Connect Plus (M25) Ltd v Highways England Company Ltd [2016] EWHC 2614 (TCC)

Case No HT-2016-000176[2016] EWHC 2614 (TCC)
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
TECHNOLOGY AND CONSTRUCTION COURT
Venue Royal Courts of Justice, Rolls Building, Fetter Lane, London, EC4A 1NLDate 27 October 2016
Before
THE HON MR JUSTICE COULSON
Between
Connect Plus (M25) LimitedClaimant/RespondentHighways England Company LimitedDefendant/Applicant
Mr David Streatfeild-James QC and Mr Mark Chennells(instructed by Pinsent Masons LLP) for Claimant/RespondentMs Anneliese Day QC and Ms Isabel Hitching(instructed by DLA Piper UK LLP) for Defendant/ApplicantHearing Hearing date: 19 October 2016
JudgmentThe Hon. Mr Justice Coulson :
[1]INTRODUCTION Pursuant to a Design, Build, Finance and Operate contract (“the DBFO contract”) dated 20 May 2009, the defendant (formerly the Secretary of State for Transport, and now a government-owned company whom I shall call “HEC”) engaged the claimant (referred to in the contract as ‘DBFO Co’, but whom I shall call “CP”) to provide various services over a 30 year period in respect of the M25 motorway around London. This was a PFI contract worth some £6.2 billion.[2]In 2014, a dispute arose between the parties as to the interpretation and application of a specific element of the compensation mechanism, known as the ‘Critical Incident Adjustment’, in Schedule 25 of the DBFO contract. Pursuant to the dispute resolution provisions in the contract, this dispute was first considered by the Network Board. On 16 November 2015 the Board agreed that it should be referred to an expert and Sir Robert Akenhead was appointed to determine the dispute. His Decision was dated 12 February 2016 and was in favour of HEC.[3]Pursuant to a Claim Form issued on 11 July 2016, CP challenged the Expert’s Decision. Paragraph 10 of the Claim Form sets out the basis for CP’s challenge in these summary terms:
“It is CP’s case that: (1) The Expert was wrong in his approach to the construction and application of the DBFO Contract and in granting declarations A and/or B set out above; and/or (2) The parties having previously agreed and/or resolved a different approach to the DBFO Contract and/or the parties having proceeded on the basis of a convention and/or in accordance with representations made by HEC as to the proper approach to the DBFO Contract, HEC is bound by and/or estopped from departing from that previous approach.”
These assertions, and the way in which CP’s case is now put, are dealt with in much greater detail in the Particulars of Claim which was served on 30 September 2016.[4]By an application dated 27 July 2016, HEC sought to strike out paragraph 10(2) of the Claim Form, on the grounds that the court had no jurisdiction to consider it, because it was not a claim that had been determined by the Expert. The hearing was fixed for 19 October 2016, in order to allow the arguments to take into account any refinement provided by the Particulars of Claim. That hearing lasted most of the day. At the close of submissions, because of the importance of the point to both sides (the underlying issue is said to be worth £12 million of past costs, and £87 million of future costs), I reserved judgment until the following week.[5]I should say at the outset that, throughout this application, there was a tendency on the part of HEC to overstate its case. They argued that, not only were CP prevented from running what they called the “new claims” in these proceedings, but that they were not entitled to raise them anywhere else either. Effectively HEC argued that CP had had one opportunity only to raise whatever points they wanted on the issue of the interpretation and application of ‘Critical Incident’ and that they were now barred, for all time, from raising any other arguments on the topic, either in these proceedings or in another expert determination. In similar vein, they maintained that CP were now seeking to argue that the Expert did not have the jurisdiction to reach the decisions that he did, despite the fact that they had agreed to give the Expert that jurisdiction, and that they were therefore seeking to resile from their previous agreement as to his jurisdiction. The legal basis for both of these submissions remained uncertain and they were strongly denied by Mr Streatfeild-James QC, on behalf of CP. This tendency to overstatement was also apparent in some of HEC’s witness evidence: for example, the most recent statement from Ms Soper of DLA Piper ran to 11 pages of inflammatory argument, with no new factual material at all.