with gusto, regardless of the reality of the situation, and I find that he chose to ignore important aspects of the factual background that did not match ICI’s case. I find that such evidential support as he could provide, so far as the defective welds was concerned, to be flimsy at best, and for the three specific pleaded allegations I have identified, non-existent.

He is a Director of Engineering Excellence for AkzoNobel Advanced Manufacturing Projects & Engineering based in Arnhem in the Netherlands. Project Fresco had commenced in January 2011 and was supposed to be fully operational by December 2014. Mr Boerboom was brought to the project in July 2014. He was appointed Project Manager in October 2014 after PROJEN resigned, although the validity of that appointment is challenged by MMT. In his first witness statement he stated in paragraph 3 that he became Project Manager “shortly after” July 2014. If that is correct, then no notification was given to MMT of this at that stage, and indeed until Mr Barton of PROJEN resigned three months later he was still, on the face of it, the Project Manager. Indeed, part of MMT’s theme concerning the second half of 2014 is that PROJEN resigned because they were unable to deal with the level of interference or pressure being brought to bear by Mr Boerboom who was acting solely in ICI’s interests. PROJEN were specifically instructed that they could only certify payments to MMT if the AkzoNobel personnel expressly agreed to this in writing. Such an instruction is plainly at odds with how a third-party certifier, or decision maker (to use the phrase of Jackson J as he then was in Scheldebouw BV v St James Homes[2006] EWHC 89 (TCC)) is supposed to behave. The unavoidable inference is that PROJEN decided, for professional reasons, that they could not continue to act as Project Manager in these circumstances and Mr Barton resigned, even though he remained involved behind the scenes assisting Mr Boerboom and his team with the administration side in terms of paper work and so on. For the avoidance of doubt, I find as a fact that this is why PROJEN resigned. Mr Boerboom’s evidence makes clear that this interference by him must have started very shortly after he arrived, and he must have purported to act as Project Manager behind the scenes even before PROJEN resigned.

In paragraph 15 of the same statement Mr Boerboom explained that he “took over as Project Manager for the purposes of the Contract in October 2014” but states that he is “not aware of why Andy Barton and/or PROJEN decided to no longer act….however it seemed sensible for me to take over that role given my project involvement and my position as the internal project manager for ICI”. I deal with the legal issue of an employer-appointed employee seeking to be appointed or act in this role further in the section of this judgment headed “The Project Manager”. Further, given the identity of interest between ICI and AkzoNobel, its parent, I find that there is no difference between an employer-appointed employee here, and an employer-appointed employee of AkzoNobel on the facts of this case.

Further, in my judgment, it is simply not credible that Mr Boerboom did not at the time, and does not know now, why PROJEN resigned as Project Manager. He is a highly experienced person – Director of Engineering Excellence – and was brought on to this project specifically to be the project manager for ICI. The entire project was late and seriously over budget. The notion that the Project Manager under the Contract with MMT could resign, yet the reasons for that neither be discussed nor brought to the attention of Mr Boerboom by others within ICI and/or by PROJEN personnel at the time, is verging on the absurd. It cannot seriously be thought that the reason or reasons would not be discussed directly then, and at a high level. This is even more compelling when one considers that Mr Barton remained working on the project; his resignation was plainly not due to his availability. I conclude that Mr Boerboom dealt with this in his evidence in the way that he did because the real reason would be detrimental to ICI’s case in this litigation. He chose to keep his knowledge of this to himself.

Mr Boerboom was also directly involved in ensuring that the 10 Point Letter did not result in an agreement between ICI and MMT. I deal with the detail of this further in the section “Relations between ICI and MMT”, but not only did Mr Boerboom take the lead role in undermining the agreement that had been reached in principle between MMT and ICI, but he must have known that no-one ever informed MMT that the promised sum of £2.75 million would not be paid. This is because he knew that Steer Co had decided in early December 2014 to withdraw the previous authorisation for this payment. I find as a fact that part of the strategy adopted by AkzoNobel/ICI – perhaps from November 2014, but certainly from December 2014 onwards - was one aimed at driving MMT from site. I use the term AkzoNobel/ICI because at the time there were no separate ICI personnel in any decision making roles. All decisions on ICI’s behalf were being made by personnel and senior management at AkzoNobel. The hope was clearly that MMT would simply leave; the fact that MMT’s expectation of a sizeable payment of £2.75 million to MMT (and its non-payment) was potentially going to push MMT close to insolvency was seen as a commercial benefit. MMT thought it had been agreed a payment of £2.75 million would be paid to it after certain steps were taken; Mr Boerboom and the members of Steer Co knew MMT thought this, knew this sum had been offered, and knew it would not be paid. It was known that Steer Co had disavowed or de-authorised any such payment. MMT were ignorant of this fact.

There is nothing wrong with having one’s own company’s commercial interests at the forefront of one’s mind. Modern business can be fairly ruthless commercially, and it may be that the founders of the modern industrialised world were the same. However, Mr Boerboom came into a project that was towards the end of its completion, with a simple remit – finish it and reduce the cost. He chose to achieve that remit by revisiting almost everything that MMT had done in the lengthy period prior to his involvement. Inconvenient matters such as the £7.5 million due on Interim Application No.22, the cost-saving expressly agreed for the PMI03 works on the NDT by not using radiographic testing, and ICI’s contractual obligations, were simply ignored or glossed over. He embarked upon his own course, which paid no attention to the contract and no attention to the legal rights of MMT.

Mr Boerboom effectively accepted this in one part of his cross-examination (Day 4/47), which is self-explanatory:

As this passage of evidence shows, when confronted with the stark evidence in e mails at the time of what was being done by the AkzoNobel team, Mr Boerboom would sensibly concede ground. His evidence was therefore more subtle in its partisanship than that of Mr Brugman. However, although the manner and style of his evidence was superficially persuasive, when the content of what he had to say was examined objectively and by reference to the contemporaneous documents, Mr Boerboom’s evidence did not assist ICI’s case overall. It rather demonstrated, in my judgment, that what MMT had long complained of, was in fact what had occurred.

MMT called three witnesses, Mr Wells, Mr McGrady and Mr Conn. There were some curiosities about how Mr McGrady and Mr Conn’s witness statements were presented that I deal with below.

Mr Wells is the Managing Director of MMT. His witness statement was extensive and detailed and he had a comprehensive grasp of the details of the project, and in particular the dispute which had such a profound impact upon MMT as a company. He was involved in the whole project, and was the only witness who appeared at the trial who was present at the meeting of 22 January 2013 when the tender qualification in relation to NDT was discussed, agreed and then recorded in the minutes. His written evidence explained that he gave an express warning to ICI about limiting the NDT regime to dye-penetration, and not using radiographic techniques. His evidence on this meeting was not challenged to any material respect in cross-examination or at all. The cost to ICI would have been in the order of an extra £250,000 for such testing. The ICI/AkzoNobel individual present at the meeting was Jeff Conrad, and he agreed that this be omitted. This was recorded in the minutes which states “MMT had allowed for 10% dye penetration NDT testing of welds”.

That this approach was plainly agreed by the parties – even without the clear minutes – is obvious from various e mails during 2014, including one to Mr Westerlund from Mr Martin Blythe that was made available on disclosure but was not shown at the time, so far as one can tell, to MMT. This is dated 11 November 2014 and in it Mr Blythe stated:

“The NDT for shop-fabrication was 10% either dye-penetrant or radiography. Dye-penetrant was selected. There were several visual inspection visits to the fabrication shop. Test records were checked, and it was apparent that internal visual examination of welds to assess root penetration was being done”.

(emphasis added)

Mr Wells also gave evidence about the adjudications and the financial impact upon the company. Adjudication No.1 was commenced in late January 2015, and such was the cash flow position of MMT at that time that a Company Voluntary Arrangement or CVA came to be contemplated by MMT’s Board of Directors in late February/early March 2015. However, when the decision in Adjudication No.1 was issued in MMT’s favour, there was the prospect of a very sizeable cash injection if ICI complied with that decision. Timing became crucial. In what Mr Wells described as “surreal” events, the money was received by MMT, leading (as he said) to enormous relief, followed almost immediately by further tension and difficulty because MMT’s bankers chose precisely that moment to terminate all of its lending facilities and overdraft arrangements without notice. Small and medium companies sometimes complain about the treatment they receive at the hands of their banks. This behaviour must have been a hammer blow to MMT and its directors and employees. It led to certain steps being taken, which I find are not relevant to the liability phase of these proceedings. In the event the CVA was avoided.

MMT as a company had acted on a variety of different projects before, including prestigious ones such as the Diamond Light Synchrotron facility at Didcot, and the Harrods department store. Mr Wells relied upon this to show that MMT is capable of high quality work, and although a Small or Medium Enterprise or SME (an expression for companies such as MMT in terms of their economic size), MMT had a sizeable cash surplus earlier in 2014 and appears to have been soundly run. Mr Wells was effectively the decision maker and no doubt found himself increasingly involved in the middle to latter part of 2014 as the commercial problems on the project with the AkzoNobel project management team increased.

My view of the quality of evidence provided by Mr Wells is also assisted by the fact that what he wrote at the time, both in letters and e mails, both internally and to the different personnel at AkzoNobel with whom he found himself dealing, was entirely consistent with his evidence. This is usually useful corroboration for the court when considering a witness’ reliability, and was here.

Mr Wells gave his evidence openly and frankly, and I am satisfied that he was accurate and reliable in what he told the court. Following ICI’s concession on Issue 1, Mr Wells’ credibility was, if anything, increased; however, regardless of that concession I was satisfied that his evidence was to be preferred. If, in any area, Mr Wells’ evidence differed to that of Mr Brugman and Mr Boerboom, I prefer that of Mr Wells.

Each of the witness statements of Mr McGrady, and Mr Conn, were curiously worded and extraordinarily brief. Mr McGrady simply stated that he agreed with everything Mr Wells had said. Mr Conn similarly stated that he agreed with what Mr Wells had said, but identified by paragraph number certain passages in respect of which he had no knowledge of his own. This led to an application by ICI, at the 2^nd Pre-Trial Review seven days before the trial was to start, to strike out these witness statements as failing to comply with the rules and not being in the witnesses’ own words.

These two witness statements had been served in September 2016 and no objection had been taken to this approach – albeit an unorthodox one – at any time between September 2016 and late April 2017. Further, no mention of any supposed technical difficulty was raised by leading counsel for ICI at the first Pre-Trial Review, albeit that this was not Mr Bowdery QC, who obviously took a different view of the matter. I refused the application, which struck me as being an opportunistic one, designed to sow confusion and/or doubt in the collective mind of MMT shortly before the trial date. Essentially MMT was tendering each of Mr McGrady and Mr Conn to be cross-examined on exactly the same ground as Mr Wells, and to that extent this approach was understandable. However, it will rarely be satisfactory for written witness statements simply to attest to the entirety of another witness’ statement, and if this approach is adopted in other cases the result of such an application to strike out the evidence may not be the same. Litigants generally should not therefore adopt such an approach, which in other cases may not necessarily highlight the evidence of fact which a party seeks to adduce from any particular witness. Evidence in chief should be correctly set out in a witness statement in conventional form. Parties should not interpret my ruling on this point in this case, on a very late application just before trial on statements that had been served 8 months before, as being of wide application. It is highly case specific.

Mr McGrady is a chartered accountant and the Finance Director of MMT. He was cross-examined at some length about MMT’s financial position, both during 2014 but more particularly after March 2015, after the events directly relevant to the liability trial had occurred. This cross-examination suffered from the fact that it was aimed at demonstrating some additional criticism of MMT concerning what was termed “affordability” in terms of performing any necessary remedial works. This was not part of the pleaded repudiatory breaches by ICI, and also did not form part of the Agreed Issues. It therefore did not have promising prospects.

Its prospects suffered yet further for the following reason. The adjudicator in Adjudication No.1 decided, wholly understandably on the basis of the documents both before him then and before the court at the liability trial, that no valid payless and/or payment notices had been served in relation to Interim Payment No.22. The sum affected by such non-service was in excess of £7 million. The law of England currently is that this sizeable sum was therefore due as a matter of legal right (although on an interim basis under the contract terms) to MMT. In my judgment it cannot be right to concentrate on “affordability” in the way that Mr Bowdery QC did, yet ignore the non-payment of such a sizeable interim payment that was due to MMT.

Yet further, such considerations of MMT’s financial health could only sensibly arise as being relevant, if they arose at all in this case (which I find they do not), in the period November 2014 up to the date MMT were required to leave site by the letter of 17 February 2015. What happened after that date could simply not be relevant, as MMT’s financial viability was so demonstrably affected by being required to leave the project. The construction industry is, as with so many other areas of life, prone to share information amongst its members, and Mr Wells explained that the problems on this project were already the subject of third party interest (although he did not use that phrase). A different phrase (which again he did not use) might be “industry gossip”. It was undoubtedly a major reason for MMT’s bank to withdraw its borrowing facilities the moment that the money from ICI in satisfaction of Adjudicator’s Decision No.1 was banked.

Mr McGrady dealt with all the questions asked of him in an open and persuasive way and I accept his evidence.

Mr Conn is one of the project managers at MMT and had day to day knowledge of the actual works. In his own words he was “an operational guy on site”. There were certain paragraphs of Mr Wells’ statement that Mr Conn did not adopt, and this was because they dealt with more senior management and commercial matters in which he was not involved and so had no direct evidence. He was taken to a variety of documentary references in cross-examination that dealt with welders and their qualifications. This was to substantiate the case advanced by ICI that MMT were using unqualified welders. Mr Conn fully explained the way that the welders’ qualifications were organised, and kept at the fabrication shop. The isolated references in e mails to which he was taken by Mr Bowdery QC either chasing copies of qualifications, or reminding particular individuals of the need to maintain up to date certification, were simply part of MMT sensibly organising and supervising the paper work necessary. I find as a fact that such communications were part of what would be expected on any sizeable project of this size, and do not constitute evidence that there was widespread, or any, dissatisfaction at the time by ICI and/or the Project Manager with regard to the welders’ qualifications, or that MMT were using non-qualified welders. I also find as a fact that the use of an unqualified welder was restricted to the incident of Mr Orlop in the autumn of 2014, satisfactorily explained by Mr Conn, who performed approximately 10 welds for which he was not qualified, which were cut out and replaced by MMT.

The orbital welds which were required for the works in December 2014 and into 2015 were a change to the original specification and samples of these were inspected at the MMT fabrication facility by Mr Wray for AkzoNobel/ICI in December 2014. They were described as “top quality” by Mr Wray. I find that this demonstrates the quality of welding performed by MMT was generally acceptable (a subject to which I return in my consideration of the expert evidence), and also that inspections and approvals were performed by ICI before production welding commenced. This inspection and approval process was a system used in December 2014 for work about to commence, and was also one that had also been adopted under the original ICI project management team in 2013.

Mr Conn’s evidence, including not only welders’ qualifications, but also welding methodology and testing, was given sensibly and honestly and I accept his evidence.

Each party called expert evidence going to the defects issues, limited to welding and Non-Destructive Testing (or “NDT”), pursuant to the permission granted by Coulson J at the Case Management Conference on 12 February 2016. Due to the overlap of these areas, the parties were given permission to call either one or two experts, depending upon the expertise of each expert. ICI called two experts, Mr Neil Millwood of DNV GL and Mr Marcello Consonni of TWI Ltd. MMT called one, Mr Stephen Parry of Rosen. All three of the experts attended joint meetings and held joint discussions and produced two joint statements.

There is some overlap between welding and NDT, because NDT is one of the methods used to ascertain quality of welding. Due to concerns raised by MMT at the 2^nd Pre-Trial Review about both Mr Millwood and Mr Consonni each covering the same territory in their respective expert reports, I directed ICI to specify which of the experts would be dealing with each of the two areas for which Coulson J had given permission. Mr Millwood was therefore identified as ICI’s expert on NDT and Mr Consonni as the expert on welding defects.

Before turning to each of the experts and how they approached their task, and their evidence overall, it is necessary to make some observations on the contents of the experts’ joint statements. Joint statements were ordered by Coulson J in the usual way, and such documents are important in cases such as this one to agree matters (where any particular area of the expert evidence can be agreed) and to identify the real areas of dispute. In this case, the two statements were dated 20 April 2017 and 2 May 2017.

Paragraphs 16 to 31 of the First Joint Statement were added to that document on the day that it was signed, namely 20 April 2017, by Mr Millwood and Mr Consonni, the two experts for ICI, without any opportunity for discussion or review of those paragraphs with Mr Parry. Those paragraphs were therefore used by the two experts for ICI as a way of bolstering, or adding, to their written evidence, after that written evidence had been served in the usual way in their expert reports which were served earlier. That is not the function of a joint statement by experts.

Further, paragraph 130 of the First Joint Statement contained the following statement:

“[Mr Consonni]’s opinion is also that due to the inadequate quality of the welding produced by MMT and to the exceptionally high repair rates…..it would have been reasonable for ICI to have lost confidence in MMT’s ability to carry out the rectification works to an acceptable standard.”

The repair rates, and whether they were “exceptionally high” or not – MMT’s case is that they were not, and that the sample(s) chosen by ICI were deliberately skewed, a subject which is dealt with in greater detail below – is a disputed matter of fact and Mr Consonni should not have been simply accepting ICI’s case in this respect. Doing so raises real questions about the quality of his evidence. However, regardless of that, whether or not ICI were justified in losing confidence in MMT is a question for the court, and not one upon which expert evidence is admissible. I informed the parties that I considered such evidence inadmissible, and therefore no cross-examination was required on this point, and neither counsel sought to persuade me otherwise. An experts’ joint statement should not be used for such statements, and an independent expert on technical issues should not be giving an opinion on such matters. Entries such as these in the Joint Statements gave the impression that the experts for ICI were anxious to bolster ICI’s case.

There were some difficulties with the evidence, both physical and documentary, that was made available to the experts and which has had an effect upon their evidence. These difficulties should not have occurred, as will become clear.

This phrase was used to describe welds which were said to be defective, and which were cut out, retained by ICI and placed in one of the meeting rooms on site (hence the name). Mr Brugman said in his written evidence that ICI had kept these defective welds – there were said to be 2500 of them. However, Mr Millwood visited the site on 24 January 2017 and found out that “all the samples plus all the original pipework removed from the hygienic lines had been scrapped”. No explanation was provided for this whatsoever, by anyone. The disposal of this important evidence must have been done by personnel at ICI; ICI’s solicitors are very experienced and will no doubt have been aware of the importance of preserving such evidence, and had been involved since about January 2015 because there is a letter from January 2015 from them to MMT prior to the events of February 2015. I cannot believe that the importance of preserving such evidence was not brought to the attention of those at ICI involved in the litigation.

In cross-examination, Mr Brugman said that the last he had seen of these welds (which would have been sometime in 2015) was they were left in the meeting room. So far as their disappearance is concerned, his evidence was as follows.

“Q: So do you know anything about that? Is that news to you?
A No. New.
Q Okay, so somebody thought that they would get rid of all of that evidence.
A That is very strange because they were in the meeting room, so that is strange.
MR JUSTICE FRASER: Okay. So when you left the project, as far as you were concerned they had been kept? Is that right?
A Yes.”

Mr Boerboom said the following when the situation regarding the scrapping of welds was put to him in cross-examination:

“I am quite astonished you bring this fact to me now”.

He left the project at the beginning of 2016. However, he did not leave instructions for their preservation, because:

“I did not leave instructions for something I didn't expect to happen”.

That last answer rather misses the point. The purpose of such an instruction would be to make sure that something did not happen. However, the answer suggests that Mr Boerboom simply assumed this evidence would be preserved. Regrettably, the evidence was destroyed.

Such destruction of physical evidence in any event, but particularly when the question of the quality of the welds is such a contentious issue between the parties, should not have occurred and I am greatly troubled by it. Although non-destructive testing reports of some of these welds survive, these are far inferior to actual inspection of the welds by the experts for the parties. Given that it is ICI’s case that the quality of the welding by MMT was below the necessary standard, the absence of the physical evidence affects the strength of the case advanced by ICI. However, regardless of that, preservation of such evidence was important and it should not have been destroyed.

