Costain Ltd & Ors v Bechtel Ltd & Anor

A project manager who assesses sums payable under a construction contract may be required to act impartially between employer and contractor where the contract leaves residual areas of judgment or discretion. Detailed contractual criteria, review by adjudication or arbitration, and other employer-focused functions do not necessarily exclude that obligation.

At the interim stage, the claimant need only show serious questions to be tried. Even where that threshold is met, an injunction may be refused where the contract provides an exhaustive dispute-resolution mechanism, damages are adequate, and the injunction would require difficult supervision or affect third parties.

The claimants, a construction consortium, sought interim injunctions against Bechtel Ltd and Mr Fady Bassily. They alleged that Mr Bassily had encouraged Bechtel and the project manager consortium, Rail Link Engineering, to administer the contract in the employer’s interests rather than impartially, thereby procuring breaches by the employer.

The application arose from a meeting at which Mr Bassily had urged staff to reduce project costs and apply the contract more strictly. The court considered what had been said, the project manager’s alleged duty, whether breaches were arguable, whether the defendants might have procured a breach, and whether interim relief was appropriate.

1. Serious question to be tried. The evidence did not support a case that Mr Bassily had instructed staff dishonestly to disallow sums known to be due. That aspect therefore failed the threshold in American Cyanamid Co v Ethicon [1975] AC 396. However, the evidence supported an arguable case that staff had been told to exercise contractual functions in the employer’s interests rather than impartially.
2. Impartiality. The principles stated in Sutcliffe v Thackrah [1974] AC at 727 were arguably applicable. Although the contract contained detailed criteria, the project manager retained residual areas of discretion requiring independent judgment. In those areas it was properly arguable that the project manager had to hold the balance fairly between employer and contractor.
3. The dispute-resolution provisions, including adjudication under clause 92 and arbitration under clause 93, did not exclude an arguable duty of impartiality. Nor did the project manager’s other functions, which were performed solely in the employer’s interests. Royal Brompton Hospital NHS Trust v Hammond (No. 8) [2002] EWHC 2037 (TCC) was distinguishable because the contractual role there was materially different.
4. The claimants had shown serious questions concerning possible breach by the project manager, breach by the employer, and procurement of breach by the defendants. The court made no final finding against the employer, which was not a party and had not been heard.
5. Interim relief refused. The contractual remedies were exhaustive under clause Z.10. Any loss could be compensated by damages, and an injunction would be difficult to supervise and would adversely affect other members of Rail Link Engineering. The balance of convenience therefore decisively favoured refusing the application.
6. The expression “in good faith” was ambiguous in this context and could mean honesty or impartiality. The court accordingly concentrated on the alleged duty of impartiality. A definitive ruling on that important question should be sought in proceedings to which the employer was a party.