Supreme Court rejects bid to appeal ruling on £2.7bn highways PFI contract

The Supreme Court has refused to grant contractor Amey permission to appeal in its dispute with Birmingham City Council over the correct interpretation of a £2.7bn highways PFI contract, it has emerged.

A three-justice panel comprising Lord Wilson, Lord Carnwath and Lady Black decided that Amey’s application did not raise an arguable point of law.

In August 2016 His Honour Judge Mark Raeside QC had found in favour of the contractor in the Technology and Construction Court, overturning an adjudicator’s decision in favour of the council.

Birmingham appealed and in February the Court of Appeal ruled in its favour in Amey Birmingham Highways Ltd v Birmingham City Council [2018] EWCA Civ 264.

The 25-year long PFI contract, which was entered into in May 2010, was some 5,190 pages long. The definitions alone spanned over 200 pages.

The background to the case was that in February 2014 the council’s PFI contract and performance manager noticed that some parts of the roads and footpaths were being left unrepaired. Amey Birmingham Highways Ltd (ABHL) were leaving defects in selected areas untreated.

A dispute about ABHL’s contractual obligations then arose.

The principal issues before the Court of Appeal were:

(1) whether the PFI service provider was required to update inventory details on a database provided at the outset (ABHL denied that it was); and

(2) whether four completion certificates could be set aside for "manifest error".

Lord Justice Jackson said: “Any relational contract of this character is likely to be of massive length, containing many infelicities and oddities. Both parties should adopt a reasonable approach in accordance with what is obviously the long-term purpose of the contract. They should not be latching onto the infelicities and oddities, in order to disrupt the project and maximise their own gain.

“In the present case the PFI contract worked perfectly satisfactorily for the first three and a half years. Things only went wrong in 2014 when ABHL thought up an ingenious new interpretation of the contract, which would have the effect of reducing their workload, alternatively increasing their profit if BCC issued change notices.”

The judge, with whom Lord Justice Moylan and Sir Stephen Tomlinson agreed, rejected ABHL's interpretation of the contract. He also set aside four milestone certificates.

See also: Contractual interpretation: the Amey dispute
Deborah Down of Sharpe Pritchard considers how a contractor’s rigid approach to what a highways maintenance contract said, led to unintended consequences for the authority.