[6]I set out in Section 2 below a brief outline of the relevant facts and documents. In Section 3 below I summarise the applicable principles of law. In Section 4 below I address the two linked submissions put at the forefront of their argument by HEC, namely that CP have waived their right ever to advance the new claims (if that is what they are), and that CP are seeking to resile from their earlier agreement to confer jurisdiction on the Expert. In Section 5 below I consider whether or not the claim at paragraph 10(2) of the Claim Form is brought in breach of the dispute resolution provisions of the DBFO contract, which is relevant to HEC’s alternative application for a stay. In Section 6 below, assuming that the claims are brought in breach of contract, I consider whether or not there should be a stay of these proceedings.[2]THE RELEVANT FACTS AND DOCUMENTS[7]In common with many PFI contracts, the DBFO contract documentation is ridiculously unwieldy. Happily, it is unnecessary to set out large parts of the contract for the narrow issue which I have to decide. For present purposes it is sufficient to note that:(a) There are 94 operative clauses, filling more than 600 pages;(b) There are 29 substantial operative schedules;(c) There are different provisions addressing ‘Works’, ‘Project Facilities’ and ‘Operations’.[8]The compensation provisions are set out at various places in the contract, in particular within clauses 49-52. In clause 50 there are numerous cross-references to Schedule 25, which sets out how compensation was to be calculated. An event which could lead to a significant adjustment in what was paid was called a “Critical Incident Adjustment” by reference to Section B of Part 6 of Schedule 25. This defined a “Critical Incident” as “an incident declared as such by or on behalf of the Secretary of State in accordance with applicable emergency procedures”. These are the vital words. For completeness, I should also refer to “Relevant Critical Incident”, which was defined as meaning:
“A Critical Incident that: (a) is neither an Exceptional Circumstances Event…nor a Major Incident; and (b) requires or results in a partial closure of a Carriageway on the Project Road; and (c) results in one or more of the following; (i) A physical obstruction (other than traffic management equipment) in the Carriageway that requires removal before the affected traffic lanes can be safely opened to traffic; or (ii) Damage or potential damage to any of the Project Facilities that will require assessment and/or remedial action before the affected traffic lanes can be safely opened to traffic; and (iii) In respect of which the Incident Controller has requested the attendance of the DBFO Co at the scene of the Critical Incident in order to perform any of its duties under this Agreement…” (i) A physical obstruction (other than traffic management equipment) in the Carriageway that requires removal before the affected traffic lanes can be safely opened to traffic; or (ii) Damage or potential damage to any of the Project Facilities that will require assessment and/or remedial action before the affected traffic lanes can be safely opened to traffic; and (iii) In respect of which the Incident Controller has requested the attendance of the DBFO Co at the scene of the Critical Incident in order to perform any of its duties under this Agreement…”
[9]It appears that, prior to 2013/2014, no issue had arisen in respect of the operation of the Critical Incident Adjustment provisions, a matter on which CP now rely. Thereafter a dispute arose which was first referred to the Network Board, and then to the Expert, in accordance with Schedule 19 of the DBFO contract. Paragraph 2 of the Expert’s Decision defined the dispute that was referred to him in these terms:
“A dispute has arisen between the parties relating to the interpretation and application of what is called the ‘Critical Incident Adjustment’ referred to in Schedule 25 of the Agreement. HEC through its solicitors served a Notice of Referral of a Dispute to Expert Determination on 4 January 2016 on DBFO Co.”
[10]HEC’s case in the Expert determination was set out in paragraph 5.1 of the Notice of Referral. They argued that a Critical Incident “means an incident in fact declared as critical by NILO in accordance with the procedures applied by NILO from time to time.” NILO is an acronym for the National Incident Liaison Officer, an internal agency of the then Highways Agency, and therefore under the umbrella of the Secretary of State, and now HEC. HEC’s position was expanded in paragraph 30 of its submissions to the Expert:
“(a) The clear meaning of these clauses is that a Critical Incident is an incident which is declared as such by NILO on behalf of the Secretary of State for Transport (now HEC). (b) Only NILO can declare an incident critical on behalf of the Secretary of State (now HEC). (c) Only incidents in fact declared as critical can be inputted into the Critical Incident Adjustment, if relevant. (d) The ‘applicable emergency procedures’ are those procedures from time to time in force that NILO has regard to in making declarations.”
