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University of Warwick v Balfour Beatty Group Ltd [2018] EWHC 3230 (TCC)

13 February 2019

On 11 December 2018, at the High Court of Justice, Technology and Construction Court, the honourable Judge McKenna handed down judgement, in the matter between University of Warwick (“the Claimant”) and Balfour Beatty Group Limited (“the Defendant”).

The Claimant employed the Defendant under an amended Joint Contracts Tribunal (“JCT”) Design and Build Contract 2011 form of contract (“the Contract”). Under the contract, the Defendant was employed to design and build the National Automotive Innovation Centre (“NAIC”) at the Claimant’s campus. The bespoke amendments of the contract formed the subject matter of this case.

The court was faced with the contractual interpretation of a clause, which concerned the definition of Practical Completion within the contract, and whether entire Works were to be completed before a single Section could be certified as complete, and whether as a consequence of the meaning of Practical Completion, the liquidated damages provisions were inoperable.

The contract

The contract provided for the Works to be divided into Sections as follows:

“Section of works identified in the Employer’s Requirements”:
Section 1 – Main Equipment Room’s and Sub Equipment Room’s as defined on Cullinan Studio drawings NAIC-L800 series;
Section 2 – Dynamometer build and test area as defined on Cullinan Studio drawings NAIC-L800 series;
Section 3 – Café area as defined on Cullinan Studio drawings NAIC-L800 series; and
Section 4 – all other works.”

The date for possession for each section was 20th April 2015 whilst the date for Completion for Sections 1-3 was 10 April 2017 and for Section 4 was 5 July 2017.

The contract further provided a provision for liquidated damages for each Section as follows:

“Sections, range of liquidated damages for each Section:
Section 1: £5,000 per week or pro-rata for any part thereof;
Section 2: £15,000 per week or pro-rata for any part thereof;
Section 3: £10,000 per week or pro-rata for any part thereof; and
Section 4: £65,000 per week or pro-rata for any part thereof.”

Clause 1.1 defined Practical Completion as:
“…a stage of completeness of the Works or a Section which allows the Property to be occupied or used…”

Property was defined as: “…comprised of the completed Works.”
Works was defined as: “the works briefly described in the First Recital, as more particularly shown, described or referred to in the Contract Documents, including any changes made to those works in accordance with this contract.”

Clause 2.27.1 as amended, stated the following:
“When Practical Completion of the Works or a Section is achieved and the Contractor has sufficiently complied with clause 2.37 and 3.16.5, then:

  • in the case of the Works, the Employer shall forthwith issue a statement to that effect (‘the Practical Completion Statement’) and the Employer shall from such date be entitled to enter and take possession of the completed Works with effect from such date;
  • in the case of a Section, he shall forthwith issue a statement of Practical Completion of that Section (a ‘Section Completion Statement’);

and Practical Completion of the Works of the Section shall be deemed for all the purposes of this Contract to have taken place on the date stated in that statement.”

Clause 2.29 provided a mechanism whereby the Claimant could claim liquidated damages from the Defendant in the event that the Works or a Section of the Works did not achieve Practical Completion by the relevant completion date.

The adjudication

The Defendant’s position at the adjudication was that it was not possible to achieve completion of one Section of the Works prior to completion of the whole of the Works, as a result, the liquidated damages provisions were inoperable as it could not separately achieve Practical Completion of each of the Sections of the Works.

The adjudicator accepted the Defendant’s view that the relevant provisions of the Contract “the ordinary and natural meaning of the words used in the definition of Practical Completion means that it is not possible to achieve Practical Completion of any Section in isolation from the other Sections…”. The only time that Practical Completion could be achieved was when the whole of the Works (all four Sections of the Works) achieved Practical Completion. It was not possible to achieve Practical Completion in isolation.

The Applicable law

Judge McKenna looked at several factors and in conclusion stated the following: “the court is concerned to identify the intention of the parties by reference to what a reasonable person, having all the background knowledge which would have been available to the parties, would have understood them to be using the language in the Contract to mean, and it does so by focussing on the meaning of the relevant words, that is to say, what the parties are taken to mean by using the words in question.

It is important to bear in mind, however, as was submitted on the Defendant’s behalf, that the purpose of interpretation is to identify what the parties have agreed and not what the Court thinks that they should have agreed. Where the parties have used unambiguous language, the Court must apply it and not ignore the words used or import words not used so as to achieve what the Court divined to be the parties’ real intention.”

Conclusion

Judge McKenna disagreed with the findings of the adjudicator and made an order in favour of the Claimant. He held that the defendant’s construction of Practical Completion did not accord with the ordinary meaning of the words used in the contract. He stated the meaning of ‘Property’ carried too much focus without due regard to the wider context of the other provisions of the Contract, as well as the background known to both parties at the inception of the contract.

Judge McKenna further explained that the ordinary meaning of the words used in clause 2.27 both when considered in isolation and in the context of the Contract as a whole is that a Section attains Practical Completion if it is sufficiently complete that it would permit or allow the use and occupation of the Property. He concluded that the Contract reflected the ordinary meaning of the language used in clause 2.27 and the definition of Practical Completion reflected the parties’ clear intention, by introducing a sectional completion regime.