{"id":180,"date":"2020-12-17T19:04:27","date_gmt":"2020-12-17T23:04:27","guid":{"rendered":"http:\/\/blogs.duanemorris.com\/london\/?p=180"},"modified":"2020-12-17T19:04:27","modified_gmt":"2020-12-17T23:04:27","slug":"wasnt-it-obvious-the-curious-case-of-abc-v-network-rail","status":"publish","type":"post","link":"https:\/\/blogs.duanemorris.com\/london\/2020\/12\/17\/wasnt-it-obvious-the-curious-case-of-abc-v-network-rail\/","title":{"rendered":"Wasn\u2019t It Obvious? The Curious Case of ABC v. Network Rail"},"content":{"rendered":"

By Steve Nichol<\/a> and <\/strong><\/em>Matthew Friedlander<\/strong><\/em><\/a><\/p>\n

At first glance, the Court of Appeal\u2019s recent decision in ABC Electrification Ltd v Network Rail Infrastructure Ltd<\/em> [2020] EWCA Civ 1645 might look like the culmination of an exercise in legal hubris. This was, after all, a case focussed on the meaning of a single word in a contract; moreover, a word \u2013 \u201cdefault\u201d \u2013 that most of us in the legal profession might say has a well-established meaning.<\/p>\n

And, after several hundred thousand pounds of legal fees no doubt well spent, the Court of Appeal told the world that the word \u201cdefault\u201d means exactly what we all thought it meant \u2013 a failure to fulfil an obligation. <\/p>\n

However, there\u2019s a clue in the fact that this case made it to the Court of Appeal that all is not quite as it seems here. The appellate courts get to choose whether they will hear a case, and will refuse to hear cases that lack merit, much like the US Supreme Court\u2019s rejection of the State of Texas\u2019s efforts to overturn the result of the US election (only usually with international fewer column inches arising). So the Court of Appeal must have seen something in this case that was worth their time.<\/p>\n

What\u2019s more, the party that commenced proceedings, Network Rail, was also the party that argued that \u201cdefault\u201d meant exactly what it said on the tin. Although that fact alone doesn\u2019t tell the whole story it does suggest that there was a genuine issue here between the parties that needed an answer.<\/p>\n

The judgment itself is very readable, and is worth a turn for those with the time and the inclination.<\/p>\n

In brief, however, this quandary arose due to the insertion of the offending word into part of the definition of Disallowed Cost in a target cost contract.<\/p>\n

Those familiar with target cost contracts will know that the idea is that the contractor is paid all<\/u> (more or less) of the costs that he incurs during the course of the works, however they were incurred. At the end of the job the contractor\u2019s total cost is measured against the predefined target cost; if the contractor\u2019s cost is under the target he gets a reward, and if he\u2019s over he takes a penalty.<\/p>\n

The \u201cmore or less\u201d bit is important though: there are of course limits on the contractor\u2019s right to be paid all of his costs, and if (for example) the contractor claims costs that have nothing to do with the works, the employer is allowed to disallow those costs.<\/p>\n

In any case, it appears that that, or something like it, is what ABC thought it was signing up to. However, Network Rail\u2019s amendments to the standard form contract had added the word \u201cdefault\u201d to the following sub-clause of the definition of the term \u201cDisallowed Cost\u201d:<\/p>\n

\u201cany cost due to negligence or default<\/strong> on the part of the Contractor in his compliance with any of his obligations under the Contract<\/em>\u2026\u201d<\/p>\n

Network Rail\u2019s case was that the addition of that word \u201cdefault\u201d meant that it could disallow costs for any<\/u> non-compliance with the terms of the contract. So, for example, if ABC was late in completing the works, Network Rail could refuse to pay any costs incurred after the date for planned completion on the basis that ABC was in default.<\/p>\n

ABC, on the other hand, complained that that approach was inconsistent with the rest of the contract, and in particular the ethos of a target cost contract. It pointed to a number of clauses which it claimed were inconsistent with, or made redundant by, such a broad interpretation of the word \u201cdefault\u201d. Instead, ABC argued that the intention was that the word \u201cdefault\u201d should be confined to instances of blame or culpability on the part of ABC, similar to its neighbour word \u201cnegligence\u201d.<\/p>\n