[11]Thus it was and remains HEC’s case that they had an almost unfettered discretion to declare whether or not an incident was critical. From their answers to the Expert’s questions, it appears that they maintained that their declaration one way or the other was only challengeable if they acted deliberately unfairly or in bad faith, which is, on any view, a very limited qualification.[12]HEC were aware from the outset that CP did not agree with this analysis, and instead argued that the relevant definition of Critical Incident was contained in the ‘M25 DBFO Co Service Provider Contingency Plan’, a template which contained a list of incidents which were ‘deemed’ to be critical. This is referred to in the documents as the ‘deemed list’ argument. Accordingly, at paragraph 5.1 of the Notice of Referral, HEC sought a declaration that CP was “not to classify any incident as critical for the purposes of calculating the Critical Incident Adjustment by reference to the definition in the Contingency Plan”.[13]In CP’s Response Submissions, at paragraphs 47 and 48, they argued that the deemed list in the Contingency Plan set out incidents which were to be taken to have been declared (in advance) as Critical Incidents by or on behalf of the Secretary of State (the “advance declaration” argument) or, alternatively, that the Secretary of State was obliged to declare that something was a Critical Incident if it was in accordance with the deemed list. They also argued that incidents falling within the general introductory words of definition within that Contingency Plan – “the “serious impact upon HEC and its ability to deliver its ‘safe roads, reliable journeys, informed travellers’ objective” - were Critical Incidents.[14]Both parties’ submissions to the Expert referred to events which occurred, and documents which were produced, after the contract had been agreed in 2009. In particular I note that CP relied on a version of the Contingency Plan dated October 2015. They also argued, at paragraph 49 of their submissions to the Expert, that their stance on the deemed list, set out above, had been expressly adopted by HEC in March 2013. HEC, whose case was that the relevant definition incorporated procedures applied by NILO “from time to time”, relied solely on a document called NILO Process B1, dated November 2013, which had never been provided to CP and was only produced for the first time in the Expert determination.[15]What had happened after the contract had been agreed in 2009, and before the dispute arose in 2014, was something which the Expert himself considered material. I note that, at paragraph 5 of his Decision, he set out the 30 questions which he had asked the parties to answer. Many of those went to matters of fact, and to procedures and processes that were actually adopted after the contract had been agreed. Thus, by way of example only: a) Question 13 went specifically to NILO’s Process B1. HEC said that the November 2013 version was the only version of this document that they had. Following the issue of the Claim Form in these proceedings, it is CP’s case that HEC have now provided an earlier version called F1, with very different provisions. b) Question 18 asked HEC what they said “the applicable emergency procedures” were at the date of the DBFO contract “and/or have become since?” HEC again referred to the B1 Process document saying that this had been the applicable procedure since 2013.[16]All this matters, because of the Expert’s conclusions as to what was meant by “applicable emergency procedures”. He first considered the Contingency Plan of October 2015 (paragraph 75 et seq of the Decision), which was the document relied on by CP. He set out between paragraphs 75 and 79 why he did not consider that this was a document relevant to the definition of “applicable emergency procedures”, although he stressed that he had only seen the October 2015 version.[17]Then he turned to consider the B1 Process document (paragraph 81 et seq of the Decision), which was the document relied on by HEC. He found at paragraph 84 that the B1 Process document could be described “as a material emergency procedure within the meaning of the term Critical Incident definition.” He then went on at paragraph 85 to say that it was an applicable emergency procedure and explained why.[18]At paragraph 86 the Expert emphasised that he had not been asked to determine whether either an earlier version of the Contingency Plan, or other procedures utilised by the NILOs, were applicable emergency procedures for the purposes of the Critical Incident definition. He stressed that no other documents or versions had been produced to him. This is noteworthy because, amongst other things, it meant that the Expert himself must have been aware that he had not answered the question as to what the applicable procedures were for the first 4 years of the contract (until, on his analysis, Process B1 was produced in November 2013).[19]In consequence of this rather unsatisfactory situation, the Expert provided limited declarations at paragraph 87 of the Decision, as follows:
“A Critical Incident as defined in the Agreement and in particular in paragraph 1 of section B part 6 of Schedule 25, and for the avoidance of doubt for the purposes of calculating the Critical Incident Adjustment, means an incident in fact declared as critical by National Information Liaison Officers in accordance with Process B1 NILO incident reporting criteria dated November 2013. B In circumstances where a ‘deemed Critical Incident’ of any type set out in appendix D to the M25 DBFO Co Service Provider Contingency Plan (Version 4.2 dated October 2015) occurs neither shall such incident thereby be treated as declared as a Critical Incident for the purpose of the definition of a Critical Incident set out in paragraph 1 of section B at part 6 of Schedule 25 (whether or not it is further declared as such) nor shall the SOS or HEC be or have been required to procure that NILO or anyone else acting on behalf of the SOS or HEC must declare such incidents as Critical Incidents.”