This document was disclosed by ICI, and included a summary of all the reports done on a number of welds for ICI by a testing company referred to as Oceaneering. This had a very large number of weld reports – originally it was said to be 2,500 (an approximate number), but in fact turned out to be nearer 1,800. Whichever number it was, it was obviously in the thousands and was a sizeable sample. However, Mr Millwood, one of ICI’s experts, was not shown this. He was only given access to a far smaller number of weld reports, comprising 412.

When asked about this, and why he had not asked to see the other far larger number of weld reports, Mr Millwood’s evidence in cross examination was as follows:

“Q. So you haven't seen the spreadsheet with all 2,500 on it?

It was later confirmed by Mr Bowdery QC for ICI that Mr Millwood had indeed asked for this spreadsheet. There are some notable points about this aspect of the case and Mr Millwood’s evidence.

His evidence in cross-examination further on this subject was as follows:

“MR MORT: [Referring to the 412 welds] They are the welds that had been rejected, aren't they? That's why you have a sample showing such a high proportion, they've been cut out because they've been rejected, and they're radiographed. That's precisely what has happened.

His answer “I don’t believe that” is not the sort of evidence one would expect from a wholly impartial independent expert witness. Given the existence of documents showing a far larger number was not only referred to in the e mails he had seen (and referred to in paragraph 149 of his report) but was also being put to him by leading counsel as definitely existing in disclosure, and it turned out he had himself asked to see this (and not been provided with it by the solicitors instructing him), there could be no grounds for his “belief” that the welds in the far larger sample would not affect his sampling exercise. An expert’s role is not to decide issues of fact themselves, and choose what facts to believe and what not to believe. Self-evidently, if there were at least a thousand more welds (and nearer to 1,500) in excess of the 412 for which Mr Millwood had seen the test reports, without considering that material, Mr Millwood’s extrapolation/sampling conclusions could potentially be affected. That is a common sense and logical point. Mr Millwood’s dogged attempt to hold on to his original conclusion, as shown by his answer “if you look at the 412, the defect rate comes out at about 38 per cent which is a rather large number” demonstrates in my judgment not only that his expert views have to be scrutinised with much greater than usual care, but that he had lost the degree of independence and impartiality which is rightly expected of experts. Mr Mort QC in his oral closing submissions described him as “ a cheerleader for ICI”. That description is colourful, but does encapsulate the enthusiasm with which Mr Millwood weighed points in ICI’s favour, with those that might count against it.

The experts are agreed that a failure rate of 5% is normal. Here, the situation concerning defects is not straightforward because when the experts were preparing their reports, it was still in issue between the parties as to whether the contract terms required MMT to perform radiography on all the welds. That point was conceded by ICI in its Closing Submissions and has its own separate section in this judgment “The concession on radiography”. The experts are agreed that many of the defects listed in Table 5 of BS:4677 (and observed by testing on some of MMT’s welds carried out in late 2014) could only have been detected by radiography. Both Mr Millwood and Mr Consonni however sought to expand criticisms of MMT rather wider by imposing upon MMT some sort of general and more onerous duty than compliance with the contract terms. For example, Mr Millwood stated in his report at paragraph 12:

“Whilst ICI may not have specified the technical requirements for the pipework fabrication as thoroughly as they should have, ICI was entitled to rely on MMT who were engaged as the experts in pipework fabrication and installation. It was therefore incumbent on MMT to be fully aware of the technical requirements and to manage the weld quality in a professional manner. In my opinion, MMT failed to do so.”

(emphasis added)

Such expertise on the part of MMT and consequential reliance thereon by ICI in terms of specifying the technical requirements for the pipework was no part of ICI’s pleaded case. Such an assertion by a welding expert – that, effectively, any deficiencies in the technical specification were to be laid at the door of MMT who was working to the specification, rather than ICI who had provided the detailed specification – goes obviously well outside the scope of expert evidence in any event, given the issues in this case. It might, in other circumstances and in other cases, be possible for an employer to maintain such a case against a contractor but, in my judgment, simply did not and does not arise in this case. Even if it had, such evidence of “reliance” would have required factual evidence from ICI witnesses who were involved at the time contractual relations were formed stating that they had so relied upon MMT, and in the absence of such factual evidence, such a case would fail. There was no contemporaneous factual evidence from ICI to support such an assertion or claim of reliance on MMT for expertise, and it is unclear to me why an independent expert should feel the need to include such hypotheses in his written report. However, even if it were appropriate for it to be dealt with by an expert, there was factual evidence in the case from Mr Wells in his first witness statement in which he stated “I was at that meeting [the Post-Tender Interview] and I recall warning ICI’s representatives about limiting the non-destructive tests to only Dye-Pen, which is why MMT had offered to carry out additional radiographic NDTs (for an additional cost) in the first place”. This evidence was wholly ignored by Mr Millwood, who did not refer to it at all. He simply chose to ignore the existence of important factual evidence on this very point. It was also barely challenged in cross-examination when Mr Wells gave evidence.

Additionally, Mr Millwood’s conclusions were undermined in my judgment by his resolute determination to stick to his percentage figure of 38% for defective welds, failing to take account of the fact that the sample of 412 which he had considered was not representative of all the welds, but was itself already limited to welds that had been identified by ICI as being defective. In other words, the 412 was already a sub-set of a wider total of welds that had been determined to be defective.

Mr Consonni too sought to give evidence on what the contract required MMT to do, and stated in paragraph 5.1.12 of his report that in his expert opinion radiography should have been used by MMT to test the welds. He concluded in paragraph 5.1.16(b)(ii) that the contractual documents required MMT to perform radiography to 10% of the welds. These are not matters of expert opinion. For what it is worth, they are views that are in any event in my judgment wrong, but his evidence on the matter is plainly inadmissible.

When preparing his report, Mr Consonni had no idea how much of the installation had been completed – he accepted that ICI’s contemporaneous documents showed this was nearly 90% - when complaints were raised about quality issues. He characterised the events as a mistake with MMT failing to apply radiography and boroscoping as part of the testing, when these are required by the British Standard. He described this as similar to another project he had been involved in where something was “missed in the project specification”.

He also accepted that the percentages for repair rates provided in his report were not based on projects where the testing regime changed part of the way through the project, which MMT maintain that it effectively did in this case. This is because no radiography was used by MMT prior to October 2014 because (as MMT argued at the time, and at trial) the contract did not require this to be done. That position was ultimately accepted by ICI at the end of the trial; however, rejection of welds for being defective from October 2014 onwards was based on the use of radiographic examination (and the presence of defects that could only be discovered by the use of such radiography) because at that time ICI was arguing that radiography was required under the contract. Mr Consonni’s analysis of percentages of failure were not comparing like with like. Mr Consonni agreed that this would change the defect rate, which is a sensible and obvious point.

The degree to which Mr Consonni was prepared to lay blame at the door of MMT for deficiencies in the contract specification was worded differently to the way Mr Millwood expressed it, but came to the same broad conclusions. Any deficiency was MMT’s fault.

This can be seen in the following extract from his cross-examination:

“Q: But it would be an explanation as to why far higher rates of weld defects were found on my project compared to these little numbers, that the method of NDT was changed. That would be an explanation, would it not?

A. No, I don't think that would be an explanation. The figures in table 1, which is what we're referring to, are first of all these are projects which are not directly comparable but are there to give an idea of reject rates in pipe products made partly or entirely of stainless steel. But there are other factors, as I said, which might be causing the reject rates to be higher. So I would not conclude that the reject rate was high because the NDT regime changed. I think there are other measures that should have been put in place, knowing that the NDT regime was inadequate from the start, and this was known by the fabricator [ie MMT] to pick up any other cause of defects, for example problems with the application of the welding procedures. You know, this one example, of chemical analysis of the material which may affect penetration, which is then the cause of -- root cause of problems like this lack of penetration or lack of root penetration that have been reported.

Q. If the client says to the contractor, "We don't want to pay for X-raying", if that is what they said, it is reasonable to assume, isn't it, that the employer is not concerned by certain categories of defect. Is that reasonable?

A.

I do not think that is reasonable to assume. I -- there are specific requirements in, for example, BS4677 which say that table 5, which had been discussed often in these days, applies, and any changes to those difference must be -- to those defect acceptance criteria shall be agreed between the parties or specified by the purchaser. In this case the purchaser, ICI, did not specify changes to the acceptance criteria.”

(emphasis added)

There are various points of note about this evidence, and about Mr Consonni’s evidence generally. Firstly, he accepted the case ICI was advancing at the time on the contract terms without troubling to consider what if the case on this issue by MMT turned out to be correct. Given this was an issue to be determined by the court, he should not have done so. Secondly, he sought to impose upon MMT liability for any inadequacy in the testing regime agreed by the parties at the time. Thirdly, he was imposing actual or imputed knowledge upon MMT that the testing regime agreed at the time was inadequate. Fourthly, this approach to his evidence (even if acceptable otherwise, which in my judgment it is not) was wholly undermined by ICI’s concession at the end of the trial that radiography was not required by the contract terms. Finally, he completely ignored that the testing regime that was used was expressly agreed by MMT with the ICI personnel at the beginning of the project. These factors again undermine the quality of his expert evidence.

Mr Parry, the expert called for MMT and who dealt with both welding quality and NDT, gave his evidence in a sensible and even handed way, and where there were matters that were plainly ones of dispute for the court to resolve – such as the contract terms – he identified this in both his written evidence and the experts’ agreements, and did not choose the side of the party who had instructed him, which was rather in stark contrast to the approach adopted by both Mr Millwood and Mr Consonni. His approach to the issue of sampling, and whether it was valid to extrapolate the findings of the 412 welds across to all the welding done by MMT was far more sensible than the approach of the other two experts. He had only been recently instructed, receiving instructions in March 2017 for a trial that was to commence in May 2017.

Mr Parry’s ability to give an opinion on small bore pipework was challenged, due to what was said by Mr Bowdery QC to be a lack of experience or expertise on his part of pipework of particular dimensions. I reject that criticism. Mr Parry’s expertise was in welding, regardless of dimensions of the pipework being welded. He was amply qualified in my judgment to give expert evidence on welding of smallbore pipework as well as larger bore and structural steel.

On all matters where the experts for the two parties hold different views, I prefer the evidence of Mr Parry for the reasons expressed above. I find his evidence to be wholly impartial and his independence to be uncompromised. His conclusions were sensible and did not seek to advance the case of the party instructing him. The same, regrettably, could not be said of Mr Millwood and Mr Consonni.

The documents forming the contract were:

I shall deal with the clauses of the contract itself, which was on the NEC3 form, in numerical order. There were amendments to the standard wording and I reproduce below the clauses as amended. Clause 11.2 (5) defines Defect as including:

“A part of the Works which is not in accordance with the Works Information…”

Clause 11.2(37) defines Contractor’s Documents as:

“All drawings, plans, designs, diagrams, details and specifications of materials, goods and workmanship, technical data, models, CAD materials, bills of quantities reports, calculations and other related documents and recorded information, of any nature whatsoever, which have been or will be written prepared and/or produced by or on behalf of the Contractor in connection with the design and/or construction of Works.”

Clause 11.2 (49) defines Project Records as including:

“… information, documents, records and the like, in the possession of, or available to the Contractor, and/or Related Persons, in each case relating to the Works and this Contract, including information, documents and records of:

•

the Contractor’s monitoring of its Provision of the Works against the Key Performance Indicators and its quality management systems…”

Clause 20.1.1 sets out MMT’s main responsibilities:

“The Contractor Provides the Works in a proper and workmanlike manner and in accordance with the Works Information and shall proceed regularly and diligently with the performance of its obligations and this contract…”

Clause 20.1.5 states:

“The Contractor warrants and undertakes that the Works when completed, will satisfy any performance specification or other requirements included or referred to in this contract.”

Clause 20.3 states:

“The Contractor shall not use or specify for use in the Works any Materials which contravene any British Standard Specification or Code of Practice or European Union equivalent relevant at the date of specification or use which are generally known to be deleterious to health and safety and/or to the durability of the Works in particular circumstances in which they are used. The Contractor shall impose a like obligation on all Sub-Contractors.”

Clause 22.1 states:

“The Contractor grants to the Employer an irrevocable, royalty-free and non-exclusive licence to copy and use the Contractor’s Documents and to reproduce the designs and Works contained in them for all purposes relating to or connected with the Works, the Site or in the property comprising the works…

If the employment of the Contractor under the Contract is terminated the Contractor hereby agrees that the licence in respect of the Contractor’s Documents granted pursuant to this Clause 22.1 shall continue in all respects, and shall not be affected by such termination and the Contractor shall when requested in writing to do so by the Employer, deliver up forthwith to the Employer two copies of the Contractor’s Documents.”

Clause 27.15 imposes on MMT an obligation to operate a quality management system:

“The Contractor will operate a quality management system which complies with the relevant parts of BS EN ISO 9001 and 9002 and has third part[y] certification from an approved accreditation body or is operating in preparation for accreditation within six months of the Contract Date. Prior to the starting date the Contractor prepares a quality plan and submits it to the Project Manager for acceptance. The quality plan incorporates:

•

The Quality Statement;

•

Quality requirements stated in the Works Information …”

Clause 27.8A imposes on MMT an obligation to provide the Contractor’s Documents requested by ICI:

“Before Completion, the Contractor supplies to the Employer, without additional charge, such Contractor’s Documents and related information as may be specified in the Works Information or as the Employer may request, showing or describing the Works as constructed and concerning the maintenance and operation of the Works including any Plant. Notwithstanding any provision to the contrary in this contract, the Contractor is not entitled to any payment of any amount retained pursuant to Clause X16 that would (but for this provision) become due and payable until the provisions of this clause 27.8 have been complied with…”

Clause 40.4 states:

“If a test of inspection shows that any work has a Defect, the Contractor corrects the Defect and the test or inspection is repeated” :

Clause 43.1 obliges MMT to rectify defects in the Works.

“The Contractor corrects the Defect whether or not the Supervisor notifies him of it.”

Turning to payment provisions, clause 50.1 states:

“The Project Manager assesses the amount due at each assessment date.”

Clause 50.2 states:

“The amount due is

•

The Price for Works Done to Date

•

Plus other amounts to be paid to the Contractor

•

Less amounts to be paid by or retained from the Contractor

Any tax which the law requires the Employer to pay to the Contractor is included in the amount due.”

Clause 50.4 states:

“In assessing the amount due, the Project Manager considers any application for payment the Contractor has submitted on or before the assessment date. The Project Manager gives the Contractor details of how the amount due has been assessed.”

Clause 50. 5 states:

“The Project Manager corrects any wrongly assessed amount due in a later payment certificate.”

Clause 52. States the following:

Clause 52.1 “All the Contractor’s costs which are not included in the Defined Cost are treated as included in the Fee. Defined Cost includes only amounts calculated using rates and percentages stated in the Contract Data and other amount at open market or competitively tendered prices with deductions for all discounts, rebates and taxes which can be recovered.”

Clause 55 obliges MMT to provide audit access to ICI in respect of the Works:

Clause 55.1 states: “The Contractor:

•

provides the right of access for the Employer, the Project Manager and other representatives of the Employer at all reasonable times to enter any of the Contractor’s premises or facilities to inspect or access the Contractor’s equipment (including computer hardware, software and databases) in order to monitor the Contractor’s compliance with its obligations under this contract;

•

provides the right of access for the Employer, the Project Manager and other representatives of the Employer at all reasonable times to:

◦

enter any Affiliates’ premises or facilities to inspect or access equipment (including computer hardware, software and databases);

◦

visit any Affiliates’ premises or site where Works or fabrication of equipment, components or materials for the Works is being carried out and/or which are being used as training facilities in connection with the Contractor’s Provision of the Works

In order to monitor the Contractor’s compliance with its obligations under the contract;

•

uses reasonable endeavours to provide the right of access for the Employer, the Project Manager and other representatives of the Employer at all reasonable time to:

◦

enter any Subcontractor’s premises or facilities to inspect or access equipment (including computer hardware, software and databases)

◦

visit any Subcontractor’s premises or site where Works or fabrication of equipment, components or materials for the Works is being carried out and/or which are being used as training facilities in connection with the Contractor’s or a Subcontractor’s Provision of the Works.”

In order to monitor the Contractor’s compliance with the Contractor’s obligations under this contract, the following clauses make the following provisions:

Clause 55.3 states:

“The Parties acknowledge and agree that damages shall not be an adequate remedy for breach of this Clause 55.”

Clause 56 states:

“The issue of any payment certificate or the payment of any amount by the Employer to the Contractor does not constitute or imply or be evidence of the Project Manager’s, the Supervisor’s or the Employer’s approval or acceptance of any design, work, Plant and Materials forming part of the works or relieve the Contractor of any of his obligations under this contract.”

Core Clause 63 provides for the assessment of compensation events, including changes to the Works Information instructed by the Project Manager, excluding any change instructed in order to accept a Defect.

Clause 63.4 states:

“The rights of the Employer and the Contractor to changes to the Prices, the Completion Date and the Key Dates are their only rights in respect of a compensation event.”

Clause 63.5 states:

“If the Project Manager has notified the Contractor of his decision that the Contractor did not give an early warning of a compensation event which an experienced Contractor could have given, the event is assessed as if the Contractor had given an early warning.”

Clause 63.6 states:

“Assessment of the effect of a compensation event includes risk allowances for cost and time for matters which have a significant chance of occurring and are at the Contractor’s risk under this contract.”

Clause 63.7 states:

“Assessments are based upon the assumptions that the Contractor reacts competently and promptly to the compensation event, that any Defined Cost and time due to the event are reasonably incurred and that the Accepted programme can be changed.”

Clause 63.10 states:

“If the effect of a compensation event is to reduce the total Defined Cost and the event is

A change to the Works Information or

•

A correction of an assumption stated by the Project Manager for assessing an earlier compensation event the prices are reduced.”

Clause 63.12 states:

“Assessments for change Prices for compensation events are in the form of changes to the Activity Schedule.”

Clause 63.14 states:

“If the Project Manager and the Contractor agree, rates and lump sums may be used to assess a compensation event.”

The contract terms concerning termination are as follows. They are for the most part contained in clauses 90 and 91.

TERMINATION TABLE

Reasons for termination are dealt with in clause 91.

As has been referred to above, there was prior to and during the trial a contentious issue about the testing regime which MMT were required to apply, and whether this required radiography. This issue reared its head during the works in the second half of 2014, after the AkzoNobel team including Mr Boerboom and Mr Brugman became involved in the project. This was finally conceded by ICI in its written Closing Submissions. This concession was dressed up as arising from the evidence of Mr Boerboom on Day 3, when he accepted there was a “deviation” from the British Standard. However, it is clear on the face of the documents – in particular the minutes of the Post-tender Meeting in January 2013 that Mr Wells attended – that such testing, namely 10% dye penetration and not radiography, was expressly agreed by the parties in early 2013 as the testing regime. Mr Boerboom’s evidence on the matter was neither here nor there; he did not even come to the project until some 18 months or so after the agreement was made, and the terms of the contract regarding testing are points of construction. This concession should be seen for what it is, namely a retreat by ICI from a wholly unarguable position. That retreat, however, did not come until nearly three years after ICI first started arguing to the contrary with MMT, and at the very end of the trial of liability. The degree to which this dispute coloured relations between ICI and MMT from about September, but particularly October 2014 and on into early 2015 cannot be overstated. The AkzoNobel project management team, in particular Mr Boerboom but all working under or for him, were simply adamant that radiographic testing was something that MMT had been contracted to do, and should have been doing throughout the contract works (of about 18 months duration). MMT adopted the contrary position, one which has been fully vindicated by the concession made by ICI at the end of the trial.

