Midland Expressway Ltd v Carillion Construction Ltd & Ors

In a construction contract, a provisional sum is not ordinarily payable as a fixed additional entitlement. Its meaning and effect depend on the contract, but where the sum is intended for expenditure on the employer’s instructions, it is payable only to the extent instructed. The provisional sum must then be replaced by the appropriate value of the work actually performed or expenditure actually incurred, subject to any contractual limits. A contract’s description as a fixed-price lump sum does not prevent that adjustment where the contract expressly provides for it. The court should read the relevant provisions as a whole, including payment and valuation provisions, and avoid a construction producing payment for work neither instructed nor performed.

Midland Expressway Ltd v Carillion Construction Ltd & Ors concerned three provisional sums in a design and construction contract for a toll road. The contractor argued that the contract entitled it to retain the original provisional sums and receive, in addition, the value of instructed work or aggregate tax incurred. The employer argued that the provisional sums had to be omitted and replaced by the appropriate actual amounts.

An adjudicator accepted the contractor’s construction. On a subsequent claim, Jackson J in the Technology and Construction Court held for the employer. The contractor appealed, while the employer sought to uphold the decision on additional grounds. The central issue was the proper construction of the contractual provisions governing provisional sums and price adjustment.

The appeal was dismissed unanimously. The Court of Appeal upheld Jackson J’s construction of the contract.

1. Nature of a provisional sum. The expression is close to a term of art in the construction industry, but its precise meaning and effect depend on the individual contract. In this contract, the definition showed that each provisional sum could be used in whole or in part in accordance with the employer’s instructions.
2. Contractual operation. Clauses 36.3.1 and 36.3.2, read in the context of the contract as a whole, provided that the employer could instruct expenditure or work relating to a provisional sum. If no instruction was given, the sum was not spent and was not payable. If an instruction was given, the contractor was entitled to the actual value of the work under clause 39.6.1(a), or to the actual aggregate tax incurred subject to clause 36.3.3. The original provisional sum was therefore omitted or replaced, rather than paid in addition.
3. Fixed-price provisions. This construction was consistent with clauses 36.1 and 36.2. The adjustment was made under the express provisions of the contract and did not require an implied term authorising a deduction.
4. Commercial and textual confirmation. The payment table in clause 37 and the provisions of Appendix 1 confirmed that payment depended on percentage completion, expenditure under employer’s instructions, or tax as levied. The contractor’s construction would produce payment for an uninstructed or unperformed item and, where work was instructed, double recovery. The alternative construction producing a different regime for aggregate tax was also rejected as commercially implausible.

The syntactical imperfections in clause 36.3.1 did not alter its substance. The order was: appeal dismissed.

• Court of Appeal (Civil Division) — dismissed the contractor’s appeal and upheld the construction adopted below: [2006] EWCA Civ 936.
• Queen’s Bench Division, Technology and Construction Court — Jackson J decided the provisional-sums issue in favour of the employer in a judgment dated 14 November 2005. No citation for that decision was stated in the judgment.
• Adjudication — John Marrin QC had previously construed the contract in favour of the contractors.