[20]CP were unhappy with this Decision. Clause 6.5 of Schedule 19 provided that, “unless and until revised, cancelled or varied by the Court in accordance with the provisions of paragraph 8 below, the Expert’s determination shall be binding on both Parties, who shall forthwith give effect to the determination”. Clause 8.3 permitted the referral of “any matter comprised in the Dispute to the Court for determination”. The same clause gave the Court “full power to open up, review and revise any…determination of the Expert”. On 11 July 2016, pursuant to these provisions, CP commenced these proceedings.[3]THE APPLICABLE LEGAL PRINCIPLES[21]The relevant principles can be summarised in this way:(a) Parties who sign detailed and specific dispute resolution provisions should usually be held to them because they are as much a part of the contract as any other provision: see The Channel Tunnel Group [1993] AC 334 at 352;(b) If one party brings court proceedings which the other contracting party claims is not in accordance with the dispute resolution provisions, and therefore in breach of them, the court has the inherent jurisdiction to stay the proceedings: see Channel Tunnel Group at page 352;(c) Although the power to grant a stay is discretionary, there will be a strong presumption in favour of the grant of the stay to enforce agreed dispute resolution procedure provisions: see Channel Tunnel Group at page 352-353; or, to put the same point another way, the persuasive burden is on the party resisting the stay to demonstrate why the stay should not be granted: see Cott UK Limited v Barber Limited [1997] 3 All ER 540 at pages 546-548 and DGT Steel and Cladding v Cubitt Building and Interiors [2007] BLR 371;(d) This general approach has been applied to dispute resolution provisions involving expert determination (see Cott) and in disputes involving adjudication (see Cape Durasteel Ltd v Rosser & Russell Building Services Ltd 46 Con LR 75).[22]On behalf of CP, Mr Streatfeild-James QC argued that a consideration of the adjudication cases was also relevant to the present application in another way. One of the problems which arises in construction adjudication is the problem of serial adjudication, where a number of different disputes, arising sequentially, are decided by the same or different adjudicators, and it is argued that a decision in, say, adjudication 4 is invalid or unenforceable because it purports to reopen something which was decided in adjudication 2. In such cases, the courts have repeatedly said that it is unnecessary for there to be a complete identity of factual and legal issues before concluding that the decision in the later adjudication should not be enforced: see paragraph 38(7) of the judgment of Ramsey J in HG Construction Limited v Ashwell Homes (East Anglia) Limited [2007] EWHC 144. The test in those cases is whether, on an analysis of the relevant documents, the ‘new’ claim is the same or substantially the same as the ‘old’ claim. That is a matter of fact and degree. Mr Streatfeild-James argued that, although here the application of the principle worked the other way round – substantial similarity was, he said, enough to avoid any stay – he maintained that the principle itself was apposite and applicable to this case.[23]On behalf of HEC, Ms Day QC disagreed. She said that the principle in HG Construction had been considered and modified in later cases and was in any event inapplicable because it related to the statutory adjudication scheme under the Housing Grants (Construction and Regeneration) Act 1996, where the words “the same or substantially the same” expressly appear. She said it was of no application to cases of this sort.[24]I do not agree that the principles set out by Ramsey J in HG Construction have been in any way modified or qualified in the later authorities. On the contrary, I consider those cases in which it has been subsequently considered, such as Benfield Construction Limited v Trudson (Hatton) Limited [2008] EWHC 233 (TCC); Harding v Paice [2015] EWCA Civ. 1231; and Brown v Complete Building Solutions Limited [2016] EWCA Civ. 1, have done no more than repeat and apply the principles noted by Ramsey J. Furthermore, it is wrong to say that HG Construction was a case involving the statutory scheme. It was not: it was a decision which turned on a contractual provision as to the binding nature of the decision of an adjudicator which was in almost identical terms to Clause 6.5 of Schedule 19 here (paragraph 20 above).[25]On the question of whether or not the principle of ‘the same or substantially the same’ applies in the present case, my views are as follows. I consider that the principal question for the court is to decide whether the claims in paragraph 10(2) of the Claim Form, as modified by the detailed pleading in the Particulars of Claim, amount to “any matter comprised in the Dispute” referred to the Expert. That is what is required by clause 8.3 of Schedule 19, so that must be the main way to test whether the claims in these proceedings are brought in breach of the dispute resolution provisions of the DBFO contract.[26]However, I consider that the test of whether the claims now are “the same or substantially the same” as those determined by the Expert is, at the very least, a useful fall-back, to test whether the court’s conclusion on the principal question is right. The reason why there is a close relationship between the two can be found in the decision of Dyson LJ in Quietfield Limited v Vascroft Construction Limited [2006] EWCA Civ. 1737 where he identified the right approach to ‘the same or substantially the same’. He said:
“There is an analogy here, albeit an imperfect one, with the rules developed by the common law to prevent successive litigation over the same matter: see the discussion about Henderson v Henderson (1843) 3 Hare 100 on abuse of process and cause of action and issue estoppel by Lord Bingham of Cornhill in Johnson v Gore Wood & Co (a firm) [2002] 2 AC 1, 30H-31G.”