However, the fact that this position was maintained by ICI for so long, and particularly during the period October 2014 to February 2015, means that all the analysis and discussion during those crucial months was taking place from ICI’s side from the standpoint that radiographic testing was required under the contract. In other words, ICI were wrong about the testing regime that ought to have been applied to MMT’s works. Concessions in litigation are to be welcomed. However, this concession came at about the very last moment it was possible to be made. Everything that was done in this case by ICI prior to the stage at which written closing submissions were lodged was (prior to the concession) from the stand point that MMT was in breach of its contractual obligation by failing to perform such radiography. Although the making of the concession does not undermine the whole of ICI’s case on all the subject matter of all the Agreed Issues, in this case and on these facts the point does go to the very heart of what AkzoNobel had been doing in the period October 2014 to February 2015. For what it is worth, I would have accepted MMT’s case on this Issue in any event. However, Mr Boerboom struck me as a highly intelligent individual. The members of Steer Co are probably all very highly intelligent people too. Given the recording in the actual minutes of the Post Tender Meeting of this very point, it cannot have been a point that Steer Co thought in the period October 2014 to February 2015 would be resolved in ICI’s favour. This contractual “issue” loomed over almost everything that took place in that period, and had a very considerable effect upon relations between ICI and MMT.

This litigation is self-evidently between the claimant, Imperial Chemical Industries Ltd, and MMT. ICI was the contracting party, which as I have explained is a wholly owned subsidiary of AkzoNobel. There was no differentiation by the claimant at the trial between those who were ICI personnel and those who were AkzoNobel personnel. However, at the time (and in Mr Wells’ witness statement) there was a distinction drawn between ICI and AkzoNobel. Mr Wells refers to the “original ICI project management team” and “the AkzoNobel project management team”, which had Mr Boerboom as its head and which took over in about July 2014. It is a distinction which I consider should be made, and it is one that I adopt.

Indeed, there do not seem to have been any appreciable problems between ICI and MMT on this project before the summer of 2014. I find as a fact that the inspection regime that MMT established prior to the commencement of the works was approved by those at ICI, and the Project Manager, before any physical welding commenced in the usual way. Indeed, for MMT not to have obtained such approval would have been extreme folly; there is nothing to suggest that the management at MMT were that foolish. MMT was a well-run and experienced specialist company in the field and failing to obtain approval for the way in which the works for the project were to be performed would have made no commercial sense. None of the ICI personnel involved at the time were called as witnesses to give evidence that this was not so, to contradict the evidence of Mr Wells. Mr Wells’ evidence was challenged in this respect but the challenge was an arid one; no evidence to the contrary could be identified or put to him, and almost the entirety of the contemporaneous documents (including e mails from Mr Blythe) made it clear that Mr Wells was telling the truth.

Of the three witnesses of fact called for ICI, the only two who were involved prior to February 2015 were Mr Brugman and Mr Boerboom. Both of these were AkzoNobel personnel, and part of the AkzoNobel project management team, and only arrived at the project in the middle of 2014. The group who took the decision to terminate MMT’s contract, Steer Co, was an AkzoNobel entity and nobody from the original ICI project management team was involved in that decision. The person who took the decision to terminate MMT’s contract was Ms Trudy Schoolenberg, an important point which Mr Boerboom told the court. Nor did the ICI project management team have any separate decision making function or committee involved in the project, at least during the period November 2014 to February 2015, and probably from about July 2014 when the AkzoNobel project management team was installed.

Given the modest size of the contract sum for the works originally let to MMT, which was in the region of £1.9 million, it can safely be said that, regardless of the amount of the final account, the work the subject of the contract grew to a far larger amount than the originally intended scope. There were in excess of 250 PMIs, which is a large number, particularly on a contract of an initial value of less than £2 million. PMI03 expanded the scope of the original works very considerably, as I have stated, but there were obviously a very large number of other PMIs. Even on ICI’s case, the final contract sum will be in the order of £10 million, and MMT were paid during the works approximately £20 million. MMT’s case is that it is still owed approximately £2.8 million. The works were therefore dramatically enlarged in scope from those originally intended, on any view.

The progress and rise in expenditure led to a sea change in terms of the approach of the Employer (whether controlled by ICI or AkzoNobel) to the project in the middle part of 2014. The degree to which what was originally intended for the Plant by the ICI project management team, and how that changed over time, may or may not suggest that the initial design was considered to be inadequate. Regardless of that, the contract personnel were changed, and Mr Boerboom was brought in as the project manager for ICI. The names of other personnel, who had appeared extensively involved prior to this period, simply disappear from the e mail and correspondence, and they appear to have ceased to be involved in any way at all. No evidence was given to the court about why this happened, or where these people were redeployed. There was an internal review performed, entitled “Project Fresco Review”, dated 7 May 2014 and in that document the decision making within the Employer Engineering Department during the project is heavily criticised, including criticism of Martin Blythe who had been in charge of the project for ICI. The criticism also includes that there was an incomplete FEED study. FEED is an acronym for Front End Engineering Design; references to it in this document state that the design of the project was inadequate, and also included numerous erroneous assumptions. The document is heavily self-serving by the author, who seems very keen to ensure that no blame could be directed in the author’s direction, and I heard no evidence either from the author or from Mr Blythe about any of these matters. What the document does is confirm that the project was seen within AkzoNobel in the middle of 2014 as being seriously off-track, with multiple failings on the part of ICI.

Further, in the autumn of 2014 the AkzoNobel team decided simply to stop paying MMT. These decisions were taken at about the same time as Mr Boerboom was appointed Project Manager in place of PROJEN. Since 1996 in the United Kingdom no employer on a construction contract has an unfettered right to stop (or reduce) instalment payments to a contractor without following some basic procedures, which are set down in statute, originally the Housing Grants, Construction and Regeneration Act 1996, supplemented by the details contained in the Scheme for Construction Contracts (England and Wales) Regulations 1998 (Statutory Instrument 1998 No.649) and more recently amended in the Local Democracy, Economic Development and Construction Act 2009. Originally termed withholding notices, then payless notices, a system of notification was created so that a contractor was entitled to know how much was being withheld by an employer, or deducted, from interim payments and (in broad terms) why. Those involved for ICI from AkzoNobel seem to have approached the matter from October 2014 onwards as though such legal requirements simply did not apply to this contract with MMT at all. Some suggestion is made by MMT that this was because those involved were brought to the project from the Netherlands where the legal framework for such contracts is different. Whether that does, or does not, explain what occurred does not much matter in my view – and what Dutch law does, or does not, require does not matter either -- because this construction contract was obviously governed by English law.

MMT therefore found itself, in November 2014, having issued Application No.22 in the sum of £7.559 million, being faced with ICI not paying anything towards that at all. So far as AkzoNobel and ICI was concerned, no sum would be paid, and no sum was due. At this time, all welding work had been suspended by direct order of the new Project Manager, Mr Boerboom, who prior to this had been the project manager for ICI and could therefore not immediately be seen as impartial. This is a sizeable sum for a contractor not to be paid, and doubtless represented a significant commercial concern for MMT. Further, the relatively recently arrived AkzoNobel contractual team, including Mr Brugman, took the view that radiographic testing was required of the welding and that MMT should have been performing this from the beginning of the project works. Given this is expensive, and that MMT had expressly qualified their tender almost 2 years before and had clearly stated that this was not included –that qualification being agreed by ICI at the time and minuted to this effect in one of the documents given contractual status as an attachment to PMI03 – it is not difficult to see why ICI and MMT were not likely, readily, to agree on this point. Apart from anything else, MMT had been working on this project for about 20 months at the very least, not doing radiographic testing. Mr Brugman and Mr Boerboom also took the view that the specification to which MMT (and ICI prior to mid-2014) had been working was old and inadequate. In very basic language, AkzoNobel by Mr Brugman and Mr Boerboom decided that the contract works should have been different to the ones that MMT had in fact been performing over such a prolonged period of time.

The interesting point to note at this stage is the main focus at the liability trial was on the quality of the welding performed by MMT and the testing regime. This took a large proportion of the time available at the time of the trial. However, at the time in November 2014, such complaints were not relied upon by ICI to justify wholesale non-payment of Application No.22. Indeed, and as recounted by the adjudicator in his decision in Adjudication No.1, the certificate in which ICI identified what it considered was due (in ICI’s direction, because there was a negative valuation) included a deduction for defective welds in the sum of only £1,322,830.60. Indeed, that was the sum that ICI in Adjudication No.1 maintained in early 2015 should be deducted for defective welds. If, at that time, ICI had genuinely considered that a far higher sum should be deducted for defective works, then I would have expected that far higher sum to have been relied upon in that adjudication. The fact that it was not suggests to me that sums larger than £1.3 million were not seriously held as an approximate value of the defective works. The far larger deduction of £6,326,510.43 was advanced by ICI in December 2014, and during those adjudication proceedings, as being justified as a deduction arising out of the valuation of variations performed by MMT. Although it is therefore claimed in the liability trial by ICI that MMT’s works were so defective that the behaviour of ICI in terms of the interim payment, and indeed in the dispute with MMT generally, was justified, this was not something that was relied upon to that extent contemporaneously.

ICI are not bound in these proceedings to a maximum recovery for defective welds in the sum of £1,322,830.60. However, the point is of note for the following reason. It demonstrates that at the time in November 2014, even the team headed by Mr Boerboom on the project did not consider that the defects justified wholesale non-payment of the Application No.22. At that time, the reason being used was the valuation of variations (in which the trial process has shown PROJEN were under express instruction to seek AkzoNobel approval for any sums, regardless of Mr Barton’s separate professional view). That reason, justified contemporaneously for non-payment, has substantially fallen into the background for the purposes of this trial, and the main thrust of ICI’s case in this liability phase concerns defective welds. The valuation of variations is something that would come to be considered at the quantum phase, but is not being relied upon by the ICI witnesses of fact in this phase to justify ICI’s the behaviour in November 2014 to February 2015. Mr Brownlee was not even involved before February 2015. I consider that this change of approach substantiates, and further justifies, my finding that Mr Boerboom’s attitude in the autumn of 2014 was not to pay MMT anything more, regardless of MMT’s contractual entitlement. MMT did not however know this. I find that the decision was taken by Mr Boerboom – no more payment would be made to MMT – and then reasons searched for after that decision, in order to attempt to justify this.

Relations between the parties were not therefore entirely amicable in November 2014. An attempt was made to negotiate a way forwards, and this was why a Without Prejudice meeting was held on 13 November 2014. Three people were present. John Schelhaas and Martin Westerlund for AkzoNobel/ICI, and Mr Wells for MMT. Only the latter gave evidence before me. Neither of those present at that meeting for ICI provided witness statements, nor was any explanation provided for their absence. In reality, AkzoNobel was entirely in control of the project at this stage (and had been for some months) and no separate personnel for ICI had any involvement, either autonomously for ICI as a separate legal entity, or even under the authority of AkzoNobel. Documents that have emerged in disclosure show that after this meeting, at which an “in principle” agreement was reached by the parties, the AkzoNobel senior personnel sought to record in a written offer (itself marked Without Prejudice) to MMT the basic components of that in-principle agreement. It was contained in what I refer to as the 10 Point Letter, and from MMT’s point of view the most important element was the payment to it of £2.75 million. That figure was reached as a horse-trade. ICI offered £2.5 million, and Mr Wells wanted £3 million. They settled half way between those two figures.

It is however clear that different personnel within AkzoNobel had different points of view about the desirability of this agreement, after it had been concluded in principle. Mr Brugman in his oral evidence bluntly stated that he did not agree with it. Given that he also told the court that he was not involved in commercial matters at all, it is unclear to me why he should have had a view on it one way or the other. He referred to John Schelhaas as “one of the big bosses” and explained that he was a member of Steer Co.

Mr Boerboom said that he did not agree with the contents of the 10 Point Letter either, and the e mails available in disclosure that were sent by him at the time show that he did everything he could to present potential problems for AkzoNobel as being very sizeable in terms of costs exposure if such an agreement were made – quite enormous figures of £12 million plus were simply bandied about as a possible bill for remedial works – and he expressly stated that his credibility and that of his team was being undermined. He also suggested that personnel who were involved in the project would be so upset by such an agreement that they might leave, and could not be readily replaced. All of this behaviour was designed to scupper the proposed arrangement with MMT. This did indeed have the desired effect upon those senior to him, and he successfully steered Steer Co away from a compromise. Steer Co therefore decided to withdraw authorisation for the payment. However, nobody told MMT that.

As a result of what should be described as the AkzoNobel project management team only concentrating on those parts of the 10 Point Letter that suited it, and ignoring all the others, the following happened. The points identified in that letter were treated by AkzoNobel as being finally agreed and binding upon MMT, whereas the parts imposing obligations upon ICI (in particular the payment of £2.75 million to MMT) were not, and were ignored. That wholly one-sided approach by ICI has continued throughout this litigation. Mr Bowdery QC, in his oral closing submissions, even went so far as to draw a parallel between MMT’s behaviour in seeking to agree a deal with ICI in this case, with the behaviour in the case of De Beers UK Ltd v Atos[2010] EWHC 3276 (TCC) where one party refused to comply with its contractual obligations and would only continue the project on new, more advantageous, terms. Such parallels are, in my judgment, wholly misplaced in terms of criticism of MMT’s behaviour. The only party that was seeking to impose other, more onerous, terms on the other was AkzoNobel/ICI who were seeking to do so upon MMT.

It is entirely correct that the terms of the 10 Point Letter were not finally agreed by the parties and it did not lead to a binding legal agreement. Neither party argues that it did, and it was rather overtaken by events in February 2015. However, in my judgment it is not valid for ICI to concentrate (as it did at trial) upon, for example, MMT’s “agreement” to jointly appoint, and abide by, the decision of the third-party welding inspector on quality of welds, and strongly to criticise MMT for allegedly refusing to do so, when that aspect of the matter was part of an overall agreement in principle that included payment to MMT of £2.75 million that was simply never paid. Given that nobody at AkzoNobel/ICI told MMT that this sum would not be paid, even after the decision had been taken by Steer Co in December 2014 specifically that approval to do so was withdrawn and it would not authorise such a payment, this meant that MMT went along with the process of appointment and inspection by a third-party welding inspector, believing that it was fulfilling its side of the bargain struck in the 10 Point Letter.

Further, there were other aspects of the 10 Points that required action first from ICI, and that action never took place. ICI essentially had to decide how it wanted to proceed on the project in general, and to what specification it wished to have the pipework constructed (in terms of the relevant standard and testing). This was the consequence of Mr Boerboom (and also Mr Brugman) realising that the specification agreed by ICI in the contract works before their involvement was potentially of a lower standard than was ideal for water-borne paint, rather than for solvent-borne paint. At that point, there was still an ongoing dispute between the parties (that continued until Friday 19 May 2017 and the concession in ICI’s written Closing Submissions) with ICI maintaining that the contract had always required MMT to perform radiographic NDT of the welds. MMT’s position on this important point was finally vindicated by the concession at the end of the trial that was given in respect of Issue 1.

The only principles, if principle is the right term, that the AkzoNobel project management team were applying to the contract in late 2014 and into January and February 2015 was their own self-interest. No regard at all was being had to the contractual specification, or the qualification of the MMT tender that had been made in 2013 regarding dye-penetration (and hence not radiographic) testing only. No regard was had by the AkzoNobel project management team to the payment terms of the MMT contract, nor to the contractual/statutory requirements in terms of relevant payment notices, nor to the necessity and importance of interim payments generally in this jurisdiction. No regard had been paid since October 2014 to the independent role of Project Manager under the contract, and who should or could have been appointed in PROJEN’s stead to perform that important role. No regard was being had to those elements of the 10 Point Letter that required any positive steps to be done by ICI.

ICI instituted an audit of MMT’s account, and this was performed by a practice called Coppa Associates. This was therefore called the Coppa audit. There may have been a hope at AkzoNobel that this would uncover something that could be used against MMT. Instead, it did not, and broadly vindicated MMT’s financial account. In the assessment performed internally by AkzoNobel dated 6 January 2015, when the first round of the Coppa exercise was either completed or nearing completion, Mr Shuttleworth wrote in an e mail the following:

“Assuming Coppa are correct and based on invoice value from [MMT], we owe [MMT] £6.12m. The Capex budget allows for £3.2m for further [MMT] spend…..[AkzoNobel] can only pay [MMT] a maximum of £3.2m.”

Whether or not the precise figures in that e mail are correct – and MMT rely upon the fact that later analysis by Coppa showed a higher figure due to MMT of between £6 and £11 million– the sentiment in the e mail demonstrates the approach being taken to MMT’s contractual entitlement. The amount to which MMT was entitled in accordance with the contract terms was, so far as AkzoNobel and hence ICI were concerned, not of any relevance.

Notwithstanding this, the works were very substantially complete in any event. The instruction to stop welding had been given in October 2014 and some limited welding recommenced in January 2015, but that was on the pigging lines. The main works were, to all extents and purposes, done by this time, or at the very least, 90% done. In one of the PowerPoint presentations prepared for a Steer Co meeting dated 20 January 2015, for example, titled “Fresco project update”, it is recorded that Pre-Commissioning was underway. This could not have commenced if the works were in a state of only partial completion.

It is also recorded by AkzoNobel in that presentation, which MMT did not have sight of at the time, but which was provided in the disclosure process, that English law has an adjudication process which MMT could use “to pursue an accelerated claim which could result in a significant payment to MMT within 3 months. In order to avoid this….we urgently need to….. demonstrate that many welds are faulty and the situation is extremely complex so as the Judge says it is not possible to take a quick decision”. Under “Proposal”, the same page continues “we need to appoint a Contract Manager who can collect all relevant data and explore any fraudulent practices”. I should state here that “fraudulent practices” has never formed any part of the case against MMT, but demonstrates in my judgment that ICI/AkzoNobel were intent on exploring any and all options to avoid having to pay out any more money to MMT. There is no evidence that anyone prior to this at ICI or AkzoNobel ever thought any fraudulent practices had been used – however, this shows that the approach was to be that no stone was to be left unturned. The issue of the correct contractual entitlement on MMT’s part to further payment was simply never considered. The limit imposed by Capex was to be observed regardless of ICI’s contractual liability to MMT. The next page states “Avoid Adjudication process: demonstrate complexity of the case”. There are further clear references, in my judgment, to an attempt to avoid the effect of the legal impact of adjudication, regardless of the merits, or of MMT’s contractual entitlement. Whether welds were, or were not, faulty, and whether the situation was, or was not, complex, could not of course oust adjudication as a dispute resolution process, or prevent MMT from referring a dispute to adjudication. MMT was entitled to seek a decision from an adjudicator. It would be wrong to read too much into such entries in internal documents such as this, and I do not do so, but it does demonstrate the mindset at the time on the part of the members of Steer Co and their approach to the dispute with MMT.

In an update of 19 January 2015, the conclusions include that “MMT are well prepared, have a lot of accurate data/e mails and have a strong case” and “have had enough and expect payment”. There are further entries in the contemporaneous documents that demonstrate that AkzoNobel realised there would be considerable difficulties in any formal dispute with MMT. This was a wholly accurate summary of the situation. MMT were not obviously in breach of contract, and certainly not in repudiatory breach of contract. Some members of Steer Co favoured resolving the dispute with MMT, and pointed out that this would be cheaper in the long run; other members, and in particular Mr Boerboom, were diametrically opposed to this. Mr Boerboom was involved in presenting figures that became increasingly large in terms of how much it would cost to correct MMT’s welding – at one point this figure was inflated to over £12 million. The origin of this was however Mr Boerboom’s view that MMT were to be held to a far more onerous specification than the one to which MMT had agreed. The inconvenient fact that ICI had contracted with MMT to provide something less onerous than the one Mr Boerboom wanted was swept to one side.

When such internal material, which was distributed and discussed internally at AkzoNobel, is taken into account, in my judgment it shows that what was driving the act of 17 February 2015 when MMT were ordered by Mr Boerboom to leave site was not widespread dissatisfaction with the quality of the welds done by MMT. It was chosen as a commercial route to avoid having to pay MMT any more money. In my judgment the contemporaneous correspondence is consistent with MMT’s case that there were no proper grounds for making allegations of repudiatory breach against MMT in the first place, and the “repudiation” was a device simply designed to remove MMT from the project, and possibly also to cause irreparable financial damage to MMT. The individual breaches have to be considered in any event, and I do so in those sections of this judgment below.

