Amey Birmingham Highways Ltd v Birmingham City Council

A contract must be construed as a whole, giving effect to its language in the context of its structure and long-term purpose. An obligation to keep a project database accurate and up to date may require the routine replacement of default information with subsequently available actual data.

A certificate expressed to be final and binding absent fraud or manifest error remains subject to that restriction during contractual dispute resolution and court proceedings. Manifest error means an error that is obvious or easily demonstrable without extensive investigation. The error need not be immediately and conclusively provable where its correctness depends upon resolving a legal dispute. Extrinsic evidence may be considered.

A local authority engaged a service provider under a 25-year PFI agreement to rehabilitate, maintain and operate Birmingham’s highway network. The initial Project Network Model contained substantial quantities of default inventory data. The parties disputed whether the service provider had to replace that data with actual information obtained from surveys and whether its obligations extended to the network existing on the ground.

An adjudicator determined those issues in favour of the authority and set aside milestone certificates 6 to 9. The Technology and Construction Court, in [2016] EWHC 2191 (TCC), reached the opposite conclusion on the first two issues and did not determine the certificates issue. The authority appealed. The central questions were the extent of the updating and maintenance obligations and whether the certificates could be set aside for manifest error.

1. The appeal was allowed unanimously. Reading the agreement as a whole, the service provider was required to update all six tables comprising the Project Network Model. Clause 19.2.1 imposed a general obligation to keep the model current, including by replacing default inventory information with actual information when it became available. Its final words referred to the model as a whole and were not confined to updates arising from changes notified by the authority under Performance Standard 8.

2. That construction was supported by the contractual requirements concerning due diligence, inspections, surveys, condition information, certification and indemnity. Those provisions proceeded on the basis that the service provider would work from an accurate record of the network actually existing. The provisions prescribing amendments in particular circumstances did not exclude the broader duty to keep the model updated. Although the provisions governing the condition of the model at expiry gave some support to the contrary construction, they did not outweigh the language and structure of the agreement.

3. The service provider’s rehabilitation and maintenance obligations therefore extended to the whole highway network as it existed on the ground. They were not limited to assets recorded in the original, partly default-based model.

4. The dispute-resolution powers were subject to the provision making milestone certificates final and binding in the absence of fraud or manifest error. The intervention of an adjudicator or court did not remove that restriction.

5. Following IIG Capital LLC v Van Der Merwe [2008] EWCA Civ 542 and North Shore Ventures Ltd v Anstead Holdings Inc [2011] EWCA Civ 230, manifest error is an error that is obvious or easily demonstrable without extensive investigation. Immediate and conclusive proof is unnecessary where the evident error depends upon the court first resolving a legal issue. Extrinsic evidence may be considered, as recognised in IG Index v Colley [2013] EWHC 748 (QB).

6. Everyone involved knew that certificates 6 to 9 would rest on erroneous calculations if the authority’s contractual interpretation prevailed. That interpretation did prevail. The certificates consequently contained manifest error and were set aside. The court directed that declarations be made to the same effect as those granted by the adjudicator.

1. Court of Appeal (Civil Division): In [2018] EWCA Civ 264, unanimously allowed the authority’s appeal, restored the substance of the adjudicator’s declarations and set aside milestone certificates 6 to 9.

2. Technology and Construction Court: In [2016] EWHC 2191 (TCC), held that the adjudicator was wrong on the scope of the service provider’s obligations and its duty to update the Project Network Model. It therefore did not decide whether the certificates should be set aside.

3. Adjudication: The adjudicator held that the service provider’s obligations covered the whole network, that it had to maintain an accurate Project Network Model and inventory, and that milestone certificates 6 to 9 should be set aside or revised.