VAN OORD UK LIMITED AGAINST DRAGDOS UK LIMITED 30/09/2020 [2020] ScotCS CSOH_87 (30 September 2020)

VAN OORD UK LIMITED AGAINST DRAGDOS UK LIMITED 30/09/2020 [2020] ScotCS CSOH_87 (30 September 2020)

The defender was not contractually entitled to omit works and transfer them to other subcontractors except in the specific circumstances provided in clause 14.3 of the NEC3 subcontract, which did not apply. The omission constituted a breach of contract. However, the NEC3 compensation event mechanism applies to such breaches, and the reduction in bill rates for remaining works is a valid contractual consequence under NEC3. The pursuer is not entitled to declarator preventing reduction of rates or payment based on unreduced rates.

Citation
[2020] ScotCS CSOH_87
Parties
Pursuer: Van Oord UK Limited; Defender: Dragados UK Limited
Jurisdiction
Scotland
Judgment Date
30 September 2020
Procedural Posture
Commercial Construction Contract Dispute / Debate on Preliminary Pleas to Relevancy
Outcome
Declarator refused; breach of contract found but compensation event mechanism applies.
Legal Topics
Subcontractor Rights, Variation and Omission of Works, Compensation Events, Interpretation of NEC3 Contracts, Valuation of Change, Breach of Contract, Mutual Trust and Co Operation
Construction Law Contract Law Subcontractor Rights Variation and Omission of Works Compensation Events Interpretation of NEC3 Contracts Valuation of Change Breach of Contract +1 more

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Parties

Van Oord UK Limited

Pursuer

Dragados UK Limited

Defender

Procedural Posture

Commercial Construction Contract Dispute / Debate on Preliminary Pleas to Relevancy

Legal Issues

  1. 1 Whether the defender was entitled to omit and transfer works to other subcontractors under the NEC3 subcontract
  2. 2 Whether the omission and transfer constituted a breach of contract
  3. 3 Whether the defender was entitled to reduce the bill rate for remaining works after omission

Ratio Decidendi

The defender was not contractually entitled to omit works and transfer them to other subcontractors except in the specific circumstances provided in clause 14.3 of the NEC3 subcontract, which did not apply. The omission constituted a breach of contract. However, the NEC3 compensation event mechanism applies to such breaches, and the reduction in bill rates for remaining works is a valid contractual consequence under NEC3. The pursuer is not entitled to declarator preventing reduction of rates or payment based on unreduced rates.

Court Disposition

Declarator refused; breach of contract found but compensation event mechanism applies.

Orders

  • The pursuer's plea for declarator that the defender was not entitled to reduce the bill rate is refused.
  • The pursuer's plea for payment based on unreduced bill rates is refused.