The contract between the parties was on the NEC3 Engineering and Construction Contract, Third Edition (June 2005) with amendments June 2006 and September 2011, Main Option “A”, core clauses with dispute resolution option W2 and Secondary Options X2, X4, X7, X13, Y(UK)2, Y(UK)3, X18 and Additional Clauses Option Z. Both the Project Manager and indeed the Supervisor named in the contract was PROJEN plc. Although there were various amendments to certain elements of the contract that were particular to this project, the contract form itself – widely referred to in the industry simply by the shorthand as “the NEC3” – is a very widely used standard form. In common with widely used standard forms, it includes within it provision for a third party entity, here PROJEN, to act as the Project Manager. About two months later, on 11 February 2013, the parties entered into a Memorandum of Agreement, which consisted of a schedule of amendments to the contract. It was signed by Mr. Masterson, the Commercial Director of MMT on 11 February 2013.

The majority, if not all, of the commonly used standard forms of construction and engineering contracts, have express provisions within them for the involvement of a third party entity who is central to the operation of the contractual provisions. In some contracts this entity is termed the Architect; in others the Construction Manager; in some – such as this one – the Project Manager. Their duties can broadly be considered as falling into one of two functions. One is the “agency function”; an example of this is instructing variations, acting on behalf of the employer. The other is the “decision-making function”. This is quite different and is where the decision-maker has to reach decisions on matters where, at least potentially, the contractor and the employer have opposing interests. That categorisation of the two different types of function is explained by Jackson J (as he then was) in Scheldebouw BV v St James Homes (Grosvenor Dock) Ltd [2006] EWHC 89 (TCC) at [21].

In that case, the contract in question between the contractor, Scheldebouw, and the employer, St James Homes, was a trade contract (there were in fact three separate trade contracts for three different buildings, but that is not relevant for present purposes). The contractor was to design and install the cladding on the three separate buildings. By a separate agreement, the construction management agreement or CMA, the employer engaged MACE to act as the construction manager. The construction manager was named as MACE in the trade contract, and was the decision maker for the trade contracts. Part of the way through the works, MACE and the employer agreed that MACE would no longer act as the construction manager, and the employer sought to appoint itself to act as the construction manager. The contractor issued proceedings seeking declarations that this was not something that the employer could do, and by doing so was in repudiatory breach.

The judge heard preliminary issues which are set out at [17] in the judgment. One of them was whether the employer was entitled to appoint itself as the construction manager. In considering and deciding that issue, the judge considered the two different types of function of the construction manager, and at [25] to [34] considered all the relevant authorities over a lengthy period of time that deal with such matters. At [33] and [34] he stated the following, which are of wide application.

“33.

Let me now draw the threads together. In many forms of building contract a professional person retained by the employer, and sometimes a professional person directly employed by the employer, has decision-making functions allocated to him. I will call that person "the decision-maker". The decisions which he makes are often required to be in the form of certificates, but this is not always so. For example, there are many contracts (of which the present one is an instance) in which extensions of time do not take the form of certificates.

34.

Three propositions emerge from the authorities concerning the position of the decision-maker.

(1)

The precise role and duties of the decision-maker will be determined by the terms of the contract under which he is required to act.

(2)

Generally the decision-maker is not, and cannot be regarded as, independent of the employer.

(3)

When performing his decision-making function, the decision-maker is required to act in a manner which has variously been described as independent, impartial, fair and honest. These concepts are overlapping but not synonymous. They connote that the decision-maker must use his professional skills and his best endeavours to reach the right decision, as opposed to a decision which favours the interests of the employer.”

(emphasis added)

The judge then went on to decide the preliminary issues. In relation to the preliminary issue asking whether the employer could appoint itself as the construction manager, the judge decided that it could not do so. His reasons for that conclusion are nine in number and are included at [45]. They are reproduced here for convenience.

“(1)

It is such an unusual state of affairs for the employer himself to be the certifier and decision-maker that this can only be achieved by an express term. In the present case there is no express term authorising this, as there was in Balfour Beatty. The general words at the end of Part E of Appendix 1 to the trade contract are not sufficient.

(2)

The whole structure of the trade contract is built upon the premise that the employer and the construction manager are separate entities. Endless anomalies arise if the employer and the construction manager become one and the same. For example, under clause 1.6 the employer issues certificates to himself. Under clause 21 the scheme for dispute resolution becomes distorted. The employer will, by definition, be in agreement with his own decisions. The only party which might feel the need to challenge certificates or decisions would be the contractor.

(3)

The construction manager is under a legal duty to perform his decision-making function in a manner which is independent, impartial, fair and honest. In other words, he must use his professional skills and his best endeavours to reach the right decision, as opposed to a decision which favours the interests of the employer: see Part 4 above. Whilst I reject Mr. Hughes' submission [for the contractor] that the employer is incapable of performing this task, I do consider that this task is more difficult for the employer than it is for a professional agent who is retained by the employer. Furthermore, this task is more difficult for the employer as an entity than it is for a specific individual who is employed by the employer. A senior and professional person within an organisation can conscientiously put his employer's interests on one side and make an independent decision. See Perini. It is more difficult for the organisation itself to make a decision which is contrary to its own interests. The employer could of course ask a named professional employee to make the relevant decision, but the employer would still have to go on and adopt that decision as its own.

(4)

In the course of argument Mr. Dennison [for the employer] conceded that the words in Part E of Appendix 1 "any further or other person" cannot mean literally any other person. The term must be limited to persons who have the requisite competence. When I asked whether this limitation was express or implied, Mr. Dennison inclined to the view that the limitation was express but he wished to reserve his position. It seems to me that Mr. Dennison's concession was an entirely proper one. The phrase "any further or other person" cannot be read literally, it must be read subject to at least some limitation.

(5)

Mr. Dennison is correct that, in one sense, both the employer and the contractor have an interest in securing that the construction manager makes correct decisions and issues correct certificates. There are dicta in the authorities to this effect. On the other hand, this argument of identity of interest cannot be pressed too far. Anyone who has practised or sat in this court will have seen many cases where the stance of both employer and contractor is driven by their own commercial interests rather than by any more lofty ideal. Property developers are in business to make a profit. They do not always welcome large awards of loss and expense to the contractor, however well merited such awards may be.

(6)

Under the trade contract in this case, and indeed under most standard forms of construction contract, the contractor has two separate protections which reduce the likelihood of under-assessment or under-certification occurring. First, the assessment or certification is made by an identified professional person or firm who (despite being employed and paid by the employer) is nevertheless separate from the employer. Secondly, the decision-maker has a duty to act in a manner which is independent, impartial, fair and honest. If the employer suddenly becomes the assessor and certifier, the contractor loses one layer of protection. As Mr. Hughes forcefully put it in argument, a contract in which the employer acts as construction manager is very different from the contract which Scheldebouw priced at tender stage.

(7)

The involvement of other professionals in the construction manager's decisions is not a sufficient protection for the contractor. Neither the architect nor the cost consultant can compel the construction manager to issue a certificate which is unacceptable to him. In the case of extensions of time no certificate is required. The construction manager must consult the architect, but he need not accept the architect's advice. Extensions of time are, of course, relevant not only to damages for delay but also to loss and expense.

(8)

So far as my researches go, every case in which the certifier was a direct employee of the employer is a case in which this circumstance was known to the contractor at the outset. The contractor went into such a contract with his eyes open. The seventh edition of Keating on Building Contracts (edited by Vivian Ramsey Q.C. and Stephen Furst Q.C.) indicates that the contractor's knowledge may be an essential element: see the second paragraph on p. 147. The one reported case where this aspect of the facts is not entirely clear is Panamena. However, Panamena proceeded on the basis that the repairers had expressly consented to Dr. Telfer acting as certifier: see the judgment of Lord Justice Scott at p. 123.

(9)

As Mr. Dennison conceded in the course of argument, if his interpretation of Appendix 1, Part E is correct, the employer is entitled at any time to dismiss the entire professional team and appoint himself to act in their place. The employer would thus become the construction manager, the architect and the costs consultant. In response to my suggestion that this situation could not have been intended by the parties, Mr. Dennison characterised this as "the Armageddon scenario". The analogy with chapter 16 of the Book of Revelation is appropriate. The contract would be utterly transformed from that which Scheldebouw had priced. This possible scenario is a further reason why I reject the broad interpretation of Part E of Appendix 1 for which Mr. Dennison contends.”

In my judgment, exactly the same analysis applies to the contract here between ICI and MMT and Jackson LJ’s reasons apply to this contract too, and indeed to most if not all of the standard contract forms in this field. To be fair to Mr Bowdery QC, he does not rely particularly upon that at (5), identity of interest, but he also advances another reason, which is that the contractor has protection from an employer decision-maker in the form of the dispute resolution provisions and the ability to seek a rapid decision in adjudication. The exact way in which he put it in oral submissions in opening is as follows:

“An employer can employ his own employee to act as Project Manager, providing he acts impartially and the check and balance to ensure he should act impartially is the fact his decisions, or non-decisions, can be challenged by adjudication.”

I do not consider that the existence of adjudication as a dispute resolution process alters the analysis by Jackson LJ (or Jackson J as he then was), and I consider the submissions by ICI on this point to be contrary to authority, at least so far as there is no express term permitting it. Firstly, adjudication was part of the dispute resolution landscape in 2006 when Scheldebouw was argued, and even though that particular argument was not advanced before the judge, he could not be thought to have been ignorant of it – he was after all the Judge in charge of the Technology and Construction Court, where such decisions were then enforced, and still are. In any event, such an argument is, with respect, off the point. The identity of the decision maker is central to the operation of the contract; dispute resolution is for when disputes have arisen, and not an answer to the central operation of the contract terms.

It is contrary to the whole way in which the contractual mechanism is structured, and intended to work, to have the employer seek to appoint itself (or one of its employees, or an employee of its parent) as the decision maker. As Scheldebouw makes clear, “the whole structure of the …. contract is built upon the premise” that the employer and the decision maker are separate entities, and “endless anomalies arise if the employer and the [decision maker] become one and the same”. It can be seen that, so far as the alternative argument put forward by the employer concerning contractual termination is concerned, the giving of notices under the termination procedures in clause 91 of the contract are required to be given by the Project Manager, not by the employer. If the employer and the Project Manager are the same entity, then notices would be coming from the employer in reality, but dressed up as though they were from the Project Manager, and notification(s) would be given by the employer (as though it were the Project Manager) to itself. This is not how the contract is designed to work, either by intention, or indeed by its terms.

In my judgment, one need go no further than the reasons in Scheldebouw at [45](1), (2) and (3) to conclude that the arguments by MMT on this point are plainly to be preferred. Such a situation is so unusual that an express term is required. There is no such express term here. The situation which ICI sought to impose upon MMT by appointing Mr Boerboom as the Project Manager was fundamentally different to that for which MMT tendered, and contracted. This is the case even though Mr Boerboom was formally employed by AkzoNobel and not ICI. AkzoNobel was and is the parent company of ICI, and he was acting as the project manager for ICI prior to his purported “appointment” as the Project Manager. He was the very opposite of independent on the facts of this case.

Mr Barton himself plainly realised the difficulties in the position in which AkzoNobel had placed him. Mr Conrad of AkzoNobel sent an e mail to Mr Barton on 8 October 2014 which stated the following:

“This e mail is an official instruction to you that any revision of assessments on PMIs with Merit Merrell will need to be signed off by myself and Theo Brugman before they will be included in the certification each month. This goes for upwards and downwards revisions.”

In an e mail of reply dated 9 October 2014 copied Mr Conrad of ICI and copied to Mr Boerboom and Mr Brugman, Mr Barton stated:

“Further to your e mail below and the previous instruction from [Mr Boerboom] and [Mr Brugman] I believe that an amendment to the Contract is now required to give AkzoNobel full responsibility for the contractors.

As you are aware Projen plc are named in the Contracts with [MMT and others] as the Project Manager. Under the NEC3 Contract the Project Manager carries a lot of responsibilities in terms of the administration of the Contract. As I am no longer empowered by the Employer to carry out these responsibilities it is, I believe, time to change the Project Manager to AkzoNobel”.

Mr Barton was wholly correct; the instruction to him that AkzoNobel had to “sign off” – which means agree with – any revisions of assessments before they could be included in the monthly certification meant that AkzoNobel had removed certain (if not all) of the powers that were essential for Mr Barton to act as the Project Manager. He had no option but to resign.

As this and other similar correspondence shows, prior to PROJEN’s resignation AkzoNobel had interfered with the proper exercise by PROJEN of its duties and I find as a fact that this is why PROJEN resigned.

AkzoNobel and any of its employees or officers were not sufficiently independent – indeed, were effectively the employer under the contract by another name – to act as Project Manager. I find that no proper appointment was made of a replacement Project Manager under the NEC3 terms, following Mr Barton’s resignation which occurred on 9 October 2014 “effective immediately”. Further, I find that the purported appointment of Mr Boerboom as his replacement was a breach of contract by ICI.

However, MMT did not characterise the appointment of Mr Boerboom as Project Manager as breach of contract, or a repudiatory breach, at the time, and did not seek to accept it. In law, a repudiatory breach that is not accepted does not have any effect. Whether the breach by ICI in this respect is properly so characterised or not does not therefore matter for present purposes. It does however impact upon the arguments advanced by ICI about the proper characterisation of what occurred on 17 February 2015 when MMT had its involvement in the contract brought to an end. It means that there was no Project Manager.

I am satisfied on the evidence that the specification for the installation, and in particular the quality of the welding and the testing that was required, was changed by AkzoNobel in the autumn of 2014. This conclusion is amply supported by the contemporaneous documents. Mr Boerboom (and also Mr Brugman who was acting under Mr Boerboom) decided that radiography was required, and indeed came to the conclusion that radiography should always have been part of MMT’s testing regime from the beginning. This meant that all and any analysis carried out by AkzoNobel was comparing MMT’s welds against a different standard to the one for which they had contracted. Mr Boerboom set about investigating the need for radiography in order to justify the conclusion that he had already reached. In October 2014 someone called Roberto Matsunaga, an AkzoNobel employee with expertise in this field who was in Brazil, was asked for his views about radiography, weld quality and the effect upon paint being transported in the pipework. He had a discussion about this with Mr Boerboom and then summarised it in an e mail dated 13 October 2014 to Mr Westerlund. He stated, inter alia, that sanitary tubing (the type being used at Project Fresco) was not “typically used” for paint applications (although there were two exceptions) and he did not know why it had been used here. He explained that the common practice within “Deco” – the particular part of AkzoNobel that deals with such installations – for inspections of welds was visual examination, hydro testing and leak testing. (It should be noted that all three of those were exactly what was agreed between ICI and MMT for the Project Fresco works, prior to August 2014. What MMT was contracted to provide therefore entirely matched common practice in “Deco” for such an installation). He said this testing was done to ensure mechanical integrity and not for reasons related to product quality. He stated “typically we don’t do any radiography”. He stated that lots of attention was paid to the hygienic aspect of piping design on waterborne paints to avoid bacteria growth, which was “the most critical situation we tried to deal with.” The presence of water meant that there was chance of bacteria growth, but this was dealt with by good design and not related to bad quality of welds. He said “the quality of weld I believe is not influential on bacteria growth” and periodic sanitization was utilised. He stated that poor welds would be detected during the hydro tests and leak tests.

Mr Blythe in an e mail of 11 November 2014 to Mr Westerlund of AkzoNobel stated, correctly, that the testing regime in the specification issued for tender was to have been a choice between 10% dye-penetration or radiography, with the former chosen as the one that would be adopted for MMT’s works. It is therefore clear to me from this that Mr Blythe, at least, never believed that MMT had been contracted to perform radiographic testing. He stated that the NDT regime proved not to be suitable, and radiography was then requested. Mr Boerboom in an e mail dated 14 November 2014 to Mr Schelhaas asked “Can we change the specification to a consistent appropriate level without additional costs charged by MMT?”, and this clearly demonstrates to me that ICI itself knew that the original specification which had been contracted for with MMT was not, by then, adequate for what AkzoNobel purposes had become. Mr Boerboom would not have used the word “change” otherwise. However, so far as MMT were concerned, the position of AkzoNobel/ICI remained that radiographic testing should have been performed by MMT from the outset. AkzoNobel therefore maintained a common front to MMT, and Mr Boerboom’s view of what was required internally as a “change” was not communicated to MMT.

I find as a fact that Mr Blythe and his colleagues expressly agreed with MMT that visual inspection only was acceptable and was the testing regime to be adopted, together with dye-penetration testing of 10% as demonstrated in the tender qualification. This visual inspection was done with torches and mirrors and Mr Blythe and his colleagues knew this, and agreed to it. At that time in 2013, nobody at ICI knew, cared or was particularly concerned that the presence of any characteristics in the welds, that could only be detected by radiography and might under that different and more stringent testing regime be categorised as “defects”. In so far as they did think about it, they would probably have agreed with Mr Matsunaga’s views as the common approach in Deco was that such higher quality welds would not make the remotest difference to the installation or the quality of the paint being produced. ICI was not concerned about radiography in 2013, and did not wish to contract with MMT at the higher contract sum that would have included the extra charge(s) of approximately ¼ million pounds for radiographic testing. This approach to testing, and the type and limited extent of testing required by ICI in 2013, is entirely supported by the contents of the e mail setting out Mr Matsunaga’s views.

Mr Parry explained in his written report that “not using boroscopes would severely reduce the effectiveness any internal visual inspection”. The testing regime adopted by MMT was visual inspection using torches and mirrors. It is not in issue that boroscope inspection was not used by MMT. Whether inspection by boroscope was, or was not, required by the contract terms is therefore a matter that I have to decide.

In the quotation provided by MMT to AkzoNobel and PROJEN for the works – the Invitation to Tender (“ITT”) issued by PROJEN identified ICI as the Employer, but the Addendum to the ITT stated “Client Akzo Nobel” and the piping specifications had the AkzoNobel name on the front page – dated 11 January 2013, MMT included its Quality Plan. ICI aver in paragraph 58 of its Particulars of Claim that MMT’s Quality Plan was incorporated into the contract. MMT deny that it is a contract document. Section 11.4 of that Quality Plan was headed “Process and Welding Inspection, Material Traceability”. It stated:

“A visual inspection of the internal and external surface of the joint will be carried by the Quality Control Inspector to ensure the two components which have been welded are smooth, free from discolouration, straight and uniform.

All welding and NDT requirements will be in accordance with the Client requirements.

Unacceptable defects revealed by visual or non-destructive examination shall- either be repaired or deemed not to comply with the specification. All repairs shall be re-examined as if they were new welds.”

The next section is headed “Corrective Actions” and states:

“All activities not meeting the requirements of the Quality Management Systems or agreements with clients are suspended pending appropriate action.

All materials, products, services and sub-contractor performance not meeting the required specification are clearly identified and/or segregated pending a decision regarding their further processing. The occurrence is investigated in order to establish its cause.”

Given that PMI03 expressly stated that “all terms and conditions as per the existing contract” it can be seen that the terms of the Quality Plan applied both to the original contract works and those the subject of PMI03 too. It was included in the document as the 5^th bullet point in the list of attachments to PMI03. It is clear therefore that the “NDT requirements will be in accordance with the Client requirements”, in other words as agreed with the ICI personnel responsible for agreeing those requirements. However, the fact that the Quality Plan was so incorporated does not assist ICI because it expressly states that “all welding and NDT requirements will be in accordance with the Client requirements.” Mr Wells gave detailed evidence about this in the following terms in paragraph 45 of his statement:

“Those methods [of testing] and the standard of welding that resulted were checked by AkzoNobel and ICI’s consultants, Projen and ABB, continuously from March 2013 with no detrimental comment. Indeed the weld inspectors were complimentary about the standard of welding as the e mail from Clive Chapman dated 13 March 2013 at page PBC/70 and Akzo/Projen worked alongside MMT’s operatives in the fabrication workshop for over 16 months, continuously observing and checking the MMT welding throughout without even a single adverse comment about the fabrication workshop welding.”

PROJEN, the Project Manager, were informed in 2013 of the welding procedures and testing regime and on 13 March 2013 Clive Chapman of PROJEN stated in an e mail, copied to Mr Barton and Mr Conn “We have no comments to make on your weld procedures issued. Please proceed”. Favourable comment on the quality of the welds was also made in this e mail, these being described as “of good visual quality”.