In other words, the common law has regularly used the test of ‘the same or substantially the same’ to deal with what can and what cannot be raised in subsequent court proceedings, following an earlier decision involving the same parties and the same general subject matter. 4 THE APPLICATION TO STRIKE OUT 4.1. Introduction[27]The authorities noted above suggest that, where proceedings are issued in breach of an agreed dispute resolution procedure, the responding party is prima facie entitled to seek a stay of those proceedings whilst the dispute resolution procedure is complied with. The contractual provisions do not themselves exclude the jurisdiction of the court (Cott), making an application to strike out inappropriate in the ordinary case. However, here, HEC do seek to strike out what they call the ‘new claims’ altogether. Ms Day explained to me that there were two particular reasons for this. The first is what she described as “the waiver/consent issue”, and the second arose out of what she said was CP’s attempt to resile from their agreement that the Expert had the necessary jurisdiction to decide the dispute referred to him. I take each point in turn. 4.2. The Waiver/Consent Issue[28]Let us assume for the sake of this argument that Ms Day is right and these proceedings include new claims or new matters which were not referred to the Expert. She says that, in those circumstances, the court should not stay those new claims but should instead strike them out. She made it clear that the consequence of this was that CP would never have a chance to run those points, arguing that their failure to raise them with the Expert meant that they had waived the right, for all time, to rely upon them.[29]I was puzzled as to the legal basis for such a draconian result. On the face of it, if there were new claims, they would not, by definition, have been referred to the Expert, so they could now be the subject of the agreed dispute resolution process. Ms Day disagreed. She properly accepted that she was unaware of any authority which supported her stance, but said that CP’s agreement to give the Expert the necessary jurisdiction first time around amounted to a waiver of their right to raise any other points, no matter how closely related they might be to the matters that were raised. The submission appeared to have some similarities to a Henderson v Henderson argument.[30]I am in no doubt that this submission is incorrect. On the assumption that these were new claims, then prima facie the contractual dispute resolution process would apply to them. If they were not referred to the Expert earlier this year, CP would at the very least be entitled to refer them to an expert now; if they were not decided by the Expert in early 2016, it must follow that an expert (and if there was a subsequent dispute, the court) would be entitled to decide such claims de novo.[31]Moreover, I cannot see how a Henderson v Henderson argument arises in these circumstances, given that the Decision was only binding if it was not challenged by one of the parties, and it has been challenged. There is currently therefore no binding decision, on anything, until the matter is resolved by the court. I am aware of no authority in which the Henderson v Henderson principle has been applied to an expert determination. In the present circumstances, I consider that it is impossible to argue that CP are somehow prevented as a matter of law from raising the issues which they want before either an expert or the court and which, on this assumption, they have never raised before.[32]Accordingly, I consider that the first basis of the application to strike out the new claims is misconceived. 4.3. The Consent to Jurisdiction[33]The second reason put forward to support the application to strike out was the contention, repeatedly made throughout the written and oral submissions produced on behalf of HEC, that CP were seeking to resile from their earlier agreement to confer jurisdiction on the Expert. The argument was that, because the new claims sought to argue that HEC were estopped from putting forward their own contractual interpretation, this amounted to a submission that the Expert had never had the jurisdiction to deal with that dispute in the first place. HEC said that CP should not be allowed to resile from their earlier agreement to give the Expert the necessary jurisdiction, so the offending element of the claim should be struck out.[34]My analysis in Section 5 below demonstrates how and why, in my view, the claims now made in these proceedings are matters comprised in the Dispute before the Expert and/or are the same or substantially the same as the matters raised in that Dispute. But even if I was wrong about that, and there are new claims, I can see no logical connection between them and the Expert’s jurisdiction.[35]Mr Streatfeild-James confirmed that CP are not suggesting that the Expert exceeded his jurisdiction; that they are not saying that he did not have the jurisdiction to reach the decision that he did; and that they are not seeking to resile from their agreement to give him the jurisdiction to decide the Dispute. All they say is that, for a variety of reasons, he reached the wrong result. On any view, he said that there was no jurisdictional issue.[36]I accept those submissions. They accord with my own analysis of CP’s position. The most that can be said is that one of the reasons put forward by CP in challenging the Decision is either a new way of putting an old claim or, at worst, a new claim. That can have no effect on the Expert’s jurisdiction or CP’s agreement to it. In those circumstances, cases like ZVI Construction Ltd v The University of Notre Dame [2016] EWHC 1924 (TCC), which are concerned with issues of jurisdiction and approbation and reprobation, are of no application.[37]For those reasons, therefore, I refuse the application to strike out. Although there was no alternative application to stay these proceedings, either in whole or in part, it became apparent during the oral submissions that Ms Day’s alternative position was that the court should stay the claim at paragraph 10(2) of the Claim Form, whilst getting on with the claim at paragraph 10(1). I therefore turn to that aspect of the case, addressing the two relevant components identified in the authorities outlined in Section 3 above, namely whether these claims are brought in breach of Schedule 19 of the Contract and, if so, whether or not as a matter of discretion, there should be a stay of part or all of the claims.[5]ARE THE ISSUES AT PARAGRAPH 10 OF THE CLAIM FORM MATTERS WHICH WERE COMPRISED IN THE DISPUTE DETERMINED BY THE EXPERT? 5.1. Introduction[38]No point arises in respect of paragraph 10(1) of the Claim Form (see paragraph 3 above): it is accepted by HEC that this issue was part of the Dispute determined by the Expert. As to the issue in paragraph 10(2) of the Claim Form, which is the subject of the application to stay, I consider that this has to be considered in the light of the Particulars of Claim which were served subsequently. It is that detailed pleading that sets out the detail of CP’s position and demonstrates the extent to which the claim at paragraph 10(2) is advanced. 5.2. The Way CP’s Claim Is Now Put[39]The way in which CP now put their claim in the Particulars of Claim is detailed and comprehensive. It can, however, be summarised in this way.[40]First, they rely, just as they did before the Expert, on the deemed list in the Contingency Plan. The argument is: (a) The Network Management Manual (“NMM”) was a standard which was incorporated into and applied to this contract. Ms Day rightly pointed out that the standard had been amended for the purposes of this contract. The relevant section read as follows:
“Critical Incidents Critical Incidents are unforeseen events that seriously impact upon the Highways Agency and its ability to deliver its ‘safe roads, reliable journeys, informed travellers’ objective. Importantly, the police, other emergency services or local authorities may not consider these types of incident as important as the Highways Agency. Critical Incidents also include incidents of which Ministers wish to be informed. It should be noted that critical incidents might be, or become, major incidents. Only category 1 or 2 responders [emergency services, the Highways Agency etc] may declare if a Critical Incident has occurred. If the DBFO Co believes that a Critical Incident has or may become a Major Incident then it shall notify the police and Department’s nominee immediately. The following are deemed to be critical incidents: [There are then 15 deemed Critical Incidents].”
