Atlantic Projects Company (UK) Limited v EP NI Energy Limited

This is an application by the Defendant for an order for the trial of preliminary issues.

The background is as follows.

This is a substantial dispute arising out of the development of a power station in Northern Ireland.

The First Defendant was a special purpose vehicle incorporated for the purposes of that development.

The First Defendant engaged the Claimant, APC, as the contractor for the design, procurement, and construction of works relating to that development for a contract price originally of the order of £73 million. That contract was made in October 2021.

Then moving forward to the conclusion of relations between the parties, on 19 April 2024, APC gave notice of termination based principally upon what were said to be failures to make payments in accordance with the terms of the contract by the First Defendant. APC then left site. There are very substantial claims on each side.

APC claim significant extensions of time, prolongation, and disruption costs, and other claims in the order of £50 million.

The First Defendant, likewise, claims damages and sums due under the contract in excess of £100 million.

In relation to the termination, the following clauses of the contract are potentially relevant.

Clause 14 of the contract sets out a payment regime which is broadly speaking in accordance with the Housing Grants Act 1996, as amended.

In particular, paragraph 14.6 requires the employer to pay the Notified Sum to the contractor by the Final Date for Payment, and clause 14.6.3 provides for the service of pay less notices by the engineer effectively on behalf of the employer.

Clause 16.2.1 then provides that the contractor is entitled to terminate in certain circumstances. The circumstance relied upon here is subparagraph (a), that the contractor does not receive an amount properly due in accordance with the contract which is equal to or greater than £100,000 within ten days after the relevant Final Date for Payment.

The Claimant relies upon that clause and in particular in paragraph 83 of its Particulars of Claim asserts that there has been non-payment in five enumerated respects.

It is essentially as to that paragraph as subsequently developed in the pleadings that the Defendant proposes a list of four potential preliminary issues.

Counsel reminded me both of the guidance which is provided in the TCC guide as to preliminary issues and as to the relevant case law. In particular, the TCC guide at paragraph 8.2.1 states that the Court would expect that any issue proposed as a suitable Preliminary Issue would, if decided in a particular way, be capable of resolving the whole proceedings or significant elements of the proceedings, or significantly reducing the scope and therefore the costs of the main trial or significantly improving the possibility of a settlement of the whole proceedings.

I should also note clause 8.2.2 which indicates that the Court is not generally minded to receive extensive oral evidence at the trial of preliminary issues.

It does not seem to me that the criteria identified in the TCC guide have been satisfied in the present case.

First of all, I am not persuaded that the issues are as factually simple as the Defendant contends.

For example, proposed issue one, reads as follows:

“Did EPNI fail to make payment of the sum of £329,000 [odd] in respect of payment milestone one in accordance with the terms of the contract as alleged?”

As to this, Ms Harwood, the Defendant’s solicitor, has provided certain evidence in her witness statement at paragraphs 23 to 25 inclusive, which are deemed to be included in this judgment.

Those assertions seem to me potentially to raise issues of fact which are not, or may not be, appropriate for determination as a preliminary issue. In this connection, I agree with the observation made by Mr Owen King’s Counsel who appears for the Claimant that in the absence of a schedule of agreed facts, it is potentially unwise to embark upon the trial of preliminary issues.

Secondly, the issues would not, on any view, resolve the whole proceedings or a significant element therein. Counsel both offered me estimates of the financial consequences of a decision on termination. Even taking the higher figure, suggested by Mr Dennison King’s Counsel who appears for the Defendant, of £8 million that figure seems to me to be a drop in the ocean in the context of the size of claims which I have indicated.

As to that point, Mr Dennison referred to the case advanced by the Defendant for wilful default. By clause 17.6 of the contract, the potential recovery of the Defendant is limited to 100% of the contract price unless there is wilful default and gross negligence. Now, I can see that it may be that if there has been an unlawful termination, that might be an ingredient of a case relating to wilful default and gross negligence but as Mr Owen points out, that case is multi limbed, and I do not think that any of the proposed issues are likely to shed very much light upon it.

Thirdly, it does not seem to me that the resolution of these issues would reduce the scope and costs of the main trial. Indeed, as Mr Owen points out, the parties are in agreement that a seven week trial is required in any event. Furthermore, Mr Dennison’s submission that these issues could almost be dealt with today, in my judgment rather undermines the proposition that they will reduce very much the costs or time required for the trial.

Fourthly, for the reasons already indicated, it does not seem to me that resolving what are relatively peripheral and narrow issues, even if they could be resolved as preliminary issues, would very much improve the prospects of settlement. It seems to me that the prospects of settlement are going to depend much more upon where the merits lie in relation to the broader contours of claims and counterclaims.

Fifthly, even in so far as the proposed issues are pure issues as law, as contended for by the Defendant, there is a real prospect that one party or the other, or both, might appeal following a judgment on preliminary issues. I think that Mr Dennison’s confidence that that could all be accommodated within the timetable leading to the proposed trial is optimistic. I would observe that in the recent Hexagon litigation appeal on points of law to the Supreme Court took up a very substantial amount of time.

Sixthly, as Mr Owen has pointed out, there are a raft of matters which are relied upon by the Defendant in relation to what is said to be an unlawful termination. They plead waiver, capricious conduct, and other matters. Those are clearly matters which require factual evidence and it does not seem to me that scraping out of the termination case one or two points of law really assists the parties very much.

For all of those reasons, I would dismiss this application. It seems to me that in the words of a now somewhat elderly authority, but still of some assistance, that to order the proposed preliminary issues would be a treacherous shortcut in the present case.