There is no evidence to challenge this from anyone at ICI, and further, there is no body of contemporaneous evidence in the documents contrary to it either. I have accepted Mr Wells’ evidence generally already. Specifically on testing it is clear in my judgment that ICI expressly agreed the testing regime adopted by MMT as explained by Mr Wells. The reliance upon boroscopes by ICI in this trial may have come about because for forensic reasons it was realised that the complaint about lack of radiography could not succeed. Boroscopes are not specifically referred to in BS 4677 (“optical instruments” are) and ICI’s focus during the trial switched to a failure to use boroscopes as an alternative ground of attack, perhaps given the realisation (that resulted in the concession on the contract) that it had been agreed that radiography would not be used. I find as a fact that ICI expressly agreed the welding and NDT regime adopted by MMT from the beginning of MMT’s works. This was visual examination with torches and mirrors, and dye penetration testing of 10% of the welds.

ICI accepted during the trial – and this is agreed by the experts – that a great many of what are described as “defects” in the welds can only be detected using radiography. The relevant piping specification for the works under PMI03 is Revision 4 dated 4 July 2012. This provided that “thermal cutting and welding of pipes shall be to the requirements of BS 2971:1991 and BS 4677:1984”. The former relates to carbon steel pipework and is not relevant for the allegations of defect in this case, which concerns stainless steel pipework. The relevant British Standard pleaded, and relied upon in this case for these welds, by ICI is BS 4677:1984. That British Standard was part of the piping specification and is headed “Arc welding of austenitic stainless steel pipework for carrying fluids”. Clause 39 of the British Standard deals with Inspection and is headed “Requirements for visual examination of completed welds”; Clause 40 deals with NDT and is headed “Non-destructive testing”. Table 5 of the British Standard is headed “Defect limits”. This sets out the limits, in terms of dimensions in mm and percentage for variations, for different defects in each of four columns, depending upon the dimensions of the pipework in question.

In paragraph 90 of the 1^st Experts’ Joint Statement dated 20 April 2017, all three experts agreed “that a significant number of defect types listed in BS 4677 Table 5 cannot be detected if radiography is not carried out”. These were summarised in Table 3 to that Joint Statement, and I reproduce that table as Appendix 1 to this judgment for convenience. It is colour-coded. Green denotes that a particular inspection method is effective for finding and assessing that flaw type. Orange denotes that the particular inspection method has only limited effectiveness in finding and assessing that flaw type. Red denotes that the inspection method is ineffective for finding and assessing that flaw type. This shows that of the NDT regime agreed by ICI and MMT, the following are agreed by the experts as having the following consequences:

Further, the use of boroscopes (a type of visual internal inspection) is effective for finding and assessing eight types of flaw, namely undercut, under-flushing, misalignment, root protrusion, root concavity, crater pipes and surface cavities, lack of root penetration, and lack of root fusion. Boroscopes have limited effectiveness in finding and assessing cracks, which visual internal inspection cannot detect.

Internal visual inspection is, at best, only limited in its effectiveness and cannot detect five types of flaw at all, namely cracks, lack of side fusion, lack of inter-run fusion, isolated tungsten inclusions and scattered tungsten inclusion. It has only limited effectiveness in finding and assessing 11 other types of flaw, namely undercut, under-flushing, misalignment, root protrusion, root concavity, crater pipes and surface cavities, lack of root penetration, lack of root fusion, porosity (isolated), porosity (scattered), and porosity (localised).

In my judgment, this shows therefore that the NDT regime expressly agreed by the parties in this case, namely visual inspection and dye-penetrant testing of 10% of welds, would not be able to detect four types of flaw at all – lack of side fusion, lack of inter-run fusion, and isolated and scattered tungsten inclusion. Further, and in my judgment equally importantly, it would have only limited effectiveness overall at detecting the other flaw types internally and would only be effective at the five flaws externally, namely undercut, underflushing, reinforcement height, misalignment and crater pipes and surface cavities.

This inability to detect such defects at all – for the four types of flaw identified – and only limited ability to detect the others, was therefore in my judgment a direct consequence of the express agreement of the parties.

Mr Bowdery QC submitted to me that MMT should be held liable for welds contrary to the limits permitted by Table 5 and the British Standard, even though radiography was agreed to be no part of the NDT regime contracted for by the parties. I am unable to accept that submission. To hold MMT to a higher standard in terms of the quality of work required (which is what the defects limits discernible by radiography identified in Table 5 do) when ICI expressly declined to contract with MMT for that radiographic standard, that standard being necessary in order to be able to detect and assess compliance with such limits (and expressly declined to pay the extra contract sum that went with that radiographic testing) would be to re-write entirely the bargain struck by the parties in 2013.

I find that characteristics of welds that can only be detected effectively by the inspection method agreed are the only ones that can be characterised as defective for the purposes of these works. These are identified as Green in Table 3 of the 1^st Experts’ Joint Statement. It is illogical to consider something a defect for the purposes of the contract between ICI and MMT if the particular inspection method agreed between MMT and ICI is not fully effective for finding and assessing that flaw type. Defect is defined in the NEC3 contract terms as a part of the works not in accordance with the Works Information. Table 5 cannot, on any view, have formed part of the Works Information, Specification or any other contract document if the parties agreed that radiographic testing would not be done.

It is a matter of fact that, when the testing and analysis was instructed by AkzoNobel by different entities involved in the autumn of 2014 onwards, these testing companies were instructed to assess the welds against the British Standard including Table 5. These entities included Oceaneering a reputable testing practice who simply carried out its instructions. However, this inevitably meant that radiography was used, because the British Standard deals with radiography in clause 40.2 and clause 41 “Fault limitations” states “Any one of the types of defect that does not comply with any of the relevant limits given in Table 5 shall be sufficient cause for rejection, unless alternative limits are specified by the purchaser in accordance with 41.2”. Accordingly, the conclusions drawn at that time as to the “failure” of certain welds when measured against Table 5’s defects limits has no relevance, in my judgment, to the compliance by MMT with the quality of welds that match the contractual agreed standard. That is because the contractual agreed standard did not incorporate those components of Table 5 that required radiography for the reasons I have identified. Tecson, another testing entity, was asked to identify welds that showed signs of burning, lack of penetration and discolouration. Discolouration does not feature at all in Table 5 although is mentioned in the Quality Plan. Discolouration is in any event something that Mr Matsunaga stated was not an issue to quality of production, and can be remedied more easily by pickling and passivation.

In paragraph 87 of the 1^st Joint Statement the experts agreed “that over the lifetime of a project, a reject rate of 5% is considered normal”. Generally, in oral evidence they accepted that the reject rate would be higher towards the beginning of a project – essentially, the beginning of a learning curve – and then tail off as the inspection process fulfilled its function, and the welders/quality of the welding improved. Ironically, here, the exact reverse seems to be the case, added to which the later “rejections” did not occur as a result of the welds failing the inspection regime agreed by the parties, but as a direct result of AkzoNobel imposing a different more stringent standard on the welds after they had been installed.

In my judgment, given the express agreement by the ICI personnel at the time from early 2013 onwards to the testing regime adopted by MMT (which I find as a fact occurred), the testing in fact performed by MMT consisting of visual inspections and dye-penetration tests of 10% of the welds was in compliance with MMT’s contractual obligations in this respect. I also find that such defects as were present in the welding, when considered against those that could be identified by the testing regime agreed, on the balance of probabilities does not exceed the percentage of welds that are to be expected agreed by the experts of 5%. The sampling/extrapolation exercise performed by ICI’s experts is in my judgment wholly invalid. It requires an assumption to be made that the 412 weld reports considered by Mr Millwood was a randomly chosen sample, which it plainly was not. It would require extreme caution in any event because none of the reports compiled by Oceaneering, Tecson and WHP considered such defects as could have been discovered by the testing regime agreed by the parties. It pays no attention to the fact that the majority of the defects limits in Table 5 are not applicable to the work of MMT in any event.

There are five separate groups of breaches alleged by ICI to have been committed by MMT that evinced an intention by MMT not to be bound by the terms of the contract, in other words were repudiatory breaches. They are all pleaded in paragraph 64 of the Particulars of Claim. In summary they are:

I deal with the first two categories, failure to produce and alleged wrongful removal of documents, in the section of this judgment headed “Supply of documents by MMT to ICI”. For the reasons explained in that section, there was no such breach by MMT, and even if I am wrong about that, there was certainly no repudiatory breach. No documents were “wrongfully removed” – at the time MMT were told by Mr Conrad that there was “no issue” with where the documents were kept. In any event, the fabrication shop was the sensible place to keep them. No proper effective request under the contract was made for such documents prior to 17 February 2015.

The allegation concerning refusing the Project Manager access to the fabrication shop is wholly without foundation and unsupported by a shred of evidence. I have dealt with this in my findings on Mr Brugman’s evidence. Similarly, the lack of welders’ qualifications is again without foundation and I find that there is no such failure.

Other findings relevant to these allegations are included in more detail in “Other findings relevant to Issue 4” below. These are all dismissed by me in that section.

This therefore leaves only one that has even the flimsiest foundation in fact, namely failing to produce any adequate plan for further testing and/or rectification of defective welding. This suffers from the following fatal flaws in terms of characterising these as repudiatory breaches. Firstly, MMT at all times made clear it would correct all defective welding for which it was responsible. That was genuine in my judgment, and demonstrated an intention to be bound by the terms of the contract. However, ICI constantly met this with assertions that radiographic testing was required and that was the standard to be applied to the existence of defects. Secondly, ICI could not decide to what specification it wished to have any remedial works performed. Thirdly, MMT’s attempts at a sensible procedure for identifying the welds that needed corrective action were set out in the 10 Point Letter. ICI simply failed to take any steps to comply with that process, and MMT did all that the letter required of it, and in my judgment, all that the contract required of it too. Further, the third party surveyor who initially embarked upon the process of identifying any welds that were in dispute was actually engaged in doing this when ICI sent the letter of 17 February 2015 requiring MMT to leave site. Finally, the whole issue of “defective welding” sat under the umbrella of ICI insisting that MMT had been required by the contract to perform radiographic testing of the welds. That would have made, at the time, any attempt to agree testing and rectification of the welds impossible, because ICI were obstinately fixed on a non-contractual standard.

I reject failing to produce any adequate plan for further testing and/or rectification of defective welding as a category of breach that has been made on the evidence. It has not been made out. None of the five categories relied upon by ICI in my judgment are made out against MMT as repudiatory breaches. All of them have, in my judgment, been aired to suit ICI’s commercial purpose as justifying dismissing MMT from site, and do not provide support for the decision contained in the letter of 17 February 2015. The decision to remove MMT came first, and the “breaches” to justify it were searched for to clothe that decision with superficial justification. ICI probably knew at the time, as shown by the contemporaneous documents, that it did not have proper grounds for acting as it did, as no repudiatory breaches by MMT had been committed. However, ICI decided to go ahead in any event. Attempts to justify that after the event have failed, as there were in reality no such breaches.

Determining the number or proportion of welds that were defective when considered against the contract terms agreed between ICI and MMT in 2013 is made somewhat difficult for the following reason. The contemporaneous reports performed at the time in 2014, by Oceaneering, WHP and others, proceeded on the basis that the specification against which the welds were to be measured was that contained in BS:4677, in other words with testing performed by radiography. Accordingly, they are not comparing the welds against the contractual standard agreed with MMT. Their determination of “defects” is therefore flawed. That contemporaneous material was extensively studied by the experts, but the experts called for ICI were approaching their task as though MMT had a duty to warn or advise ICI about the consequences of the testing regime agreed. Further, Mr Millwood was, for some inexplicable reason, not given by ICI’s solicitors the records of the far larger sample which existed and which he specifically requested. This failure to provide him with highly relevant documentary evidence directly reduces the efficacy of his evidence. Whatever the reason – whether a positive decision by ICI not to give it to him, or a failure to decide to give it to him -- it means his exercise was of limited usefulness. Examining 412 welds, themselves a sub-set of a wider group of welds that were accepted to be defective, cannot give a meaningful percentage result that could be applied across the whole of MMT’s works to give a valid result. I find that such an approach would be wholly statistically invalid. Further, a number or proportion of defective welds could only be arrived at with any degree of precision from the exercises carried out by the ICI experts if extrapolation were a valid exercise in any event. Given the limited sample, the different specification applied by the contemporaneous reports, the destruction of evidence (the “meeting room welds”) and the failure to give Mr Millwood all of the relevant material, I find that extrapolation is not a valid exercise.

Mr Mort QC in his written Closing Submissions provided a weld analysis, with numbers of welds taken from the statement of Mr Wells. Lines A, B and C of this appendix were therefore useful cross-references to the evidence of fact on this subject. This splits the welds into type, carbon steel and stainless steel welds. These proceedings do not concern carbon steel welds, only stainless steel welds. The appendix is a document used by MMT to arrive at different figures for the cost of remedial works, based on a figure given by Mr Wells in evidence of the cost to MMT of remedying welds, which he stated was about £40 per weld. This trial specifically was not to deal with matters of quantum and I make no finding about that figure, as it was challenged. However, the figures in Mr Wells’ evidence are the best evidence of the total number of welds performed by MMT of the two different types, carbon steel and stainless steel, and I accept them.

Notwithstanding my finding on the extrapolation exercise, however, there were some defects and this is made clear in the documents. MMT accepted this at the time and offered to perform remedial works on them once they were identified. MMT had a contractual obligation to remedy defects. Doing the best that I can on all of the material before the court, I find that the maximum number of defects which could have been present was the 5% agreed by the experts as being “normal”. This figure, even if applied to all 28,445 of the stainless steel welds performed by MMT taken from Mr Wells’ evidence (fabrication shop and field welds) could only at its maximum amount to 1,422. I therefore adopt that figure as the best one available on all the evidence for the defective welds. MMT could potentially feel aggrieved that such an approximation is favourable to ICI, and their welders (all of whom were qualified and demonstrably so) might feel that their workmanship is being unfairly criticised. However, based on all the evidence and my findings in this judgment, the only options sensibly available for the number of defects are either 5% of the total; or the number of welds still physically available that could be re-inspected in the light of my findings (expensively, and after the trial on liability has ended, which would cause its own objections as liability evidence should have been adduced for this trial) with some complicated further extrapolation of a different type; or zero. The evidence demonstrates that the figure is not zero. I find that evidence on a re-inspection exercise would not be of assistance as extrapolation could not give an accurate figure for the reasons that I have explained, and also this would be admitting further evidence on liability which would not be permissible. In those circumstances, and applying the balance of probabilities, I consider 5% is the most suitable measure of the proportion of defective welds performed by MMT. So far as damages are concerned, this figure does not apply to welding of specific lines that had their specification changed and which were re-done, because for those lines ICI have suffered no loss. This is because Mr Boerboom decided that those lines had to be done to a higher and more stringent specification, imposed by him and different to the one agreed with MMT. This line (or these lines) are referred to as the waterborne hygienic line (or lines). The number of welds for remedial works should therefore exclude the number of welds on this line or lines. If the parties cannot agree that number (which should be a straightforward exercise in arithmetic) I will resolve it after hearing further submissions after this judgment is handed down.

The letter of 17 February 2015 instructing MMT to depart from site was sent by e mail, and in the response from MMT to that letter (also dated 17 February 2015) it is made clear that the letter was received at 1440 hrs. That letter in reply makes some powerful points, not least that “it is ridiculous for you to assert that we have not repaired defects (which in any event are not admitted) when it is plainly you who instructed us to suspend such works”. This statement refers to the fact that on 16 October 2014 – some four months earlier – all welding operations including all site field welding and fabrication shop welding were suspended. In January 2015 some isolated welding on the ammonia lines was instructed to commence (although not validly by the Project Manager, because there was no Project Manager) but the vast bulk of operations remained suspended. One point that is not made in the letter of response, but could have been, is that it is verging on the absurd to expect production of the documents within the 2 hours 20 minutes between the sending of that letter and the deadline imposed of 5.00pm that same day.

Some of these allegations are, having heard the evidence, extraordinarily thin, verging on factually non-existent. I deal with the allegation that MMT removed project documentation from the Plant in the section “Supply of documents from MMT to ICI”, and dismiss it. Further, MMT at no time denied PROJEN access to the fabrication shop. Nor did MMT at any stage deny Mr Boerboom access to the fabrication shop. Mr Boerboom was not in any event validly and/or effectively appointed as Project Manager for the reasons that I have explained. The only evidence supporting the denial of access allegation was that of Mr Brugman, which referred to a delay (not a denial) in giving him access of about 30 minutes, the first time he attended the fabrication shop. Apart from the fact that this is an entirely different allegation, it is the sort of incidental matter that often occurs from time to time on any project. I find that it does not justify being elevated to a breach of contract by MMT, even on the most partisan of points of view. Further, there is simply no factual basis either in the allegation that MMT failed to produce evidence or proposals for ensuring that welders were appropriately qualified. The origins of this allegation were isolated references in the contemporaneous documents to a particular welder who did not have the necessary qualifications on an isolated occasion for the type of welding being performed. This was identified, rapidly dealt with and remedied by MMT. There is an entire volume of the trial bundle full of the welders’ qualifications that were provided at the time by MMT, and I find as a fact that all welders were suitably qualified save for the instance identified. No loss was in any case caused by that as MMT remedied the matter at no cost to ICI.

This attempt to particularise repudiatory breaches by MMT appears as though someone has simply trawled through the entirety of the project correspondence, and any passing reference to any matter (such as the isolated references to the welder working on different welds to that for which he was qualified) has been elevated to the status of being a repudiatory breach or breaches. The experts opined on this – and qualification is important -- but the factual evidence is that this was simply not an issue at the time. ICI seek to elevate it to a greater importance than it merits to bolster a thin case on repudiatory breach by MMT. I find as a fact that none of these sub-issues, namely 4(2), 4(4) and 4(5), are made out on the facts.

Issue 4(3) is the alleged failure by MMT to produce an adequate remedial plan. This allegation, again, entirely ignores the reality of the situation in the period December 2014 to February 2015. Firstly, that period was dominated by the issue (now finally resolved) as to whether radiography was required by the original contract agreed between ICI and MMT. Secondly, MMT made it clear that they were fully prepared to remedy any defects in welding that had been performed in accordance with that contractual specification. Obviously, however, the first of those points required resolving before the second could be addressed. Given that first point was not resolved until the final day of the trial on liability, the necessary identification of those welds that were defective when measured against that specification was not achieved. Thirdly, AkzoNobel/ICI failed to provide MMT with the specification to which they wished any repairs to be repaired, because that would damage the position being adopted by AkzoNobel/ICI on the first point.

It was not possible for a remedial plan to be produced by MMT because AkzoNobel/ICI would not, with the sufficient or any degree of finality required for such a plan to be produced, inform MMT what the specification was to be. This can be shown by the communication from Mr Westerlund of AkzoNobel to both Roberto Matsunaga and Shrikant Choubey dated 9 January 2015. In that, Mr Westerlund asked the following:

“We need your help in the Fresco Project.

Could you please inform us about what welding specification (s) that was used in the Guangzhou and Gwailor projects? Preferably use your connections and try finding the specification documents and send them to me.”

These were provided by Shrikant Choubey on 12 January 2015 by attaching them to an e mail back to Mr Westerlund. These specifications are over 100 pages in length. The scope of work required by MMT to the hygienic lines – described by Mr Brugman in his e mail of 12 January 2015 as “the scope of ‘repair’ work”, using “repair” in the very loosest (if not entirely incorrect) sense because the term was then controversial between the parties, and the specification cannot possibly be said to be repair as it was an increase in specification, was sent to MMT on that date and MMT were performing that work. There cannot therefore be any issue that the “remedial plan” said to be awaited by ICI did not include that work in January 2015. It could therefore only apply to the other work, on which all welding remained suspended since 16 October 2014.