The following are deemed to be critical incidents: [There are then 15 deemed Critical Incidents].” (b) A part of the NMM was a template for a Contingency Plan. CP were obliged to produce a Contingency Plan pursuant to the DBFO contract. (c) CP produced a Contingency Plan in accordance with the template which therefore incorporated the deemed list of Critical Incidents noted above.

The following are deemed to be critical incidents:

[41]Thus far, the argument is precisely as it was before the Expert. However, there, CP used this material in support of the ‘advance declaration’ argument (paragraph 13 above), which argument was rejected by the Expert. CP do not seek to renew that argument. Instead, they rely on precisely the same material to say that, as a matter of definition/interpretation, the declaration of an event as a Critical Incident was not a matter within the wide discretion of HEC but was the subject of the objective criteria set out in the Contingency Plan. That same argument was deployed in the Expert determination, but may have been obscured by the ‘advance declaration’ aspect.[42]In addition, in advancing this rather more straightforward argument in these proceedings, CP rely on some contractual clauses which were not drawn to the attention of the Expert. Thus, for example, they refer to Annex 2 to Part 2 of Schedule 15 which, at Clause 1.1, under the heading ‘Critical Incident Reports’, provided:
“The DBFO Co shall, without prejudice to the requirement to report accidents and Incidents in accordance with paragraphs 1.3 and 1.4 of Part 4 of Schedule 18, immediately report to the Department’s Nominee each accident or Incident deemed to be a “Critical Incident” (as referred to in the NMM), distinguishing between Critical Incidents that impact on the payment mechanism…and those that do not.”
On the face of it, this provision adds at least some weight to the contention that the deemed list in the NMM/Contingency Plan was an important element of the declaration process.[43]Furthermore, CP rely on documents which were not provided to the Expert. In particular, they rely on NILO’s F1 process document which was dated March 2009, and was therefore almost entirely coterminous with the signing of the contract. It may be that it was the predecessor of the B1 document. The F1 document contained detailed provisions as to a Critical Incident which were, on their face, very similar to the NMM/Contingency Plan, and with a very similar deemed list of incidents. Again, that document – which HEC told the Expert that they did not have, but have subsequently produced – would appear to provide some support for CP’s position.[44]Still further, CP allege that, as a matter of fact, until October 2012, the Critical Incident mechanism was operated in accordance with the deemed list. They say that, by letter dated 23 October 2012, HEC wrote to CP to say that they were changing their stance and that it was only NILO who could declare whether or not an incident was a Critical Incident. CP say that this was then the subject of discussion and in March 2013 the parties reached an agreement to the effect that CP could continue to declare by reference to the deemed list, but that NILO could also make declarations. It is important to note that the alleged agreement of March 2013 is precisely that which was alleged by CP in their submission to the Expert (see paragraph 14 above).[45]In my view, the dispute raised at paragraph 10(2), as modified by the Particulars of Claim in the way outlined above, was ‘a matter comprised in the Dispute’ before the Expert. There are a number of reasons for this conclusion, which can be grouped under two headings, ‘incremental’ and general’. 5.3. Incremental[46]I have found it helpful to approach the issue, as to what can CP can advance in these proceedings, in increments or stages. Stage 1 is to note that the underlying dispute in the court proceedings is precisely the same as it always has been: should the declaration or assessment of Critical Incident be by reference to the ‘deemed list’ on the one hand, or pursuant to NILO’s almost unfettered discretion, on the other?[47]Stage 2 is to note that CP’s argument no longer relies on the ‘advance declaration’ point, but maintains its case as to contract interpretation. In this respect, CP seeks to rely on a range of contractual terms, some of which were referred to the Expert and some of which, including (amongst others) Annex 2 to Schedule 15 (paragraph 42 above) were not. HEC does not and cannot object to CP relying on different contract terms in support of the same underlying argument as to interpretation/application.[48]Stage 3 is to note that, also in support of the same underlying argument, CP are now seeking to rely on a variety of documents, some of which had not previously been identified. The F1 process document is one such document. Again, that is entirely legitimate, particularly since HEC told the Expert – wrongly – that they did not have any versions of the process document earlier than November 2013. The fact that additional documents have only been disclosed since the Expert’s determination cannot mean that those documents are irrelevant or inadmissible in the court proceedings.[49]Stage 4 is to note that, whilst the claim at paragraph 10(2) puts certain matters of fact in issue, they always have been, and they were before the Expert. The best example is the alleged agreement of March 2013, which was expressly raised in CP’s submissions to the Expert (paragraph 14 above) and is now an important element of the estoppel argument in these proceedings (paragraph 44 above).