HSM Offshore BV v Aker Offshore Partner Ltd, Court of Appeal - Technology and Construction Court, November 28, 2017, [2017] EWHC 2979 (TCC)

Resolution Date:November 28, 2017
Issuing Organization:Technology and Construction Court
Actores:HSM Offshore BV v Aker Offshore Partner Ltd
 
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Neutral Citation Number: [2017] EWHC 2979 (TCC)

Case No: HT-2016-000156

IN THE HIGH COURT OF JUSTICE

BUSINESS AND PROPERTY COURTS OF ENGLAND AND WALES

QUEEN'S BENCH DIVISION

TECHNOLOGY AND CONSTRUCTION COURT

Royal Courts of Justice

Rolls Building, Fetter Lane, London, EC4A 1NL

Date: 28 November 2017

Before :

THE HON MR JUSTICE COULSON

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Between :

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Mr Simon Hughes QC (instructed by Muckle LLP) for the Claimant

Mr Adrian Williamson QC and Mr Calum Lamont

(instructed by Pinsent Masons LLP) for the Defendant

Hearing dates: 4, 5, 9, 10, 11 and 12 October 2017.

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The Hon. Mr Justice Coulson :

  1. INTRODUCTION

  2. The claimant (``HSM'') is a specialist fabricator of offshore process modules, with a fabrication yard (``the yard'') just outside Rotterdam. The defendant (``Aker'') is a global provider of products and services to the oil and gas industry.

  3. By a contract dated 11 April 2014, and incorporating the LOGIC Sub-Contract conditions, Aker engaged HSM to carry out the fabrication, load-out and sea fastening of two process modules, M12 and M14 for use on the Clyde Platform for the Flyndre-Cawdor oilfield in the North Sea. The modules were designed by a company affiliated to Aker. The customer was Talisman, who would operate the modules once they were commissioned.

  4. In late 2014/early 2015, it became apparent that there were problems at the yard, and the Ready for Sail Away (``RfSA'') date of 10 May 2015 would not be met. HSM and Aker entered into negotiations to try to resolve the difficulties. Those negotiations resulted in a Memorandum of Understanding (``MOU'') dated 18 March 2015. Thereafter, the modules were completed and Sail Away occurred on 1 August 2015.

  5. It is common ground that the MOU made a number of changes to the way in which HSM were remunerated for the sub-contract work. Between the period of June and August 2015, there was a good deal of co-operation between the Quantity Surveyors based at the yard and large monthly sums were approved and paid by Aker to HSM. However, following Sail Away and the provision of HSM's final account, the broad measure of agreement between the parties fell away and a series of specific disputes became apparent.

  6. In these proceedings, commenced on 20 June 2016, HSM seek to recover the sums which they say remain outstanding pursuant to the LOGIC Sub-Contract and/or the MOU. Aker dispute those claims, and they also maintain a counterclaim in respect of both liquidated damages and alleged defects. The disputes between the parties might therefore be said to cover every aspect of a fabrication contract: there are disputes as to the construction of the MOU and how it should be read with the original LOGIC Sub-Contract; there are an extensive range of estoppel arguments, designed by HSM to prevent Aker from, as they see it, going back on the approval process adopted between June and August 2015; there are factual disputes; there are disputes of principle as to what items are recoverable; and there are any number of disputes about the quantum of particular items of claim.

  7. This case was originally set down for an eight day trial (one reading day and seven further days). It was immediately apparent to me that it was quite impossible to deal with all of the disputes between the parties in that timescale and, for a variety of reasons, the parties were unable to extend the eight day period (although the court could have done). In addition, there were real uncertainties as to the nature, scope and extent of the disputes between the parties because there was no List of Issues and the written openings did not obviously correlate one with the other.

  8. Following the reading day, on the first day of the trial proper (4 October 2017), I identified 12 difficulties with the shape and nature of the case as it then stood and the impossibility of it all being shoehorned into what was by then a seven day hearing. However, instead of adjourning the trial, I made it plain that I was happy to resolve as many issues as possible in the time slot that had been allocated. The parties accepted this suggestion. Thereafter, rather confirming the views that I had expressed at the outset, there was a lively debate between them as to what was and what was not in issue between them. This required repeated scrutiny of the pleadings, evidence and other material. I was obliged to give rulings on the second and third days of the trial, in advance of the oral evidence, as to what was and was not in issue. True to form, the parties remained in dispute about the issues between them even during their closing submissions on the last day of the trial, and in the written documents they provided thereafter.

