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England and Wales Court of Appeal (Civil Division) Decisions
You are here: BAILII >> Databases >> England and Wales Court of Appeal (Civil Division) Decisions >> Midland Expressway Ltd v Carillion Construction Ltd & Ors  EWCA Civ 936 (15 June 2006)
Cite as:  EWCA Civ 936
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IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE QUEEN'S BENCH DIVISION
TECHNOLOGY & CONSTRUCTION COURT
(MR JUSTICE JACKSON)
B e f o r e :
LORD JUSTICE GAGE
LORD JUSTICE LLOYD
|MIDLAND EXPRESSWAY LIMITED
|- v -
|CARILLION CONSTRUCTION LIMITED & ORS
Smith Bernal Wordwave Limited
190 Fleet Street, London EC4A 2AG
Tel No: 020 7404 1400 Fax No: 020 7831 8838
Official Shorthand Writers to the Court)
MR J BLACKBURN & MR D ROYCE (instructed by Messrs Davies Arnold Cooper, London, EC4Y 8DD) appeared on behalf of the Respondent.
Crown Copyright ©
"To be expended under instruction by the Employer for work agreed by the District Valuer, and the Contractor as referred to in Clause 36.3 of the Conditions of Contract."
"To be expended under instruction of the Employer in respect of Aggregate Tax levied on the Contractor, subject in aggregate to the relevant maximum amounts provided for in Clause 36.3.3 of the Conditions of Contract."
"To be expended under instruction of the Employer for extra cost of undertaking Future Mining Works as referred to in Clause 36.3 of the Conditions Contract."
Note that all three provisional sums were here expressed "to be expended".
"By percentage complete of expenditure under employer's instructions."
"By percentage complete."
"As levied subject to the limits in clause 36.3.3 of the Conditions of Contract."
"In 43 AD four Roman legions led by Claudius invaded Britain and subdued the indigenous Celtic tribes."
"Provisional sum means, a sum included and so identified in the Pricing Schedule for the execution of any part of the Unspecified Accommodation Works or the Future Mining Works or the expenditure of Aggregate Tax up to the maximum provided for in Clause 36.3.3, which sum may be used in whole or in part in accordance with the instruction of the Employer given in accordance with Clause 36.3."
"The cost of executing the Works shall be the risk of the Contractor and the Contractor shall be deemed to have satisfied itself prior to the date hereof as to the correctness and sufficiency of the Contract Price which shall cover all its obligations (whether express or implied) under this Contract."
"36.1 Price for Works. The contract price is £485,500,000 subject to adjustment in accordance with the express provisions of this Contract.
36.2 Adjustment of Contract Price. The Contract Price is a fixed price lump sum and shall not be subject to remeasurement or any other adjustment save in accordance with the express provisions of this contract.
36.3 Provisional Sums.
36.3.1 The Employer shall be entitled to instruct the Contractor to expend or execute in whole or in part any work in respect of which a Provisional Sum is stated in the Pricing Schedule (as the case may be). If the Employer issues such an instruction such expenditure shall, subject to clause 36.3.3 be added to the Contract Price and such work shall form part of the Works (as the case may be) and the Contractor shall be entitled to a Price Adjustment on the basis referred to in clause 39.6.1 (a).
36.3.2. Without prejudice to clause 15.4, the Contractor shall be deemed to have allowed the necessary time and resources to enable the work relating to the provisional sum to be executed and satisfied itself as to all risks and matters associated with such execution, provided that any instruction for the expenditure of the Provisional Sum is given by the Employer within a reasonable time of the Effective Date, and the Contractor is not accordingly entitled to any extension of any Completion Period for the execution of work instructed in accordance with clause 36.3.1."
"Subject to the terms of clause 37 and 38 the Contractor shall be entitled to payment of the amounts set out in the Schedule of Prices in accordance with [a following table]."
"Subject as provided in clause 37.3 each month the Contractor shall be entitled to be paid: the amount calculated in accordance with clause 37.1 [which includes the table] and all such other amounts to which the contractor becomes entitled during that month in accordance with the express terms of the contract."
"1) A Provisional Sum is by definition a sum provided in a building contract in respect of work which cannot be sufficiently defined or properly evaluated at the time when the contract is executed. (See the first paragraph of the agreed statement.) [That is a reference to an agreed statement deriving from discussion between experts.] In practice a provisional sum is generally the best guess that can be made at the time. It is "provisional" because neither party is held to that figure, if the actual cost turns out to be higher or lower.
2) It is a necessary feature of the Provisional Sum mechanism that when the actual value of the work in question is identified and added to the contract price the provisionally estimated value is deducted. If the Provisional Sum is not deducted a) the whole system breaks down; b) the contractor is paid twice over; and c) the Provisional Sum loses its provisional quality. The so called Provisional Sum becomes a fixed and definite sum which the contractor is bound to receive in any event (even if he does nothing to earn it.)
3) Clause 36.3.1 is not a happily drafted clause. Nevertheless the meaning of that clause is perfectly clear. It is as follows. If the employer instructs the contractor to pay sums of money (e.g Aggregate Tax) or to carry out works in respect of an item for which a provisional sum is stated in the pricing schedule then the contract price shall be adjusted accordingly. In other words, the contractor shall receive in lieu of the Provisional Sum an amount assessed by reference to the actual expenditure incurred or the actual work done'.
4) If no work is instructed or executed in respect of a Provisional Sum item (as happened here in respect of future mining works), then clause 36.3.1 is not triggered at all. In those circumstances the entire Provisional Sum allocated to that item must be deducted. I say this because a) that is the natural and obvious meaning of paragraphs 18, 19 and 20 of Part A of Appendix 1 to the contract; b) the very words "Provisional Sum" mean a sum which must be deducted if the relevant item of work is not done; c) any other interpretation of the contract would be absurd. The absurdity arises in this way, it would mean that if the contractor does a small amount of work in respect of the Provisional Sum item, he receives a small payment; if the contractor does nothing at all in respect of such an item, he receives a much larger sum."
The adjudicator addressed this conundrum at paragraph 27 of his decision:
"5) The last line of part A of appendix 1 to the D&C Contract reads 'Value of Non MSA Work, £484,507,354.00 including provisional sum items 18, 19 and 20'. There would be no point in stating that the contract price includes the three provisional sums if those sums were payable in any event.
6) The definition of provisional sum in Clause 1.1 is inconsistent with the interpretation for which Canberra contend. Note the words 'which sum may be used in whole or in part'.
7) Clause 36.3.1 refers to price adjustment. The term 'price adjustment' is defined in Clause 1.1 so as to include additions to and deductions from the contract sum.
8) When pressed by me in argument Mr Stretfield-James conceded that his proposed construction of Clause 36.3 had 'a surprising feel'. That is an elegant understatement. In my view the interpretation for which Canberra contend does not make commercial sense."
Order: Appeal dismissed.