[50]The final stage is to note that, again in support of the same argument, CP rely on events or agreements to demonstrate the way in which the contract was operated prior to the dispute arising in 2014. The alleged agreement of March 2013 is one aspect of this, but there are others. Again, in my view that is entirely legitimate. This is simply another way of putting or illustrating CP’s case as to how the contract was intended to (and did in fact) apply in practice. It chimes with the Expert’s clear concern about the way in which the contract was operated in fact between 2009 and 2013, and what I read as his surprise that the parties had not provided him with all the relevant information, which is apparent both from his questions and from the Decision itself. And, perhaps most importantly of all, this aspect of CP’s case seeks to fill in the clear and obvious gap apparent on the face of the Decision itself; namely that, in view of the absence of material provided to him, the Expert was wholly unable to deal with how the contract had been applied prior to November 2013.[51]On that analysis, I consider that all of the matters now relied on can be said to be matters which were comprised in the Dispute before the Expert. 5.4. General[52]Standing back from the detail, there are a number of general reasons why I have come to the same conclusion.[53]First, the Dispute before the Expert involved both the interpretation of the relevant words of the contract, and the application of those words. Accordingly, the Dispute was always about more than just the interpretation of the words: it always involved the operation of the contract provisions and the applicable procedures in practice. That is what then leads to a consideration of what actually happened, which in turn gives rise to CP’s waiver/estoppel argument. That same dispute, with those same consequences, is also at the heart of the court proceedings.[54]Secondly, if there was any doubt about that, it can be seen that the Expert’s questions went principally to those matters of fact. Questions 13 and 18 (paragraph 15 above) show, despite the rather limited assistance that he got from the parties, that the Expert was concerned about how these provisions had operated on the ground. Many of his questions would have been completely irrelevant if all he was concerned about was an interpretation of the words as agreed in 2009.[55]Thirdly, and to take the point to its ultimate conclusion, as Ms Day suggested more than once I should, if the dispute before the Expert had just been limited to the correct interpretation of the words in the DBFO contract agreed in 2009, then the Decision would plainly be flawed, because it placed such reliance on Process B1, a document which only came into existence four years after the contract was agreed, and which CP had not even seen until the reference to the Expert. But that would be an incorrect analysis. This was a contract where many of the obligations were to be determined by reference to documents, processes and procedures (which may therefore include events, to demonstrate application) which came into existence after the contract was made. Thus this dispute always involved more than pure questions of interpretation.[56]Finally, the question of what procedures were in fact applied was inherent in HEC’s own case, because of their reliance upon documents and procedures which came into existence “from time to time”. That again meant that what happened after the contract was signed was relevant to their case as well. That is not uncommon in PFI arrangements, where the period of operation is usually very long, so the contract has to accommodate and plan for changing practices and procedures which may not even have been thought of when the contract was first signed. 5.5. Summary[57]For the reasons set out above, I conclude that the original dispute involved both the interpretation of the words of the DBFO contract and the application of those words in practice, which necessarily involved a consideration of what happened after the contract had been agreed. I find that the claim at paragraph 10(1) of the Claim Form goes to the first element of that dispute, and that the claim at paragraph 10(2), as modified by the Particulars of Claim, goes to the second element of the same dispute. Thus the issues at Paragraph 10 are matters comprised in the Dispute before the Expert.[58]Turning to Mr Streatfeild-James’ formulation, I consider that, for these same reasons, the dispute in these proceedings is the same as the dispute before the Expert. The issues encapsulated by paragraph 10(2) of the Claim Form may now give a few of the arguments a different emphasis, but in my view, the dispute in these proceedings is the same as the dispute which was determined by the Expert. Further and in any event, if I am wrong about that, I consider that the issues in paragraph 10(2) of the Claim Form plainly arise out of substantially the same facts and matters as those which were considered by the Expert. The same reasoning applies again.[6]STAY[59]For the reasons set out in Section 5 above, I consider that there should be no stay because there has been no breach by CP of the agreed dispute resolution procedure.[60]Now assume that I am wrong about that, and there has been some sort of breach, such that a particular element of the waiver/estoppel formulation raises an issue which should have been referred to the Board and then expert determination. As noted in Section 3 above, it would be unusual for the court not to grant a stay in those circumstances, although it can happen (Cott is an example of a case where a stay was not ordered). In the present case, I have concluded that, if this was a question of discretion I would, unusually, exercise that discretion against granting the stay. There are two main reasons for that.