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England and Wales High Court (Technology and Construction Court) Decisions
You are here: BAILII >> Databases >> England and Wales High Court (Technology and Construction Court) Decisions >> Transport for Greater Manchester v Thales Transport & Security Ltd  EWHC 3717 (TCC) (21 December 2012)
Cite as: 146 Con LR 194,  EWHC 3717 (TCC)
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QUEEN'S BENCH DIVISION
TECHNOLOGY AND CONSTRUCTION COURT
Strand, London, WC2A 2LL
B e f o r e :
| TRANSPORT FOR GREATER MANCHESTER (formerly Grater Manchester Passenger Transport Executive)
|- and -
|THALES TRANSPORT & SECURITY LIMITED
Jonathan Acton Davis QC and Simon Crawshaw (instructed by Linklaters LLP) for the Defendant
Hearing date: 17 December 2012
Crown Copyright ©
Mr Justice Akenhead:
The Contract and the Factual Background
"the tram operating system to be supplied to [TGM] by [Thales] (including the supervisory system and SCADA Deliverables and any part or parts of the same and all Software required for the installation, use and maintenance of the tram operating system and all associated spares), as more particularly specified in the TOS Specification and the Supplier's Proposals".
There were design, progress and completion, procurement, testing, installation and commissioning obligations.
"27.1 The Supplier shall for a period of at least 12 years…maintain accurate, up-to-date and complete records relating to its obligations under this Agreement ("Records") (in a form suitable for inspection under clause 28) relating to the performance of its obligations under this Agreement including:
(a) the acquisition and properties of all materials, parts and items of equipment included in the manufacture and/or supply of the Deliverables;
(b) the design and/or the supply and installation of the Deliverables…
28.1 In addition to the information otherwise to be submitted or provided to [TGM] under any other provision in this Agreement, the Supplier shall submit to [TGM] or to any Auditor, or ensure that there is submitted to [TGM] or such Auditor, within such period as [TGM] or such Auditor may reasonably require (having due regard to the time and costs involved in providing such information but disregarding any costs of less than £100 per request), such other information, records or documents in its possession or control or in the possession or control of any auditors, agents or Sub-contractors as [TGM] or such Auditor may reasonably request (including any information requested from [TGM] by the Department for Transport) and which relates to the Records.
28.2 [TGM], its representatives or agents, the Secretary of State for Transport…and any Auditor shall be entitled, on giving reasonable notice and at all reasonable times, to inspect and make copies of:
(a) any of the Records (and the Supplier shall ensure that [TGM], the Secretary of State for Transport and any such Auditor shall be similarly entitled to inspect and make copies of any such records or documents maintained by any Sub-contractor); and/or
(b) such other information, records or documents in the Supplier's possession or control or in the possession or control of any auditors, agents or Sub-contractors relating to:
(i) the supply of the Deliverables; or
(ii) the carrying out of any of the Supplier's obligations under this Agreement;
(c) in each case as [TGM], the Secretary of State for Transport and any such Auditor may reasonably request for the purpose of auditing any information supplied to [TGM] the Secretary of State for Transport or such Auditor under the Agreement or verifying the Supplier's compliance with its obligations under this Agreement;
And the Supplier shall submit to [TGM], the Secretary of State for Transport or to such Auditor, and shall ensure that any relevant auditor, agent or Sub-contractor shall submit to [TGM], the Secretary of State for Transport or to such Auditor such information and explanations and grant such access as [TGM], its representatives or agents, the Secretary of State for Transport (including any auditor appointed by him) or such Auditor may reasonably require in connection with such auditing or verifying.
(a) Upon a proper interpretation of the Contract, accepted by Mr Acton Davis QC as being a narrow as opposed to a broad one, the references in Clause 27.1 documents which "relate" to the performance or carrying out of obligations or to the supply of Deliverables are limited in such a way that cost records or documents are generally excluded.
(b) Again, as a matter of contractual interpretation, TGM is only entitled to request documents in order to audit information supplied to the TGM or to verify Thales' compliance with its obligations under the agreement. It then argues that on the evidence as presented the purpose of the requests is neither of these specified purposes.