This was then followed by a meeting attended by Mr Wells for MMT, and Mr Shuttleworth and Mr Balk for AkzoNobel/ICI. After that meeting, the situation was summarised by Mr Shuttleworth to Mr Schelhaas in an e mail dated 16 January 2015. This meeting was described as “informative but did not lead to a solution.” Mr Shuttleworth stated “we believe the situation is different to our previous discussions and worse for [AkzoNobel].” This e mail summarised an acceptance by Mr Wells for MMT that some welds were faulty, but that these could be agreed and would be remedied by MMT, although AkzoNobel would pay to get the welds to MMT’s facility as “it has taken 18 months to raise this issue, before that all was deemed ok so they will only pay to fix the weld in their shop – apparently this has been agreed”. So far as documentation was concerned, 25% was ready for handover and the remainder was still to be completed.

The contents of that e mail, which I have not quoted in full in this judgment but which runs to nearly two pages, were put to Mr Boerboom on Day 4 of the trial. He accepted that Mr Shuttleworth and Mr Balk were high level AkzoNobel commercial people brought in to do a deal, and that the e mail represented their judgment of the situation. That judgment was that MMT were in a strong position and knew that they were in a strong position; that many of the “defects” (including colourization) were not in the original specification anyway; and that the amount required to “fix our weld issues” (which means the issues AkzoNobel now had with the welds) would be vastly lower than the amount AkzoNobel were estimating. Under “Conclusions”, “Pay MMT” was the first one listed. Under “Options” it was stated “we would have to take them to court and are likely to lose, this could be a further cost”. Under “Decision”, it is stated:

“Our advice would be:

i.

pay MMT, try to minimize ie fixed price for remainder of work and seek compensation from Projen.

ii.

threaten to see them in Court or offer to pay and additional £8m (our original view of £4m is no longer in scope).”

What then happened was rather illogical. Steps were taken to involve a third-party surveyor to identify and agree defective welds to be corrected by MMT, but whilst this was going on, behind the scenes senior AkzoNobel personnel were preparing the ground to dismiss MMT from site. Despite the “advice” contained in the e mail of 16 January 2015 by Mr Shuttleworth and Mr Balk (who was copied in on the e mail), Ms Schoolenberg decided in late January 2015 that MMT would be removed and have their contract ended. Thus it was that on the day that the letter of 17 February 2015 was sent to MMT, the third party surveyor was actually on site too, inspecting welds for the purposes of having MMT correct them, an exercise which MMT had agreed to do.

I find as a fact in relation to issue 4(3) that there was no “failure by MMT to produce an adequate remedial plan”. This assertion by ICI has no basis in fact, given what occurred during the period December 2014 to 17 February 2015. Those welds which required correction were actually in the process of being identified by the parties in February 2015. The person who took the decision that ICI would act as it did (in the letter of 17 February 2015), Ms Schoolenberg, had already taken that decision before the end of January 2015. AkzoNobel/ICI delayed implementing that decision, partly if not wholly because it was in a massive game of bluff with MMT, and wanted to see if MMT would voluntarily leave site, finally frustrated at the constant difficulties in either being paid any more money (not least given MMT believed £2.75 million had been promised in November 2014) or in fact at ICI failing to behave in the way it was telling MMT it would. Neither transpired, and MMT held firm and indicated that it would abide by the contract terms, and in my judgment continued to do so.

Issue 4 and its constituent sub-issues will therefore all be answered in the way indicated in this section of the judgment.

To summarise the situation as of January 2015, there had been no properly appointed Project Manager since PROJEN resigned in 2014. Although Mr Boerboom had been notionally appointed to act as Project Manager, he did not have sufficient or indeed any independence and I have expressed my findings on the legal position concerning the decision-maker under a contract such as this one in that section of the judgment above. MMT had no idea that “the deal” struck in principle in November 2015 had been disavowed by Steer Co as of 9 December 2014, because nobody from AkzoNobel/ICI told them this, and MMT had been instructed to commence welding in January 2015 on the pigging lines. The Coppa audit had failed fundamentally to undermine the figures that MMT were maintaining was the value of its account, and many millions of pounds were believed by senior AkzoNobel personnel still to be due to MMT. Equally, the members of Steer Co knew that there were insufficient funds still available in the Capex budget to pay such sums to MMT. It was against that backdrop that Mr Wells sent an e mail dated 6 February 2015 to Mr Shuttleworth of AkzoNobel that, amongst other things, sought to clarify the situation regarding contractual instructions coming from AkzoNobel. He pointed out, with some justification, that different individuals at AkzoNobel were issuing non-contractual instructions to MMT – correctly described by Mr Wells in that e mail as “informal and haphazard emails” – yet MMT now realised that that no payment would be made to MMT without proper PMIs for further work. He stated:

“With one hand you are issuing us with informal and non-contractual instructions and with the other hand you are criticising us for responding to such instructions. That cannot carry on…..

Please advise us today or Monday (9^th) if anyone else is to have authority to issue us with instructions and if so who and in what format.”

No reply was sent to that e mail. There can be no good reason for simply failing to answer such an important enquiry. On 11 February 2015, Mr Wells sent another e mail, forwarding his earlier one. This was sent again to Mr Shuttleworth and in it Mr Wells stated:

“I still didn’t get a response to this e mail?

I’m not sure why this point would not be clarified? I’d appreciate a response as your site team continue to instruct us by e mail without PMIs or Projen involvement.”

Mr Shuttleworth sent that e mail on to Mr Boerboom simply asking him “Can you please respond to Tony”. Tony means Mr Wells. Mr Boerboom did not do so and no reply was sent to Mr Wells at all.

On 17 February 2015, AkzoNobel wrote a letter to MMT. In this letter, Mr Boerboom, signing the letter “for and on behalf of Imperial Chemical Industries Ltd” on AkzoNobel headed paper, set out the AkzoNobel view of the dispute. He stated that further to a letter from Clyde & Co of 28 January 2015 “we have sought your agreement to carry out the remedial works required as a result of your defective welding….Despite repeated requests, you have failed to abide by your contractual obligation to rectify your defective work in accordance with Core Clause 43.1” which states that the contractor corrects a defect whether or not the Supervisor notifies him of it. There was an assertion that “at least 30% of the welding that you have undertaken is defective, and the plant cannot be operated until all of the welds have been checked, repaired and tested…..You have fundamentally breached the terms of the Contract, and have therefore repudiated the Contract. We hereby accept your repudiation of the Contract and bring it to an end immediately.”

In the response to this letter, which came from MMT’s solicitors also dated 17 February 2015, the point was made that welding had been suspended by ICI on 16 October 2014 and had only been recently lifted on the ammonia lines. It was stated that the weld specification had been changed – which it had, and this is clear as a result of the concession by ICI in the trial concerning radiographic testing – and the contradiction in ICI’s position was made clear in the following terms:

“It is ridiculous for you to assert that we have not repaired defects (which in any event are not admitted) when it is plainly you who instructed us to suspend such works ….. [the instruction to stop welding, with immediate effect] necessarily prevented us from carrying out any remedial works to the welds, regardless of whose responsibility those alleged defects were. We are of course obligated to comply with such instructions.”

The response made clear that the letter of 17 February 2015 from Mr Boerboom would be treated itself as a repudiation of the contract. MMT complied with the instruction to leave site and were given 24 hours, their workers being required to leave their access badges by 5:00pm on that day at the gatehouse when they left.

Mr Bowdery QC relies upon this authority as justifying his stance on the correct characterisation of the circumstances in which the contract was brought to an end. He characterises the letter of 17 February 2015 as being primarily a contractual termination. In particular, in a passage of the judgment of Moore-Bick LJ giving the judgment of the Court of Appeal, at [20], Mr Bowdery QC draws attention in particular to the following words, which I have underlined in the paragraph:

“In my view Mr. Dunning's submission [for the Yard] fails properly to recognise the true nature of the contract. The primary purpose of Article 10 in the present case is to provide an agreed measure of compensation for breaches of contract by way of delay in delivery and deficiencies in capacity and performance which, although important, do not go to the root of the contract. For these the parties have agreed the payment of liquidated damages which are to be deducted from the final instalment of the price and to that extent their agreement displaces the general law, at least as regards the measure of damages recoverable for a breach of that kind. However, they have also agreed that there comes a point at which the delay or deficiency is so serious that it should entitle Gearbulk to terminate the contract. In my view they must be taken to have agreed that at that point the breach is to be treated as going to the root of the contract. In those circumstances the right to terminate the contract cannot sensibly be understood as anything other than embodying the parties' agreement that Gearbulk has the right to treat the contract as repudiated, with (subject to Mr. Dunning's alternative argument) the usual consequences. The same holds true in relation to the Yard's right to terminate the contract under Article 5.7. Although the parties may have agreed to exclude, in whole or in part, Gearbulk's right to recover damages for a repudiatory breach on the part of the Yard, I am unable to accept that they intended to create by their contract a situation which differed in its effect from that which would arise on the acceptance of a repudiation under the general law. Article 5.9 and Article 10 simply identify the circumstances in which one or other of the parties is entitled to treat the contract as discharged by the other's breach. In paragraph 88 of his judgment in Stocznia Gdanska S.A. v Latvian Shipping Co [2002] EWCA Civ 889 [2002] 2 Lloyd’s Ref 436 Rix L.J. expressed the view that where contractual and common law rights overlap it would be too harsh to regard the use of a contractual mechanism of termination as ousting the common law mechanism, at any rate against a background of an express reservation of rights. In this case I would go further. In my view it is wrong to treat the right to terminate in accordance with the terms of the contract as different in substance from the right to treat the contract as discharged by reason of repudiation at common law. In those cases where the contract gives a right of termination they are in effect one and the same.”

(emphasis added)

However, in my judgment this authority does not go as far as Mr Bowdery seeks to extend it. Although the passage “In my view it is wrong to treat the right to terminate in accordance with the terms of the contract as different in substance from the right to treat the contract as discharged by reason of repudiation at common law. In those cases where the contract gives a right of termination they are in effect one and the same” might superficially be interpreted as stating that if there is a right of termination then that is to be equated with acceptance of a repudiatory breach, the preceding passages at [19] makes clear that this is not necessarily so. The terms of the contract are highly material. This states (emphasis added):

“Whenever one party to a contract is given the right to terminate it in the event of a breach by the other it is necessary to examine carefully what the parties were intending to achieve and in particular what importance they intended to attach to the underlying obligation and the nature of the breach. The answer will turn on the language of the clause in question understood in the context of the contract as a whole and its commercial background. Sometimes, as in Lockland Builders v Rickwood, the parties will have intended to give a remedy of a limited nature for breaches of a certain kind; in other cases the terms of the contract may reflect an intention to treat the breach as going to the root of the contract with the usual consequences, however important or unimportant it might otherwise appear to be. Inevitably, therefore, there can be no hard and fast rule.”

It is clear in the instant case that the termination provisions in clauses 90 and 91 allow termination for different reasons, with different consequences to the parties in terms of financial entitlement that are set out in the Termination Table, that vary with the different reasons for termination. That is very different from the clauses in the contracts in the Gearbulk case. Termination by the employer is possible without there being any breach of the contract in any event. There is also a contractual scheme set out for such a contractual termination. That was simply not operated here at all. Further – and this is something of a sanity check for whether Mr Bowdery’s submission can be right on this point – if the letter written on 17 February 2015 by ICI were, in reality, simply an exercise of a contractual right to terminate -- then no employer under the NEC3 form would ever need to do any more to terminate that widely used contract form than serve a notice expressly stating that the employer was accepting a repudiatory breach. If Mr Bowdery were right, and even if there were no such repudiatory breach, the employer could require instant removal by the contractor from site, safe in the knowledge that any error in characterisation of the alleged breach as repudiatory would be of no detrimental effect because it could be dressed up as exercise of the contractual mechanism. I do not consider that Gearbulk can be interpreted as authority for this, and I do not accept that the NEC3 Termination provisions, by their terms, equate termination under clauses 90 and 91 with the same effect as acceptance of a repudiatory breach or breaches. On that latter point alone Gearbulk is distinguishable. If that approach were correct, then the whole contractual process for termination would be redundant and unnecessary. It would never need be operated at all. I reject such a characterisation of the letter of 17 February 2015.

I find further support for this conclusion in clause 91.5 which makes clear that the contractual rights to terminate are different to acceptance of a repudiatory breach by stating:

“Either Party may terminate if the Parties have been released under the law from further performance of the whole of this contract (R17) but this Clause 91.5 shall not entitle either Party to terminate this contract for repudiation (or accept the other Party’s repudiation or elect to treat this contract as rescinded by reason of repudiation).”

Further, I also do not accept that the terms of the letter of 17 February 2015 can sensibly be interpreted as exercising any contractual right by ICI at all. The drafting of that letter – whether it was or was not drafted on legal advice is not important, although Mr Mort QC drew my attention to the fact that Clyde & Co were already involved as of January 2015 – simply cannot sustain an interpretation that it is an exercise of a contractual right to terminate.

It is trite law that ICI is not restricted to reliance on breaches known about at the date of the acceptance of the purported repudiation. However, the breaches that are relied upon at trial by ICI as being repudiatory breaches are those in paragraph 64(i) to (v) of the Particulars of Claim. I have dealt with each type of breaches in the relevant section of this judgment. I have dismissed them all. The inevitable conclusion to my findings that these allegations of breach all fail, and that the letter of 17 February 2015 was not the exercise of a contractual right to terminate, is that the letter was itself a repudiation of the contract by ICI. I find that this is what occurred, and the issue of repudiation is resolved in MMT’s favour. These findings may or may not come as a surprise to ICI, but certainly it was a point of which the AkzoNobel senior management were aware because the Steer Co meeting minutes of 9 February 2015 record, under the heading “lowlights”, the following statement:

“MMT contract still not terminated. Adjudication started; we have no legal grounds still to declare breach”.

I have come to my own view of the matter and refer to that entry as background only. However, it does demonstrate that my view of the validity of asserting repudiatory breaches by MMT at the time in early February 2015 is one that was shared contemporaneously by Steer Co itself.

Given that a split trial between liability and quantum was ordered, it was necessary for the parties to assume that the eventual financial exercise would show that the amounts paid to MMT were in excess of the correct contractual valuation of its works, if the legal position concerning overpayment to MMT were to be resolved. ICI submit that recovery of any such (assumed) overpayment is something to which ICI is entitled, either under the contract terms or the equitable doctrine of restitution. MMT challenge this, claim that the valuation of the account is in the sum of £20.930 million (the amount paid) and maintain that the actual payments made are “deemed to be the value of the works” and any such over-payment (which is denied) cannot be recovered by ICI. It is also said by MMT that the value of the account “is not in issue in these proceedings; they have already been determined in a finally binding adjudicator’s decision and in court proceedings in MMT’s favour”. I have in this paragraph provided a summary of the parties’ cases on this point, taking in particular MMT’s points in paragraphs 55(5) to (7), and paragraphs 87 to 96 of its Amended Defence and Counterclaim.

There is one unusual aspect to this part of the case and it is that each party served upon the court written opinions of other leading counsel who had been instructed in the case previously, and also one of Mr Mort’s opinions, on the subject of this claim for repayment. These had been exchanged between the parties on a without prejudice basis as part of their fruitless attempts to reach a settlement of the litigation. Oral submissions, particularly by ICI, as to the appropriate consideration and weight to be given to these opinions were attempted. There might, very occasionally and most rarely, be some circumstances where a court might possibly be assisted by such documents, but I cannot envisage what they might be, none apply in this case, and in my judgment such views are inadmissible. They are certainly not evidence, and they have no status as authority. If points of foreign law are involved in a case, then opinions of distinguished practitioners in that foreign law are admissible (with permission) as expert evidence, on what are seen in English law as matters of fact. However, none of that applies here, and providing an English court with the views of English barristers on questions of English law is wholly unusual, inadmissible and in my judgment of no assistance whatsoever. I have had no regard to these opinions at all.

Recovery by any employer of any balance of interim payments made to a contractor could potentially arise under one of two legal routes. The first is under the terms of the contract itself; the second is by an alternative non-contractual legal route. Even though ICI puts its case on this point substantially on restitution, it is necessary to analyse the contracts term first. Each route – contractual, and ex-contractual - can be considered in turn, and it is sensible to deal with the contract itself first, because if that legal mechanism permits recovery of overpayments then there is no need to consider the non-contractual legal options. Further, in this case the total paid to the contractor MMT by ICI was, in part, as a result of two adjudication decisions, namely those in Adjudication No.1 and Adjudication No.4. The status of those payments must too be considered as that is an important component in any claim for recovery by ICI.

Although the contract terms, in clauses 90 and 91, provide for a termination process that results in a Termination Certificate specifying the reason, with the amounts payable in either way identified in the Termination Table, I have found that this did not occur in this case and ICI repudiated the contract by purporting to accept a repudiatory breach, or breaches, which did not exist. ICI therefore repudiated the contract.

I consider it well-established law that, if a contract comes to an end through repudiation, the parties’ existing rights and obligations under that contract remain in existence. Further performance of the contract by both parties comes to an end. Neither party has any future substantive obligations. However, the existing rights and obligations the parties have, as at the time the contract comes to an end, remain, and the parties remain governed by the contract terms in that respect. Accordingly, if ICI had a right as of 17 February 2015 to recover overpayments under the contract, that right remained in being notwithstanding the repudiation by ICI of the contract.

The nature of the payment obligation upon any employer in a construction contract is to make interim or stage payments. This was required by the Housing Grants Construction and Regeneration Act 1996 initially, and now as amended by the Local Government Economic Development and Construction Act 2009. Contracts governed by this legislation must include certain terms on some matters, including payment, and a failure to do so has the provisions of the Scheme for Construction Contracts (England and Wales) Regulations 1998 (SI 1998 No.649) imposed into that contract. Even before this legislation, the majority if not all the standard forms had provisions for interim payments to be made (usually against interim certificates) to the contractor during the project, to assist with cashflow. Some agreements – and a recent example is in Balfour Beatty Regional Developments Ltd v Grove Developments Ltd [2016] EWCA Civ 990 – actually identify in advance the specific dates in different months when each instalment or stage payment will be applied for, and paid. Others identify this by particular intervals stated to be in number of days. Some, more basic, contracts might have specific percentages of the overall contract value as the interim payments. Most are, however, assessed by way of some sort of interim valuation.

This contract has two components so far as payment to MMT is concerned. One is the Defined Cost, and the other is the Fee. Clause 50.1 makes it clear that the Project Manager assesses the amount due at each assessment date. That amount – the “amount due” – is, by clause 50.2, made up of three elements:

“1.

The Price for Works Done to Date

I do not consider that such an interim assessment can be said to be a definitive or final valuation of the works for all purposes at that point in the project. Clause 50.5 makes it clear that “The Project Manager corrects any wrongly assessed amount due in a later payment certificate.” That later payment certificate could, potentially, be an interim assessment. It is not only at the Final Assessment stage that the Project Manager can correct any “wrongly assessed amount”. If there could be any doubt about the nature of the entitlement by the contractor to the sums paid in an interim assessment contained in a payment certificate – and I do not consider that there can be – this is made crystal clear by Clause 56 which states the following:

“The issue of any payment certificate or the payment of any amount by the Employer to the Contractor does not constitute or imply or be evidence of the Project Manager’s, the Supervisor’s or the Employer’s approval or acceptance of any design, work, Plant and Materials forming part of the works or relieve the Contractor of any of his obligations under this contract.”

If, for example, the contractor were to perform works using certain (less-expensive) materials on a particular part of the project different to those specified, and for whatever reason these works are included in a payment certificate and paid, Clause 56 cannot be relied upon by the contractor to argue approval or acceptance of those materials or that work by the Project Manager or employer. However, if Mr Mort QC’s argument were to be correct, even though the value of those works (which would on this analysis undoubtedly be “wrongly assessed”) could be corrected in a later certificate, until that later certificate were in fact issued, the employer would not have any accrued legal rights to repayment for sums paid by it for the non-contractual works. I do not consider that is how the payment provisions of the NEC3 contract are intended to work. It should be further noted that clauses 50, 51 and 52 are Core clauses. They are central to how the NEC3 contract operates.