[61]First, the principal dispute about contract interpretation and its application in practice is before the court in any event. If I was wrong on the breach issue, so that most of the documents/events after the contract was signed in 2009 were properly raised in these proceedings, but some particular aspect or aspects of the case should have been referred to the Board and an expert first, then what are those aspects, and how could such a division be effectively policed? What would remain in the court proceedings, and what would be carved out?[62]It is, in my view, impossible to draw any sort of sensible dividing-line. HEC have identified paragraphs of the Particulars of Claim which, on their analysis, should be stayed, but their attempt is hopelessly one-sided. For example, they identify paragraphs 40 to 49 of the Particulars of Claim, despite the fact that these relate to contract provisions, and must therefore be a legitimate part of these proceedings; and paragraphs 92-106, which concern the March 2013 agreement, a matter which was expressly raised in the Expert determination (paragraph 14 above). In my view, the issues are too inter-woven to allow any sensible division now.[63]In addition, it would be completely artificial for the court to embark on a dispute which involved not only interpretation, but application as well, and then have to spend all its time striving to keep the factual investigation limited to those matters which, expressly or impliedly, were before the Expert, and to ignore those matters which were not. That would cause endless disruption and difficulty, for no sensible purpose.[64]Secondly, it is plain from the documents produced during the Expert determination, and subsequently, that this has been – and remains – an evolving dispute: indeed, Ms Day used that very expression when explaining why the time estimate for the hearing was likely to be significantly exceeded. The positions on both sides have continued to change as time has gone on. That can perhaps best be illustrated by HEC’s reliance on Process B1, a document which only came into existence in 2013 and which CP had never seen before the Expert determination. Thus, although the underlying dispute remains exactly the same, the parties’ arguments in support of their respective positions have continually shifted.[65]In such circumstances, it would be contrary to the overriding objective to stay these proceedings whilst new issues of fact or emphasis were argued in front of the Board and then referred for expert determination. That would merely cause delay and increase expense.[66]Nor would it end there. If the second expert decision was in HEC’s favour, then it would be safe to assume that it too would be referred to court. And if the decision was in favour of CP then it is safe to assume that HEC would challenge it, so the court would then have to address two different experts’ decisions with two different results. Either way, it is difficult to see any useful purpose being served by such an exercise.[67]An example of something ‘new’ being sent back for a further determination might be the argument about F1, the document which was not disclosed until these proceedings. That would allow HEC to take advantage of their failure to disclose F1 in the Expert determination, and their declaration to the Expert that they did not have any previous versions of B1, to cause delay and increase expense.[68]Ms Day argued that, to avoid delay, the claim at paragraph 10(2) could be referred to the Board and then an expert, whilst the claim at paragraph 10(1) could go ahead in court. With respect, I cannot imagine a worse outcome. It would be a recipe for more of the sort of jurisdictional infighting and point-scoring which has arisen on this application, but where – because of the uncertainty as to what was in one determination and what was in the other - the possible points in issue might become almost limitless.[69]Finally, it is necessary to deal with two further matters raised by HEC which are said to go to the merits (and which are therefore presumably relevant to the exercise of discretion).[70]First, it is said by HEC that the new matters are raised by CP so as to cause delay. There is no evidence to support that allegation. It is impossible to see how delay is in CP’s interests. In any event, this is a dispute which may be worth as much as £87.5 million of public money, in respect of a contract that will last long after these disputes, however they are formulated and decided, have been finally resolved. It is therefore a claim which deserves to be properly and fully argued on both sides.[71]Secondly, it is suggested by HEC that the waiver/estoppel argument is weak and should not therefore be allowed to continue. As HEC must surely know, the court is unable to say whether or not the case as pleaded is weak: that will depend on the evidence which has not yet been produced. The underlying merits, therefore, must be quite irrelevant to this application.[72]Accordingly, for the reasons noted above I conclude that, if I am wrong to find that there was no breach of the dispute resolution procedure, I would – unusually - exercise my discretion against granting a stay in the particular circumstances of this case.

Cited in 1 later judgment