Not such a spurious case then. In fact, one might even think it surprising that (on Network Rail\u2019s case) a single word, hidden away in a sub-clause of a definition, might have the effect of materially undermining the principles that would otherwise have been applicable to the rest of the contract. But the Court of Appeal agreed with Network Rail and refused to narrow the meaning of \u201cdefault\u201d.<\/p>\n

One suspects that this case is the tip of the iceberg for these two parties, as there will undoubtedly be underlying disputes as to whether a particular event constitutes a dispute, even on the Court\u2019s definition, and in turn what costs (if any) have actually been incurred \u201cdue to\u201d any default by ABC.<\/p>\n

In the meantime, for the rest of us, we\u2019re left with a salutary lesson in contract interpretation: just because it looks like a target cost contract, and smells like a target cost contract, doesn\u2019t necessarily mean that it is entirely<\/u> a target cost contract. So make sure that, before signing any contract, you read it for what it is<\/u>, not what you think it ought to be.<\/p>\n

And one little word can have some serious consequences<\/p>\n

\"Steve
Steve Nichol<\/a>

Read Steve's bio.<\/a><\/p>\n<\/div><\/div>

\"Matthew
Matthew Friedlander<\/a>

Read Matthew's bio.<\/a><\/p>\n<\/div><\/div><\/p>\n","protected":false},"excerpt":{"rendered":"

By Steve Nichol and Matthew Friedlander At first glance, the Court of Appeal\u2019s recent decision in ABC Electrification Ltd v Network Rail Infrastructure Ltd [2020] EWCA Civ 1645 might look like the culmination of an exercise in legal hubris. This was, after all, a case focussed on the meaning of a single word in a … <\/p>\n

Continue reading “Wasn\u2019t It Obvious? The Curious Case of ABC v. Network Rail”<\/span><\/a><\/p>\n","protected":false},"author":6,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[2],"tags":[150,56,67,149,80,54],"ppma_author":[146],"class_list":["post-180","post","type-post","status-publish","format-standard","hentry","category-general","tag-appellate","tag-construction","tag-contracts","tag-default","tag-matthew-friedlander","tag-steve-nichol"],"authors":[{"term_id":146,"user_id":6,"is_guest":0,"slug":"duanemorris3","display_name":"Duane Morris","avatar_url":"https:\/\/secure.gravatar.com\/avatar\/843ff6e7a8fe5fc92109b47a45f34b6cf0ea499e6e788db23456c838b0ae6747?s=96&d=blank&r=g","author_category":"1","last_name":"Sullivan","first_name":"Margaret","job_title":"","user_url":"http:\/\/www.duanemorris.com","description":"Visit the Duane Morris website.<\/a>"}],"_links":{"self":[{"href":"https:\/\/blogs.duanemorris.com\/london\/wp-json\/wp\/v2\/posts\/180","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/blogs.duanemorris.com\/london\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/blogs.duanemorris.com\/london\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/blogs.duanemorris.com\/london\/wp-json\/wp\/v2\/users\/6"}],"replies":[{"embeddable":true,"href":"https:\/\/blogs.duanemorris.com\/london\/wp-json\/wp\/v2\/comments?post=180"}],"version-history":[{"count":0,"href":"https:\/\/blogs.duanemorris.com\/london\/wp-json\/wp\/v2\/posts\/180\/revisions"}],"wp:attachment":[{"href":"https:\/\/blogs.duanemorris.com\/london\/wp-json\/wp\/v2\/media?parent=180"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/blogs.duanemorris.com\/london\/wp-json\/wp\/v2\/categories?post=180"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/blogs.duanemorris.com\/london\/wp-json\/wp\/v2\/tags?post=180"},{"taxonomy":"author","embeddable":true,"href":"https:\/\/blogs.duanemorris.com\/london\/wp-json\/wp\/v2\/ppma_author?post=180"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}