In RWE Npower Renewables Ltd v J N Bentley Ltd  the Court of Appeal had to reconcile two apparently conflicting contractual requirements in a contract for civil engineering works.
Bentley agreed to carry out the works namely: (i) a power house, for the plant and machinery; (ii) the turbines and switchgear; (iii) a pipeline for water from the upper reaches of the river to go into the turbines (“penstock pipeline”); and (iv) a pipeline returning the water to the lower reaches of the river after it had gone through the turbines (“tailrace”).
The contract was on standard terms derived from the NEC3 Engineering and Construction Contract, June 2005 edition (with amendments June 2006).
Late in 2012 a dispute arose between RWE and Bentley as to the required date for completion of section 2 of the works.
The answer turned on whether Bentley’s obligation was governed by clause 6.2 of the Works Information or Option X5 in Part 1 of the Contract Data, and if the latter, what was the extent of its obligation?
The court said the contract documents should, as far as possible, be read as complementing each other, and, it was only in the case of a clear and irreconcilable discrepancy that it would be necessary to resort to the contractual order of precedence of obligations, that the contract had laid down, to resolve it.
In the present case both clauses had purported to define the content of section 2. Both had referred to the completion and testing of the penstock pipeline, which strongly suggested Bentley having to complete the whole pipe runs.
The result was that Bentley’s obligation had been to complete the pipelines by 27th May 2011.
If, in fact, there had been a genuine discrepancy between Option X5 and clause 6.2 of the contract, the contract document’s provisions for precedence would have come into play and the court would have had to interpret the language of Option X5 without regard to clause 6.2.
The court was reluctant take the order of precedence as forcing a choice between one entire clause and another if they could be construed harmoniously. Only to the extent that they could solely be interpreted as imposing different obligations in relation to the same subject matter was it necessary to apply the contract’s order of precedence.
Option X5 defined the scope of section 2 for the purpose of imposing an obligation to pay liquidated damages for delay, whereas the aims of clause 6.2 were rather less clear. But in each case, there was a single obligation, namely, to carry out the whole of the required work so as to complete section 2. So if there was a discrepancy between Option X5 and clause 6.2, the court thought it impossible to extract the part of Bentley’s obligation which related to the pipelines and treat it as a free-standing obligation that was subject to a different and less demanding timetable than the rest of the section 2 work.
Furthermore there were three strong pointers to the contracting parties having contemplated that the pipelines would be completed and tested in their entirety before the work of installing the hydro plant began.
1. Clause 3 of Part 1 of the Contract Data contained the primary terms for the period for performing the contract work.
Bentley’s work was limited to the civil engineering elements of the project i.e. construction of the power house, penstock pipelines and tailrace. Completion of the intake was due by 22nd November 2010 and completion of pipeline testing by 24th November 2010. This was a clear indication that the parties intended that the pipelines should be completed and tested by the end of November 2010, even before the powerhouse had been made weathertight.
Option X5, updated these dates and instead required the powerhouse to be weathertight by 14th February 2011, and the pipelines to completed by 27th May 2011, because, by the time the contract was signed, the date of delivery of the hydro plant had been put back.
Howerver this underlined, and was no way inconsistent with, the parties’ original intention which had been for the pipelines to be completed before the hydro plant was installed and there was no reason to think that their intentions had changed in that respect.
2. Bentley’s Tender Query response dated 12th March 2010 and its production of a revised programme for the works. It provided a good indication of what the parties had in mind at the time they entered into the contract. The response showed the pipelines being completed by the end of November 2010. The programmes therefore all tended to reinforce the conclusion that when entering into the contract the parties had contemplated completion of the pipelines well before the hydro plant was due to be delivered.
3. The language of Option X5 itself. Bentley had argued that section 2 should be read as requiring completion of the pipelines only so far as needed to enable the hydro plant to be installed. However, in section 1 the parties had been more explicit in distinguishing works where only partial completion was required by a specific milestone.
In contrast they had not found it necessary to talk about partial completion in Section 2 suggesting it had not been contemplated as being sufficient for the pipelines to be partially completed by the stated deadline date.
The court reached this conclusion even though only a very short length of each pipeline adjacent to the powerhouse had to be in place to enable the hydro plant to be installed. However the court insisted its interpretation was consistent with (and therefore supported by) indications to be found elsewhere in the contract.
So section 2 of the works had not been completed until the whole of the penstock pipeline had been completed and tested.
Therefore the court dismissed Bentley’s appeal.
This blog has been posted out of general intereest. It does not remove the need to get bespoke legal advice in individual cases.