(c) The requests must be reasonable in all the circumstances.
(d) There is a lack of clarity in TGM's requests such that as a matter of authority specific performance should not be ordered.
(e) In several respects, documents requested do not exist or are outside Thales' control.
(f) A number of documents are not "Records" but were created after the event.
(g) In two respects, requests were not made before the proceedings were issued.
(h) Requests for certain cost related documents are of unreasonable breadth or insufficiently precisely drawn. The argument is made that because the contract is a fixed-price contract documents related to cost are immaterial and therefore incorrectly or at least unreasonably requested.
(i) Documents which were commercially sensitive should not be discloseable, nor should documents relating to employment records disclosure of which would or might offend against the Data Protection Act.
The Law and Practice
The Meaning and Scope of Clauses 27 and 28
(a) The Contract was an important part of a very much larger infrastructure project projected to cost about £1 billion.
(b) TGM was a public body with statutory powers to procure amongst other things the extension of the Metrolink tram system in Greater Manchester.
(c) In that context, TGM would have a legitimate interest in having a very detailed knowledge and understanding of exactly what was going on in relation to the project which was the subject matter of the Contract, given its importance to the overall extension project and its own statutory responsibility.
(a) Clause 1 definitions include:
"Auditor means a person carrying out an audit of the economy, efficiency and effectiveness with which either [TGM] or the Authority are carrying out any of their functions…"
"Compensation Event means a breach by [TGM] of any of its obligations under this Agreement, including any failure or delay in providing access to the Metrolink System in accordance with clause 11.5 (a)"
"Deliverable means an item to be supplied by [Thales] to [TGM] under the provisions of this Agreement"
"Project Schedule means the schedule for the design, delivery, installation and testing and commissioning of the System set out in the Supplier Bid Schedule in the agreed form, as further developed and replaced by the Supplier Project Schedule to be prepared and periodically updated in accordance with clause 5"
"Records means the records relating to the Supplier's performance of its obligations under this Agreement as more particularly described in clause 27"
(b) Clause 1.2 (l) provided that headings in the Contract were "for convenience only".
(c) Clause 6 provided by way of detailed terms for a design review process by which Thales was to submit various types of design document and to implement a "Requirements Managements System" which was to "ensure that all requirements from the TOS Specification and any documents it references are mapped through the Functional Specification, the Structural Design and the Detail Design, throughout the Project Schedule". Thales was to hold design reviews at appropriate stages and maintain a register in relation to "Design Submissions".
(d) Clause 10 provided that each of the Deliverables was to "be delivered to the appropriate Location in accordance with the provisions of the TOS Specification and the Project Schedule" with "title and risk in the Deliverables [to] pass to" TGM on delivery.
(e) Clauses 15 and 16 provided that the Purchase Price was to be paid by way of Milestone Payments, subject to Clause 18 Retentions.
(f) Clause 21 provided for Liquidated Damages for late acceptance of the System including Sections thereof. Although the liquidated damages rates per day differed between different Sections of the work, they ranged between £1,250 and £35,000 per day. Clause 23 provided for certain limits on liability.
(g) Clause 31.1 required Thales on request to "liaise and cooperate in all good faith with" TGM "so as to facilitate the smooth and efficient operation and development of the Metrolink System from time to time including making available and/or granting access to all reasonable information, records and documents…as are or may be relevant to the Metrolink System as are in its possession or under its control."
(h) Clause 32 provided for Variations which TGM was entitled to issue. Unless there were issues, the parties were to agree about the financial consequences of the Variation as well as any extension of time. If the parties could not agree, then the matters in issue could be referred to an independent expert for resolution.
(i) Clause 33 provided for Compensation Events and, in effect, for compensation to be payable for the consequences of such Events as well as for the award of an appropriate extension of time.
(j) Clause 34 confirmed that Thales "acknowledges that [TGM] is subject to the requirements of the "Freedom of Information Act" and provided for liaison between them when a Request for the Information under that Act was lodged, giving Thales an opportunity to make representations to TGM as to whether further information should be disclosed. There was an acknowledgement that notwithstanding the provisions of Clause 35 which dealt with confidentiality TGM might be required to disclose information relating to the Thales or its performance.