  9. In simple terms, the disputes between the parties which were addressed at the trial, were:

    (a) Whether or not Aker were entitled to bring a counterclaim for liquidated damages;

    (b) Whether or not Aker were estopped from going behind the figures which had been agreed between June and August 2015;

    (c) The nature, scope and extent of HSM's entitlement in principle to recover certain of its pleaded claims for (i) Materials; (ii) Labour Positions; (iii) Management Positions; and (iv) Third Party Costs.

  10. I propose to deal with those matters in this way. In Section 2, I set out the relevant terms of the LOGIC Sub-Contract. In Section 3, I set out the MOU. In Section 4, I deal with Aker's counterclaim for liquidated damages. In Section 5, I address the estoppel argument in respect of the approval of invoices between June and August 2015. In Section 6, I make some general points about the detailed claims, and then at Sections 7, 8, 9 and 10 I deal respectively with the claims for Materials, Labour Positions, Management Positions and Third Party Costs. There is a short summary of my conclusions at Section 11.

  11. THE LOGIC SUB-CONTRACT

    2.1 Time

  12. Throughout the LOGIC Sub-Contract, HSM are referred to as ``CONTRACTOR'' and Aker are referred to as ``COMPANY''.

  13. The Sub-Contract contained at Section XI a list of Company Key Dates. Milestones 02-05 were the start and finish dates of Mechanical Completion on M12 and M14. Milestone 07 was described as ``module ready for Sail Away''. The date for that was stated to be 10 May 2015. In the adjoining ``comments'' column were the words: ``Clause 35.1 Liquidated Damages date''.

  14. Clause 35 of the sub-contract provided as follows:

    ``35. LIQUIDATED DAMAGES

    35.1 If the CONTRACTOR fails to complete any of the items listed in Appendix 1 to Section I - Form of Agreement in accordance with the relevant date included in the SCHEDULE OF KEY DATES and/or fails to achieve the requirements of the CONTRACT in respect of any other items listed under the heading Clause 35.1 Liquidated Damages in the said Appendix 1, the CONTRACTOR shall be liable to the COMPANY for Liquidated Damages. The amounts of such Liquidated Damages shall be as specified in the said Appendix 1.

    35.2 All amounts of such Liquidated Damages for which the CONTRACTOR may become liable are agreed as a genuine pre-estimate of the losses which may be sustained by the COMPANY in the event that the CONTRACTOR fails in its respective obligations under the CONTRACT and not a penalty. Such Liquidated Damages shall be the sole and exclusive financial remedy of the COMPANY in respect of such failure.''

  15. Appendix 1 provided:

    ``Liquidated Damages for delay to the Module completion and ready for Sailaway date one hundred an fifty thousand Euros (€150,000) per day to maximum liquidated damages liability of one million five hundred thousand Euros (€1,500,000).''

  16. There was no section of the sub-contract dealing with extensions of time. However, Clause 14.7(a) provided as follows:

    ``14.7 Disputed VARIATIONS

    (a) If at any time the CONTRACTOR intends to claim any adjustment to the CONTRACT PRICE and/or SCHEDULE OF KEY DATES additional to that previously determined by the COMPANY for a VARIATION issued by the COMPANY or requested by the CONTRACTOR, the CONTRACTOR shall give notice in writing of such intention without delay after the happening of the events giving rise to such claim.

    Such events shall include but not be limited to the following:

    (i) rejection by the COMPANY of a request for a VARIATION made by the CONTRACTOR;

    (ii) any VARIATION where effect on CONTRACT PRICE and/or SCHEDULE OF KEY DATES cannot be determined at the time.

    Upon the happening of such events the CONTRACTOR shall keep such contemporary records as may reasonably be necessary to support any claim it may subsequently wish to make.

    (b) Upon receipt by the COMPANY of any such notice of claim, and without necessarily admitting any liability, the COMPANY may instruct the CONTRACTOR to keep such contemporary records or further contemporary records as the case may be as are reasonable and may be material to the claim of which notice has been received and the CONTRACTOR shall keep such records, copies of which shall be supplied to the COMPANY as and when the COMPANY may direct.

    (c) The CONTRACTOR shall send to the COMPANY at the end of every month an account giving particulars, as full and detailed as possible, of all such claims.

    (d) If the CONTRACTOR does not give notices and/or does not submit records and accounts in accordance with the provisions of Clauses 14.7(a), 14.7(b) and 14.7(c) the CONTRACTOR shall, at the sole discretion of the COMPANY, forfeit any right to receive any adjustment to the CONTRACT PRICE and/or SCHEDULE OF KEY DATES in respect of any such claims.

    (e) Where any matter in respect to adjustments to the CONTRACT PRICE and/or SCHEDULE OF KEY DATES has not been finalised and without prejudice to the rights of either the COMPANY or the CONTRACTOR, the COMPANY having taken into account the relevant provisions of the CONTRACT and all other relevant factors...

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