Imperial Chemical Industries Ltd v Merit Merrell Technology Ltd

Under an NEC3 contract, a Project Manager’s assessment is not conclusive unless the contract makes it so. The court may determine the true value of the works and open up, review and revise assessments. However, contemporaneous assessments and agreements reached by those with detailed knowledge of the works may carry powerful evidential weight. The party seeking repayment of money paid under adjudicators’ decisions bears the burden of proving overpayment. Contractual agreements on rates, measures and compensation events may be binding where the parties objectively intended finality. Damages for repudiation must be assessed by conventional principles of causation, remoteness and mitigation. Expert evidence must remain independent, address the contractual framework and leave disputed factual matters to the court.

The claimant employer sought recovery of an alleged overpayment said to arise from the final valuation of works performed by the defendant specialist contractor at a paint manufacturing facility. The defendant counterclaimed damages following the claimant’s repudiation of the contract, which had been established in the earlier liability judgment, [2017] EWHC 1763 (TCC).

The quantum trial concerned the value of the works, the effect of interim assessments and agreements reached during the project, the burden of proof, damages flowing from repudiation, interest and related procedural issues. The central questions were whether earlier valuations and agreements could be revisited and what sums were recoverable on the claim and counterclaim.

1. Quantum and contractual assessments. The court rejected the submission that NEC3 assessments were legally immune from reconsideration. The dispute-resolution provisions permitted review and revision, and nothing in the contract made a Project Manager’s assessment conclusive. The court therefore had jurisdiction to determine the true value of the works.
2. Although the assessments were not conclusive, they had powerful evidential weight. They were made contemporaneously by the Project Manager and ICI personnel with detailed knowledge of the works. ICI’s later challenge, based principally on witnesses and experts lacking comparable direct knowledge, did not overcome that evidence.
3. Agreements reached on rates, measures and individual compensation events were objectively intended to determine the relevant items finally. They were binding agreements. In any event, ICI had no sufficient evidential basis for reopening them.
4. Burden of proof. ICI sought repayment on the basis that MMT had been overpaid. It therefore bore the burden of proving the overpayment. That burden was unaffected by the fact that adjudication payments had resulted from the absence of payless notices.
5. Claims for profits on work never instructed to MMT failed. ICI had no contractual obligation to instruct that work. The rebranding claim also failed because it was unpleaded and the relevant expenditure had been incurred by another group company.
6. Counterclaim. Losses were assessed separately by reference to the repudiation, its immediate consequences, short-term effects, medium-term effects and the later liquidation. Professional fees, increased banking costs, management time for the period to May 2015, and the reduced Murphy settlement were recoverable. The SCL settlement shortfall, liquidation costs, later losses of another group company and other unsupported heads were not.
7. The court criticised ICI’s expert evidence where experts adopted partisan positions, selected between disputed facts, ignored binding findings or departed from the contractual valuation mechanism. The court preferred MMT’s independent expert evidence.
8. The final account was valued at £22,018,083.66. After credit for payments and the counterclaim, and deduction of the agreed defects sum, the balance awarded to MMT was £2,128,094.78.

This was a first-instance quantum judgment following an earlier liability judgment in the same litigation at [2017] EWHC 1763 (TCC). The judgment also refers to earlier procedural and adjudication-related decisions in the litigation.