(k) Clause 35 provided for the parties to "keep confidential all Confidential Information received by one party from the other party relating to this Agreement" but the confidentiality obligation did not apply to any disclosure required by legislation, court order or the like.
(i) There has to be a request for the information, records or documents from TGM, the Secretary of State or an Auditor;
(ii) The request must be reasonable; although there is no definition of what might be reasonable, it must mean reasonable in all the circumstances judged at the time of the request;
(iii) The request must be for at least one of two purposes: "auditing any information supplied" or "verifying [Thales'] compliance with its obligations under" the Contract.
There is no definition of the word "auditing". Chambers Dictionary defines the noun "audit" as "an examination of the accounts by an authorised person…a check or examination…an evaluation of a specified quantity or quality…a calling to account generally" while the verb is defined as "to examine and officially verify, etc (the accounts of the company)". However, the context of the word "auditing" is that of auditing "any information supplied" to TGM. It is clear from the overall terms of these two clauses that the information supplied can go way beyond simply accounting information and therefore "auditing" goes beyond official verification of financial accounts. In my view, the overall context of the word is such as to suggest that an equivalent meaning is "vetting" or "checking".
(i) Documentation which is discloseable by Thales goes beyond simply contemporaneous documents which record what Thales has done. Documentation which relates to what it has done or not done pursuant to the Contract is discloseable.
(ii) As Leading Counsel for Thales properly accepted in argument, such documentation can include documentation which records the cost of labour, materials, plant, sub-contractors, suppliers and the like because it relates to the performance of the obligations. The fact that a cost has been incurred, say in respect of a team of engineers working on the project, demonstrates that there has been an attempt to perform the obligations. The fact that £1.5 million (say) has been paid to a supplier relates to the "acquisition…of all materials, parts and items" within the meaning of Clause 27.1 (a).
(iii) It is not only the source or original contemporaneous records which have to be disclosed but also other related information records or documents within the meaning of Clauses 28.1 and 28.2(b). Therefore, documents, such as reports or internal audits, created after the events in question which have been recorded originally, which address previous events or matters otherwise earlier recorded, are linked to the supply of the Deliverables or the performance (or non-performance) by Thales of its obligations under the Contract.
(iv) The request for documents or information must be reasonable and, if and to the extent that it is not, Thales does not have to comply with the request.
(v) The request needs only to be complied with if the purpose is either to enable TGM to vet or check information supplied to TGM under the Contract or to enable it verify whether or not Thales has complied with its obligations.
(vi) The fact that documents which are otherwise discloseable under Clauses 27 and 28 are confidential is immaterial and can not be used as an excuse to withhold disclosure, although, once disclosed, TGM is required to comply with Clause 35 relating to confidentiality. That said, if TGM is required to provide the information contained in documents disclosed by Thales to third parties under the Freedom of Information Act, then it may do so subject to the provisions of Clause 34.
The Individual Classes of Documents
(a) "to enable [TGM] to understand the basis on which you seek additional entitlements under the" Contract.
(b) "we have already asked for certain documents in relation to the verification of your claim".
TGM's letter dated 2 November 2012 to Thales puts the matter in more commercial terms:
"…the commercial issues between our two organisations are not going to be resolved…without [TGM] having the opportunity objectively to consider all of the information that is relevant to the substantiation of your claim. That information is equally important in the context of enabling [TGM] to have a clearer picture and understanding of the difficulties that have beset the Project historically (and indeed continue to do so) which of itself is undoubtedly a key factor in enabling the most efficient completion of the Project from the perspective of both our organisations…
[TGM] as a public body, is held fully accountable for the use of public funding, which therefore requires a high level of scrutiny before claims of this nature can be settled. This is only possible by full disclosure of all documentation; which of course is reflected fully in our contract with Thales…
The core position remains that [TGM] is entitled under the Contract to the additional information sought from Thales and…providing access to the information is of key importance to both the resolution of the commercial issues and the completion of the project…"