Mr Mort QC has one authority upon which he relies to substantiate MMT’s argument, namely ISG Construction Ltd v Seevic College [2014] EWHC 4007 (TCC), a decision of Edwards-Stuart J. In that case, the contract was on the JCT Design and Build Contract 2011. The contractor sought an adjudicator’s decision in relation to its Application No.13, in respect of which the employer had not served valid payless notices. This decision, in Adjudication No.1, was in the contractor’s favour in the sum of £1.097 million. Some four days before the decision in that adjudication, the employer started another adjudication, Adjudication No.2, in relation to the actual value of the contractor’s works the subject of Application No.13. The employer succeeded in that adjudication in that the adjudicator decided that the value of the works the subject of that adjudication was only £315k, because the adjudicator disallowed a very considerable sum (approximately £1 million) claimed as loss and expense. Edwards-Stuart J declared that there was no jurisdiction to conduct Adjudication No.2, even though in Adjudication No.1 the adjudicator had stated "For the avoidance of doubt I record that I have made no decision as to whether or not that is the correct value of work undertaken by ISG." This was because, as he put it in [25] “as between contractor and employer, in the absence of any notices the amount stated in the contractor's application as the value of the works executed is deemed to be the value of those works so that the employer must pay the sum applied for.” He considered that the question of the valuation of the works in Application No.13 had been decided in Adjudication No.1. Permission to appeal was granted in that case by the Court of Appeal, but the appeal did not take place as the matter was compromised.

However, in my judgment that case does not go so far as Mr Mort QC seeks to press it. The Amended Defence and Counterclaim in this case relies upon part of the passage of the judgment in that case at [25] that states that the amount of the interim application is “deemed to be the value of those works”. In any event, the case was decided before the Court of Appeal judgment in MJ Harding Contractors v Paice and Springall[2015] EWCA Civ 1231 [2016] BLR 85. This was the Court of Appeal judgment in a set of disputes of long-running serial adjudications. This judgment concerned the 3^rd and 4^th adjudications between the same parties. In the 3^rd adjudication, an adjudicator found that there was no valid payless notice in respect of a final account claim which had been issued by the contractor, the notice that had been issued being too late. He decided that the final account claim (the merits of which he did not consider) should be paid. The employer (two private individuals who had contracted together as employer) commenced the 4^th adjudication to determine the value of the final account. When the 4^th adjudication started, the contractor sought an injunction to restrain it continuing on the grounds that it concerned the same dispute that had already been decided in the 3^rd adjudication. Edwards-Stuart J refused the injunction. Jackson LJ gave permission to appeal on the basis that the case raised issues of importance. The Court of Appeal heard the appeal notwithstanding a decision by Coulson J, after the decision of Edwards-Stuart J but before the appeal was heard, that the decision in the 4^th adjudication was not enforceable for reasons of breach of natural justice.

In dismissing the appeal (Jackson, Rafferty and Gloster LJJ), the Court of Appeal stated that “the dispute” referred to in any adjudication should not be looked at in isolation. The decision in the 3^rd adjudication had dealt with the first of two alternative limbs, namely the contractual issue (validity of the payless notice) and hence had not dealt with the second issue, the valuation issue. Accordingly, Mr Paice and Ms Springall were entitled to have referred the valuation dispute for resolution in the 4^th adjudication, and remained entitled to do so again in what was by then a proposed fifth adjudication. Jackson LJ referred to ISG Construction Ltd v Seevic College[2014] EWHC 4007 (TCC) and said that it was not necessary to say if that decision was right. However, in my judgment it can be difficult to reconcile the decision in ISG v Seevic with the ratio in Paice v Harding. A similar approach to defining the dispute was adopted by a differently constituted Court of Appeal in Brown v Complete Building Solutions Ltd[2016] EWCA Civ 1. In that case there were repeat adjudications, in a situation where Mr and Mrs Brown had engaged the contractor to build a new house in Surrey. Following issue of a “Final Certificate” by the Architect, the contractor sought a final payment. It was not paid and the contractor commenced the 1^st adjudication. The adjudicator decided that the certificate was not ineffective (which was one of the issues), but that the letter seeking payment was not a valid payment notice as it had certain deficiencies. He therefore found that no sum was payable. The contractor then corrected the deficiencies that had been identified, issued a valid payment notice, and started a 2^nd adjudication. Mr and Mrs Brown did not serve a payless notice, and said that this was the same dispute as had been resolved in the the 1^st adjudication. The 2^nd adjudicator did not agree and decided in favour of the contractor. HHJ Raynor QC sitting as a judge of the High Court granted the contractor summary judgment on the decision, and Mr and Mrs Brown appealed. The Court of Appeal (Beatson, Simon LJJ and Sir Robin Jacob) dismissed the appeal, holding that the terms, scope and extent of the dispute previously referred, and the terms, scope and extent of the earlier decision, had to be analysed. The dispute that was referred for resolution in the earlier adjudication could not be considered in isolation. The latter adjudication dealt with a different dispute and the adjudicator had jurisdiction.

In my judgment, the ratio of both those Court of Appeal authorities – though neither expressly finds that ISG v Seevic is wrong, because it was unnecessary for the differently constituted courts to do so – cast some real doubt on whether that case would be decided in the same way now. That must lead to similar doubts as to whether the reasoning in that case concerning rights to recover overpayments is correct, even if it were directly on the point that Mr Mort QC is pressing. However, upon analysis, it can be seen that the judgment in ISG v Seevic is not authority for what he seeks to establish in any event.

ISG v Seevic is a case concerned with timing, not substantive underlying rights. At [43] the judge said the following:

“Since the only issue referred to the adjudicator in Adjudication No 2 was the value of ISG's works at the date of Application No 13, and since I have concluded that this question was decided in Adjudication No 1, that conclusion disposes of the dispute referred in Adjudication No 2. Accordingly, ISG is entitled to a declaration to that effect.”

(emphasis added)

The fact that ISG v Seevice is concerned with timing and dates can be seen from subsequent passages in the judgment. At [44] and [45] the judge said the following:

“[44] However, if I am wrong about the issue referred to the adjudicator in Adjudication No 2 as being the value of ISG's works on the valuation date for Application No 13, there is another route to the same result. On this application for summary judgment the court is being asked, in effect, to decide the rights of the parties in relation to the dispute raised by Adjudication No 2. In my judgment, the court is entitled to do just that (because, as I have already mentioned, there is no arbitration clause).

[45] For the reasons that I have already given under this form of contract the employer has no right to demand a valuation of the contractor's work on any date other than the valuation dates for interim applications specified in the contract. Accordingly, if and in so far as in Adjudication No 2 Mr. Juniper was purporting to determine the valuation of the works at a date other than a valuation date (ie. 13 May 2014 instead of 11 May 2014), and then to make a financial award on the basis of it, he was in my judgment wrong to do so.”

(emphasis added)

These two passages are important. They show that the reasoning that follows the conclusion concerning what was decided in Adjudication No.1 is obiter and not part of the ratio decidendi of the judgment. The passages also make it clear that the statements in [45] are directed at the date upon which valuations were contractually to be performed. It should also be noted that even if the employer has no “right to demand” a valuation of the contractor’s works on a date other than a valuation date under the contract, this is different to stating that the finite amount to which the contractor is entitled as final payment for the works is in all cases the figure in the most recent interim assessment. They are two entirely different points.

In Galliford Try Building Ltd v Estura Ltd [2015] EWHC 412 (TCC) the judge himself explained his view of what ISG v Seevic had decided, and what it had not. He said the following:

“[18] I held that if an employer fails to serve the relevant notices under this form of contract it must be deemed to have agreed the valuation stated in the relevant interim application, right or wrong. Accordingly, the adjudicator must be taken to have decided the question of the value of the work carried out by the contractor for the purposes of the interim application in question.

[19] However, I made it clear that this agreement as to the amount stated in a particular interim application (and hence as to the value of the work on the relevant valuation date) could not constitute any agreement as to the value of the work at some other date (see paragraph 31).

[20] This means that the employer cannot bring a second adjudication to determine the value of the work at the valuation date of the interim application in question. But it does not mean any more. There is nothing to prevent the employer challenging the value of the work on the next application, even if he is contending for a figure that is lower than the (unchallenged) amount stated in the previous application.”

(emphasis added)

Even if the first sentence of [20] in Galliford Try Building Ltd v Estura Ltd remains correct, (and it was decided on 27 February 2015, before the Court of Appeal judgment in Harding v Paice which was decided on 1 December 2015) this means that the value of the work remains something that can be challenged. In other words, the value of the works executed is not definitely determined by the figure in the interim assessment (or an adjudicator’s decision on that interim assessment). Nor could it sensibly be argued otherwise, given the nature of adjudication. This means that ISG v Seevic cannot, in my judgment, be argued as authority for the proposition advanced by Mr Mort QC.

I also draw support for my conclusion from the judgment of O’Farrell J in Kersfield Developments (Bridge Road) Ltd v Bray and Slaughter Ltd [2017] EWHC 15 (TCC). In that case the court considered a claim for summary judgment by the contractor on an adjudicator’s decision, together with Part 8 proceedings brought by the employer. One of the issues was the validity of pay less notices. This was resolved in the contractor’s favour by the adjudicator. The judgment does identify that MJ Harding Contractors v Paice and Springall[2015] EWCA Civ 1231 was cited to the court, as it is listed at [84]. From investigations carried out by counsel in the case before me, it does not appear that Brown v Complete Building Solutions Ltd[2016] EWCA Civ 1 was cited. However, in the course of considering the different attempts by the employer to avoid having to satisfy a decision of the adjudicator that it pay £1.1 million, O’Farrell J stated at [96] the following:

“I acknowledge that the default notice mechanism under the Act might result in unfairness or hardship to an employer in circumstances where the contractor received a windfall from the employer’s procedural failure. However, it simply regulates the cash flow as between the parties and does not affect their substantive rights….This finding does not preclude a challenge to the valuation of the works and/or any claims and cross-claims for the purpose of subsequent interim payments or for the purpose of determining the sums due on a final and conclusive assessment”.

(emphasis added)

I interpret that passage as being consistent with my finding that the amount to which the contractor is entitled as final payment for the works is not definitively decided as the figure in the most recent interim assessment.

In my judgment, therefore, the accrued rights which ICI had under the contract as at 17 February 2015 include the right to recover any payment already made to MMT that was an overpayment, meaning a payment in excess of MMT’s entitlement for the works it had executed, together with analysis of MMT’s entitlement for any compensation events and the Fee. In other words, the fact that I have found that ICI repudiated the contract does not relieve the parties of an analysis of the value of the works executed by MMT, or freeze MMT’s entitlement to payment at the amount it had in fact already been paid (or which had already been included in the most recent interim assessment). Such an analysis will not, however, be the same as a Final Assessment under the contract terms in accordance with the Termination Table, nor will it be the same exercise as though MMT had repudiated the contract.

It is not strictly necessary therefore to determine this alternative way that ICI puts its case, given my findings on the nature of the contractual entitlement above. The speech of Lord Fraser in Hyundai Industries Heavy Industries Co Ltd v Papadopoulos [1980] 1 WLR 1129,1149 supports my analysis in the preceding section because the following is stated:

“Much of the plausibility of the argument on behalf of the guarantors seemed to me to be derived from the assumption that the contract price was simply a purchase price. That is not so, and once that misconception has been removed I think it is clear that the shipbuilding contract has little similarity with a contract of sale and much more similarity, so far as the present issues are concerned, with contracts in which the party entitled to be paid had either performed work or provided services for which payment is due by the date of cancellation. In contracts of the latter class, which of course includes building and construction contracts, accrued rights to payment are not (in the absence of express provisions) destroyed by cancellation of the contract”.

(emphasis added)

However, I should state that although, if there is a contract, traditionally restitution is ordinarily only available where there has been total failure of consideration – and examples of this include Rover International Ltd v Cannon Film Ltd [1989] 1 WLR 912 – the reasoning in Ferguson & Associates v Sohl [1992] 62 BLR 96 was that the concept of total failure of consideration could be applied to the balance sought to be recovered. This was on the basis that there was indeed a total failure of consideration in respect of that balance. I express no view on whether that is necessary or not. Hirst LJ stated at 105:

“…ex hypothesi, the learned judge’s finding is that for the £4,673 there was indeed a total failure of consideration because £4,673 was paid by the defendant for work that was never done at all. The plaintiffs rightly recovered their £22,000 odd for work which they had done, including their profit, and there is no question of rolling back the carpet so far as that payment is concerned. But for the sum actually claimed in restitution there was, in my judgment, no consideration at all, and it matters not, though Mr Armstrong [for the plaintiffs] sought to argue the contrary, that at some stage or other that sum of money formed part of a larger instalment”.

Nourse LJ expressed himself in the following way at 106:

“If it is necessary, out of respect for well-established principles in the law of contract and restitution, to base our decision on the proposition that there was a total failure of consideration in regard to the £4,673 [ie the balance], so be it. For myself, I would have held that simple common sense was every bit as sure a foundation.”

Whether that concept, namely that there was a total failure of consideration for part only of the work, is more than a transparent device to permit restitution to be applied to recovery of payment in such a contractual context, does not in my judgment much matter and is not necessary to decide in this case. Such an approach, termed “apportionment”, has been used in other cases, such as Goss v Chilcott [1966] AC 788, which dealt with the requirement for apportionment to be carried out without difficulty in respect of partial repayment of a capital amount in a loan agreement, and whether this is a bar to a restitutionary remedy. Apportionment was described by Stadlen J in the more recent case of Van Der Garde BV and others v Force India Formula One Team Ltd [2010] EWHC 2373 (QB) (which concerned a contract for a driver and his sponsor in Formula One to pay a sizeable sum to race for a team for a season) at [321] in the following terms:

“Given the accepted constraints of the requirement to show a total rather than partial failure of consideration, apportionment is a necessary tool to enable the court to find that the payee has no right to retain the sum claimed for work which, in breach of contract, he has not done. In my view for work done one could equally substitute goods delivered and/or services provided.”

It is also fair to refer to the fact that Stadlen J at [314] described Ferguson v Sohl as “a difficult case”. It should be noted that the sum claimed (and overpaid to a contractor) on these facts would not necessarily be claimed in breach of contract, as the failure to serve payless notices could mean they were perfectly valid interim applications that had to be paid in accordance with the payment terms of the contract. However, it is not necessary to consider the concept of apportionment any further given my findings on the contractual route available to ICI to recover overpayments.

There is however another reason why ICI is entitled to be repaid any overpayment it has made to MMT, although it could be said to be something that overlaps (or more accurately perhaps, sits above) each of the two routes discussed above. This is because the total sum paid to MMT as at the date of this trial includes sums paid pursuant to two adjudication decisions.

MMT was somewhat bullish in its approach to the sums paid to it by this route. In its Defence the following was pleaded in paragraph 55(5) and (6) in relation to the interim payments:

“(5)

There was no valid payment notice or notice of intention to pay less against application number 22, and in the circumstances MMT’s application became the notified sum for the purposes of section 111 of the [Housing Grants Construction and Regeneration] 1996 Act as amended. ICI thereby became obliged to pay the said sum of £7,559,514.76, ie corresponding with the valuation of the account in the sum of £20,930,363.05.

(6)

The matters referred to in the last sub-paragraph have been the subject of both adjudication proceedings and court proceedings (claim number HT-2015-000161) determined in MMT’s favour. In the circumstances MMT is not seeking to put these matters into issue in these proceedings: they have already been determined in a finally binding adjudicator’s decision and in court proceedings, in MMT’s favour.”

(emphasis added)

During the trial on liability Mr Mort QC went further. He described the sums claimed in the interim application in question as having been subject to “a judgment on the merits” on Day 5 at page 118 when he said, in the course of an objection, "the payment that my learned friend is referring to is the subject of a judgment on the merits of the claim, and although there was an adjudication, that adjudication has been superseded by a court judgment, not in relation to the enforcement of the adjudication, but in relation to the underlying application for money." Upon pursuing his use of this expression a little further, it became clear that the phrase “judgment on the merits” did not refer to a judgment, and did not refer to the merits. The “court judgment” turned out to be the order made in the enforcement proceedings.

There was therefore no “finally binding adjudicator’s decision” and there was no “judgment on the merits”. Neither expression therefore appears to be entirely suitable or accurate in this situation.

What had occurred was entirely mundane, so far as adjudication decisions are concerned. MMT obtained a favourable decision in Adjudication No.1, and sought to enforce it in proceedings issued in the Technology and Construction Court. Although those proceedings claimed relief based upon the lack of pay less notices, enforcement of the decision itself was also claimed. ICI sensibly conceded that (although somewhat later than ought to have been the case) a consent order was drawn up, and the amount was paid. That does not come close to a judgment, and it does not come close to changing the character of the adjudicator’s decision to one that is finally binding, rather than binding on an interim basis. Adjudication No.4 was enforced by order of the court too. ICI complied with that by paying the sum ordered to be paid. The nature of adjudicators’ decisions is one of “interim finality”. There are, sometimes, circumstances which change the character of such decisions to ones that are finally binding. None of those circumstances pertain here.

The nature of the cause of action that one party has when it seeks to recover sums paid to another under an adjudicator’s decision has been considered by the Supreme Court in Aspect Contracts (Asbestos) Ltd v Higgins Construction plc [2015] UKSC 38. That case concerned limitation, and an attempt to recover sums paid under an adjudicator’s decision that was met with a defence that the claim was time-barred. Aspect was the contractor who had performed asbestos survey works, and Higgins was the employer. Aspect had paid Higgins certain sums in 2009 pursuant to a decision by an adjudicator favourable to Higgins, and sought recovery of those sums in 2012. The survey works were performed in 2004 and the redevelopment works had been done in 2005. Aspect based its claim on both an implied term for overpayment and restitution. Akenhead J at first instance in [2013] BLR 417 held that there was no implied term, that the claim was time-barred and that there was no claim in restitution. Upon appeal, the Court of Appeal found for Aspect at [2014] BLR 79 and considered that the Scheme implied that any overpayment could be recovered. Aspect did not pursue its restitutionary claim before the Court of Appeal. Higgins appealed to the Supreme Court and Aspect was given permission to rely upon restitution as an alternative to its primary claim based on an implied term. The Supreme Court dismissed Higgins’ appeal.

In doing so, the Supreme Court held that the cause of action arose when the payment(s) made pursuant to an adjudicator’s decision were made. This was so whether that cause of action was analysed as arising under the contract (by way of an implied term) or in restitution. It is fair to say that the Supreme Court considered the same result was obtained whether the right to recover was restitutionary in character, or contractual. The Supreme Court did not see the need to consider apportionment or total failure of consideration for the balance (that balance being the amount of the adjudicator’s decision). For MMT’s argument on the subject of recovery of an assumed overpayment to succeed in this action (namely that ICI had no such right at all, and the payment obligation was crystallised in the total amount in fact paid) MMT would have to be correct that ICI had no accrued right to recover any overpayment on interim assessments as at 17 February 2015, and also that ICI was not permitted to have a final determination of the correct valuation of Interim Applications No.22 and/or No.23. Whether in practical terms these two amounts are likely to be broadly the same – they cannot be identical because of the repudiation event of 17 February 2015 and its consequences – ICI certainly has a right, at the very least, to the latter, and I have found it has a right to the former too.

In neither exercise is the amount actually paid to MMT a central part of the valuation. It is an arithmetic component that is to be applied once the valuation (on either limb) has been performed of MMT’s works. The exercise as at 17 February 2015 will be a more complete consideration than that of Interim Application No.22, because self-evidently all that occurred in terms of work performed and Fee earned by MMT between the valuation date for Interim Application No.22, and 17 February 2015, will be included in the former. If I am right about ICI’s accrued rights, the exercise concerning the correct valuation of Interim Valuation 22 need never separately be done. However, even if I am wrong about that issue, the Interim Valuation No.22 exercise would still need to be done. The same reasoning applies to Interim Valuation No.23 too.

I appreciate that any exercise which requires an analysis of the correct value of MMT’s contract works is something that could, potentially, involve both parties in further wasteful and expensive litigation, if that amount cannot be agreed between them. Mr Brownlee’s exercise was done as though the contract had been validly terminated pursuant to its terms, that did not occur and so his exercise (which is challenged in any event) will be redundant. Further wasteful and expensive litigation ought to be avoided if possible. Valuation of an account, if it cannot be agreed, should at least be capable of being distilled into a small number of discrete issues. The amount of court time available for the quantum element of this trial will be no more than four days. Judicial resources are not infinite. However, with the necessary degree of realism on both sides such differences should be capable of resolution.

Given that I have found that there were defects present in some of the welds as at 17 February 2015, although not the number or to the extent contended for by ICI, the question arises as to the correct approach in principle to quantification of the cost of remedying those defects.

I have found that ICI repudiated the contract by its actions on 17 February 2015. It is only entitled to retain such rights it had under the contract that had accrued as at that date, unless there were other rights which are properly construed as surviving the contract coming to an end by repudiation. So far as accrued rights are concerned, MMT had an obligation to perform the works without defects, and also to correct such defects as where present, whether or not instructed to do so. MMT also only had a right to be paid for such works as were properly performed, although that is subject to considerations of its rights to payments in interim assessments where ICI had not complied with the requirements to serve valid and effective pay less notices.

Prior to the events of 17 February 2015, ICI had no right to instruct alternative contractors to perform remedial works on the welds, and no right to deduct the cost of such works from the sums otherwise payable to MMT. It is well established that a party cannot benefit from its own repudiatory act; ICI cannot be in a better position in law than it would have been had it not been so in breach, in other words than it would have been had the contract continued. I have held that the repudiation by ICI is not to be treated as though it were a termination under the contractual termination provisions. In those circumstances, the Termination Table in clause 91 has no application. MMT is what is called in these circumstances the innocent party and is entitled to recover damages from ICI for the repudiation, but that does not relieve it of its obligations in terms of defective welds.

Mr Mort QC in his Closing Submissions puts forward a range of options, at the most favourable end of the scale being ICI recovering nothing for defects in the welds. Mr Bowdery QC submits that ICI is entitled to the sum of £7.628 million, this sum being “an estimate of the costs of rectifying and completing MMT’s works” as set out in Appendix 7 of the Particulars of Claim. ICI also seeks “the additional cost to ICI of completing the Works and/or rectifying the defects and/or replacing the pipework” pursuant to clause 93.2 of the contract. In the alternative, ICI seeks “to recover such completion and/or rectification and/or replacement costs by way of damages for breach of contract”. This summary of how ICI claims the different measure(s) of sums said to be due is taken from paragraphs 11 to 14 of its written Closing Submissions. However, Mr Bowdery QC correctly accepted that if ICI was wrong in respect of issues 7, 5 and 6 (which are the repudiation/termination points) ICI should have its claim arising out of defects in welds executed by MMT assessed on the basis of what it would have cost MMT to repair such defects, had ICI permitted MMT to remain on site and repair them. This concession was correctly made in my judgment.

There can be no question of ICI recovering any sums to complete the works. ICI is the party that repudiated the contract. However, MMT is not entitled to be paid as though all the welds were performed free of defect, when I have found that the correct approach is to assess the level of defects at 5% of the stainless steel welds in the lines excluding the hygienic lines. Whether the sum is expressed as recovery by ICI for defective works, or as a reduction in the amount to which MMT is entitled, the same end result obtains, namely that there should be a deduction against MMT’s account of the amount it would have cost MMT to repair such defects. Accordingly, that amount (which will be assessed at the quantum trial) is to be taken into account in the exercise yet to be performed.

In the autumn of 2014 ICI found themselves concentrating on the realities for Project Fresco after MMT, should relations between the two parties come to an end prematurely and in less than amicable circumstances. Mr Boerboom became interested in what was generically called in the trial (and at the time) the project documentation. MMT had, with the agreement of the original ICI team, kept this at the MMT fabrication facility, and such documents are specifically dealt with in the contract.

Paragraph 64(1) of the Particulars of Claim alleges that MMT was in repudiatory breach of contract in “failing and refusing to produce” what is termed “requested project documentation”. This subject comprises Issue 4 of the Agreed Issues, which includes what are called subsidiary issues to Issue 4(1), refusal to produce, as follows:

Clause 11.2(37), reproduced in the section of the judgment above entitled “Material Terms of the Contract”, defines Contractor’s Documents and clause 11.2(49) defines Project Records. Clause 22.1 grants ICI “an irrevocable, royalty-free and non-exclusive licence to copy and use the Contractor’s Documents….”. That clause continues “If the employment of the Contractor under the Contract is terminated the Contractor hereby agrees that the licence in respect of the Contractor’s Documents granted pursuant to this Clause 22.1 shall continue in all respects, and shall not be affected by such termination and the Contractor shall when requested in writing to do so by the Employer, deliver up forthwith to the Employer two copies of the Contractor’s Documents”.

Clause 55 obliges MMT to provide audit access to the ICI in respect of the Works, and requires this in respect of “the Employer, the Project Manager and other representatives of the Employer”. MMT was also required to “co-operate fully and in a timely manner with any reasonable request from time to time of any auditor (whether internal or external) of the Employer (until Completion……)” to provide “any of the Project Records and/or the Financial Records”.

The fact that clause 55.3 makes it clear, in express terms, that the parties agree that “damages shall not be an adequate remedy for breach of this Clause 55” means that a defence that damages were an adequate remedy could not be raised by the Contractor to an application by the Employer to the court for injunctive relief, which would be governed by conventional American Cyanamid principles.

However, some factual points must firmly be borne in mind when considering the way that ICI puts its case in this respect. Firstly, an audit was conducted, by the organisation called Coppa, in December 2014 and January 2015. Doing so was obviously in MMT’s commercial interests, because at that point AkzoNobel/ICI was arguing that MMT had been overpaid. MMT, conscious that a long-running and bitter dispute with a major client would be entirely counter-productive, was anxious to demonstrate that it had not. MMT fully co-operated with this exercise. The audit provisions do not therefore assist ICI so far as the allegations concerning the project documents are concerned. In any event, that obligation which was upon MMT was to comply with “any reasonable request”. I find as a fact that MMT complied with all reasonable requests so far as its obligations to co-operate with audit is concerned, including the supply of documents necessary for the audit. There can be no sensible dispute about this – the evidence clearly demonstrates that MMT fully co-operated with the Coppa audit.

There is also a distinction to be drawn between entitlement and delivery-up. The former is the legal right under the contract terms that ICI had to the documents. The latter is the process whereby those documents are in fact provided or produced. This point was explored by Edwards-Stuart J in his judgment on the application by ICI for delivery-up of the documents, which is at [2015] EWHC 2915 (TCC). In refusing the application by ICI, he stated:

“[70] So far as the declaration is concerned, the question of ICI's entitlement to the documents is not one that has been explored before me on the merits. It would therefore be inappropriate for the court to make any declaration of entitlement, but what it can and should do is to declare that the adjudicator's decision is valid and binding. That means that the adjudicator's declaration of entitlement will stand unless and until it is overruled by a decision of the court made on the merits.”

The issue concerning production of the project documents upon request can be considered in the following way.

ICI, in my judgment, did have an entitlement to the project documentation prior to 17 February 2015. Clause 22.1 makes it clear that the licence that ICI had under the contract was agreed by the parties to survive termination. However, I have found that this contract was not terminated pursuant to its terms, but came to an end by ICI repudiating it. It is necessary therefore to construe clause 22.1 to see if the objective intention of the parties was that the said clause was to survive acceptance of a repudiatory breach. I consider that it was intended so to survive. The wording makes that clear in this sense: “If the employment of the Contractor under the Contract is terminated the Contractor hereby agrees that the licence in respect of the Contractor’s Documents granted pursuant to this Clause 22.1 shall continue in all respects, and shall not be affected by such termination…..”

The licence is no more than the grant of permission by the entity who produced the documents – MMT – to ICI to copy, reproduce and use the documents. The terms of the contract that would enable ICI, under the contract, to request the documents, and MMT to be held in breach for failing to comply with that request, does not survive past the date of 17 February 2015. It is only accrued rights that so survive a repudiatory event and the right to production of those documents only arises if a request had been made.

The second part of clause 22.1 continues and states “and the Contractor shall when requested in writing to do so by the Employer, deliver up forthwith to the Employer two copies of the Contractor’s Documents”. It is necessary to construe this to see if this part of the clause also is intended to survive a repudiatory acceptance, rather than a contractual termination. I find that it would be artificial to split the clause into two elements, namely the licence on the one hand, and the production upon request on the other, with different intentions being imputed into each part. It would be wrong to construe the clause as granting the Employer the right to use the documents and enjoy the licence, but failing to give the Employer the right to obtain those documents, the contents of which it had the right to use. Accordingly, I find that this clause of the contract was agreed by the parties as intending to survive a repudiatory breach by ICI.

However, without a proper, clear and unambiguous instruction or request to provide the documents prior to 17 February 2015 ICI had no accrued right to the documents as at the date of the repudiation.

I find that there was no proper request for production of the documents by ICI prior to 17 February 2015. Firstly, there was no Project Manager, and the precise scope of which correspondence/instructions from AkzoNobel/ICI and their contractual status was unclear. Secondly, MMT was dealing with different individuals within AkzoNobel, not all of whom had the same point of view. MMT was being on the one hand criticised for acting on instructions that were not properly issued, yet at the same time on the other hand being told that no payment would be sanctioned unless instructions it received were given in accordance with the contract. Thirdly, MMT sought clarification of this in early February 2015 and these requests were simply ignored by AkzoNobel. Fourthly, the parties were seeking to agree a way forward as set out in the 10 Point Letter (which MMT believed had essentially been agreed, at least in principle). Although AkzoNobel had decided not to act in accordance with the items in that letter, and although authority to enter into such an agreement had been withdrawn by Steer Co, nobody informed MMT of this. That way forward (it would be wrong in legal terms to describe it as an agreement, although MMT believed it was an agreement) did not require MMT to produce full copies of all the project documents in duplicate for ICI. That way forward approached the matter differently, namely that the original documents would be made available by MMT for inspection, and that copies of documents would be provided. This was done by MMT, who complied with that requirement, and copies were being taken at the fabrication shop by personnel who worked for Mr Brugman in January 2015.

ICI cannot rely upon clause 27.8A because that relates to documents that describe the works which have to be produced before Completion. These are essentially what are customarily described as being “as-built drawings”. They cannot be produced before the works are completed for obvious reasons – they show what in fact has been built. The obligation upon MMT to produce them does not apply here because the works were not completed (and the majority of them could not even be progressed due to the suspension of welding operations on 16 October 2014).

ICI also relies upon Appendix D, a document concerned with the scope of work for the initial structural steelwork. It does not relate to the mechanical installation which was instructed in PMI03 and I find it does not apply. The document is headed “Scope of supply for structural installation”. Paragraph 3.6 states that the contractor is to provide tests certificates for materials etc where appropriate. Paragraph 2.38 of Appendix D also required MMT to “Handover all required documents as stated in referred documents and codes”. MMT submit that this only arises upon “handover”. In my judgment that is a narrow way of interpreting paragraph 2.38, but the clause must require a request of some kind if the documents are sought prior to that. Given there were no outstanding requests – and the clause refers to “required documents” – this appendix cannot assist ICI in terms of framing a breach on MMT’s part existing prior to 17 February 2015. It also would, even if it applied to the PMI03 works (which I find it does not), not give ICI any rights additional to those that it has under clause 22.1. Accordingly, even if I am wrong about my view of its non-applicability, it does not advance the matter for ICI.

Even Mr Boerboom accepted that the requests he said had been made for test certificates both by and to ABB were not made in writing. I find that he is mistaken about this and no such requests were ever made; but even if that were wrong, oral requests for documents cannot sensibly be construed as material instructions under the contract, a failure to comply with which constitutes a repudiatory breach (or even a breach simpliciter).

Clyde & Co wrote a letter dated 28 January 2015 to MMT’s solicitors, Mills & Co, which stated that MMT had failed either to remedy defective welds or put forward a viable plan for dealing with them. Given the welding operations were still formally suspended at this point, it is difficult to see how MMT could remedy defective welds in any event, but regardless of that, shortly after this letter Mr Wells of MMT sought clarification from ICI of who was permitted to give instructions and who was not. That e mail was simply ignored, and MMT was left in the dark about the contractual status of this letter as a result. The contractual specification and whether radiographic testing was required was still an issue at this stage. This letter does seek “all Documentation as set out in Schedule 2 relating to a pipeline [to be] delivered up to our client before your client starts Rectification Work on that pipeline”.

However, that “deadline” or “date required” was never reached because no rectification work was ever started, as on 17 February 2015 the contract came to an end. In any event, no rectification work could be agreed before the agreement over what the contract specification was became resolved (which happened at the end of the trial of liability). Yet further, Schedule 2 to the letter relates to repair works as well as other documents which did not then exist (for example boroscope inspections). The reply to that letter of 4 February 2015 set out MMT’s position and sought clarification over whether Schedule 2 constituted additional work, and if so pointed out that Clyde & Co had no contractual authority to issue instructions. It also made clear that MMT would comply with providing all documentation required under the contract. This is not therefore a refusal to produce the documents, and I find that this letter from Mills & Co was a reasonable and justifiable attempt to clarify what was being sought, when, and under what contractual provisions.

I find as a fact that the request made on 17 February 2015 was the first formal effective request for production of the documents under the contract. In those circumstances, there was no accrued right on the part of ICI for production of those documents prior to 17 February 2015 and MMT were not in breach of contract (repudiatory or otherwise) for failing to have produced them by that date. However, the request that was made on 17 February 2015 came in tandem with a statement that brought the contractual relationship between the parties to an end.

The request made for the documents on 17 February 2015 was couched in an unrealistically short time frame, and could not possibly have been complied with by 5.00pm that day. It was not a reasonable request. In my judgment MMT could not be considered to be in breach of the contract term that I have found survived, by failing to comply with the request that was made on 17 February 2015. It simply would not have been possible for MMT to have produced these documents within the period of time stated. The word “forthwith” has to be considered in the light of all the circumstances at the time. MMT was entitled to a reasonable period of time firstly to take legal advice, and then to prepare and copy the documents.

The only point that therefore arises on the project documents is what consequences flow from the production of the project documents by MMT in disclosure, rather than immediately after the letter of 17 February 2015.

ICI brought proceedings for an order for delivery up (albeit based upon an unsuccessful adjudication seeking the same relief, in which ICI failed to obtain the necessary order for delivery up) and failed to obtain such an order from the court. This application was in October 2015, some 8 months after MMT had been dismissed from site in the middle of February 2015. No appeal was made against that order and I have no jurisdiction to overrule the decision of Edwards-Stuart J in any event. The documents were provided to ICI some 10 months or so prior to the trial on liability.

The evidence at the trial before me on liability was that once the documents were produced by MMT, they were simply left in a container at the Plant by ICI and ignored. An argument was mounted before Edwards-Stuart J in the application before him in October 2015. At [61] he stated that ICI

“….gives three reasons why delivery up of the documents would be required to give effect to the adjudicator's decision and why damages would not be an adequate remedy for the failure to do so. These are:

i)

The Plant cannot be operated by ICI without the Project Documents. ICI cannot demonstrate that the Plant is safe to operate from a health and safety perspective, or that the Plant has been constructed in accordance with the relevant statutory requirements or British Standards.

ii)

The Health and Safety Executive furthermore will not permit ICI to start up the Plant without the Project Documents that ICI has sought from MMT, and to which ICI is entitled. Moreover, should there be any form of emergency on site, there is currently no Health and Safety file to be passed to emergency services to enable them to deal with any emergency at the Plant.

iii)

Finally, ICI needs copies of the Project Documents in order to carry out the necessary repairs to the defective welds that have been discovered within MMT's works, and complete the Works.”

There is however no sufficient evidence of fact before me from the factual witnesses for ICI at this trial to the same effect as that which was given to the court in October 2015 by ICI’s solicitors. Mr Brugman’s evidence was that two members of the AkzoNobel team “who work for me”, namely Mr Wray and Mr Ruczynski, were copying and reviewing documents kept at the fabrication shop in January 2015. His evidence was therefore wholly contrary to the case ICI were advancing on this subject, and on ICI’s case on repudiation for this alleged breach. Mr Boerboom’s evidence is wholly inadequate on this point. He stated that the documents that were provided on disclosure “might” not be of a sufficient quality to be used, and although he states that “many of the documents which should have been produced are missing” he does not identify these by category, or even by broad description. I have already accepted Mr Wells’ evidence in preference to that of Mr Boerboom, and his account of the documents is not only more credible, I find as a fact that this is what happened. He also explains that quantities of project documentation were left at site when MMT left, a subject Mr Boerboom skates over and does not deal with.

Yet further, it is fanciful to suppose that the owners/operators of a manufacturing facility that was to produce 1.99 million litres of paint per week would wait 8 months to make an application to the court in any event, for documents without which the Plant could not be operated at all. On a very rough calculation, that means that approximately 62 million litres of paint could have been lost due to this delay. An urgent injunction, or at the very least expedited Part 8 proceedings, could sensibly be expected if the absence of those documents during that period really was, for reasons of Health and Safety regulation, preventing operation of the Plant at all as alleged. The disclosure order given by Coulson J at the first Case Management Conference on 12 February 2016 was for the approach to e-disclosure to be agreed by 25 March 2016 and standard disclosure by lists by 15 April 2017. Both parties were represented before him by leading counsel. Those directions do not suggest any particular urgency on the disclosure issue, which would of course include the project documents. Even that CMC was one whole year after the events of 17 February 2015. However, this is a trial of liability and the losses, if any, that might flow from MMT’s failure to produce the documents within a reasonable time after the request on 17 February 2015 will have to await the trial of quantum.

Turning to the other sub-issues within Agreed Issue 4, Issue 4(2) deals with the allegation of removal by MMT of project documentation from the plant to MMT’s fabrication shop. Issue 4(3) deals with an alleged failure by MMT “to provide any or any adequate remedial plan”. Issue 4(4) is an allegation that MMT failed to produce “any evidence, or proposals for ensuring, that welders were appropriately qualified”. Finally, Issue 4(5) is the allegation that MMT denied “the project manager access to its fabrication shop”. Subsidiary issues that are included within that are said to be “who was “the Project Manager” for the purposes of this allegation?” and “in this context, was the appointment of Henk Boerboom (an employee of ICI’s parent company) as project manager valid and/or effective?” I have touched on some of these subjects already in the relevant sections above.

Although it is alleged that “MMT wrongfully removed project documentation from the Plant” (I quote from ICI’s written Closing Submissions) there is simply no factual basis for this assertion. Investigating the origin of this allegation is somewhat difficult. It is not mentioned in the letter from Clyde & Co dated 28 January 2015. Certainly, had MMT wrongfully removed such documentation from the site before that date, then this would almost certainly have been dealt with in correspondence before that letter, and would undoubtedly have been identified in the letter itself. Nor is it mentioned in the letter of 17 February 2015, the date that AkzoNobel and ICI, in the letter signed by Mr Boerboom, accepted what was said to be MMT’s repudiatory breach(es) and ordered MMT “depart from site by 5.00pm today, 17 February 2015”. There are some references in earlier e mails to removal of documents and where they were being kept, but this is against the background of confusing communications from different parts of AkzoNobel/ICI and it is wholly unclear from that correspondence what MMT were being contractually instructed (or requested) to do.

In fact, I find that MMT had done nothing improper in terms of “wrongful removal of project documentation”. The majority of the project documentation was kept at the fabrication facility, and always had been. It was created and compiled at the fabrication facility, which is also referred to as the fabrication shop. This was a sensible place for it to be created, and kept, during the project works as it was added to and supplemented as the works progressed. Some of it was taken there from the site and again, this was wholly sensible and perfectly understandable for reasons of logistics. It was kept there with the express agreement of ICI from the very beginning. This documentation is also called documentation packs and/or “doc packs”. As an example of ICI’s consent/acquiescence to their location, in September 2014 Mr Conrad of AkzoNobel wrote in an e mail to Mr Wells of MMT who explained why they were currently held at the MMT fabrication shop "I understand, and as far as I'm concerned, where the doc packs are is not a big deal."

I find as a fact that MMT did not wrongfully remove project documentation from the Plant. This assertion by ICI is wholly without factual foundation.

The answers to the Agreed Issues are therefore as follows.

failing to hand over requested project documentation; subsidiary issues are:

This judgment therefore resolves the issues on liability that the parties agreed were to be determined in this trial. It will now be necessary to make directions for the trial of the remaining quantum issues in these proceedings.