Amey LG v Cumbria CC (2016)
Neutral citation: Costain Ltd v Tarmac Holdings Ltd [2017] EWHC 319 (TCC).
NEC contract topics: quality management, testing, Works Information.
Form of contract: Services agreement based on the NEC2 priced contract with activity schedule.
Main areas of law: Contract interpretation, contract performance, valuation of defects, application of sampling techniques.
Background and the Dispute
The dispute concerned a services agreement between Amey LG and Cumbria County Council relating to highway maintenance. The agreement began in April 2005 and ran for seven years with Amey effectively operating as the council’s in-house direct labour organisation. The NEC2 contract, adapted with an activity schedule, governed the performance of works under the agreement. Capita was appointed as the overseeing organisation.
Over the life of the contract, around 36,000 instructions were issued, amounting to works valued at approximately £250 million. These included resurfacing and patching tasks. In 2008, Cumbria decided not to extend the arrangement and opted instead to internalise the services. Tensions between the parties increased as the final account process approached.
Amey initiated proceedings to recover amounts it claimed were wrongly withheld by the council. In defence, Cumbria raised counterclaims, alleging that certain elements of Amey’s work, particularly in patching and surfacing, were defective. Cumbria supported its claims using sample inspections and applied the results to a broader scope of similar works conducted under the contract.
Legal Issues
The High Court was asked to decide whether Cumbria could base its claim on evidence drawn from sample inspections and whether the sampling process used could justify extrapolation across the full range of works. The court also had to assess whether the statistical method used by Cumbria satisfied the evidentiary threshold required for such an approach. Amey challenged the statistical validity of Cumbria’s analysis and contended that the sample was neither random nor representative.
The court also considered whether Cumbria could advance a secondary claim for the defective items identified in the sample alone, if extrapolation was rejected. This required an examination of whether such an alternative claim had been properly formulated in the pleadings.
Judgment
The judge accepted that it was not feasible for Cumbria to inspect every individual item due to the scale of the works, and that sampling was in principle a permissible method for advancing its claim. However, Cumbria’s methodology did not satisfy the standards required to support statistical extrapolation. The assertion of a 95 percent confidence level was rejected, as the sampling process lacked the randomness necessary to support that level of certainty.
The court found several flaws in Cumbria’s process. The sample was not collected for the purpose of general representation but to identify defects, which introduced a bias. Some categories of patching work were omitted, and the dataset was compiled over a lengthy period, during which data collection standards varied. Notably, older patches lacking GPS data were excluded. These factors undermined the neutrality of the sample.
Judge Stephen Davies concluded that the sampling failed to meet the standard required for extrapolation. He also ruled that Cumbria’s fallback claim, limited to the defective patches examined, could not proceed because it had not been properly pleaded. No formal request had been made to amend the claim, and therefore the court declined to consider it.
As a result, Cumbria’s entire extrapolated counterclaim was dismissed, and it was denied recovery even for the defective samples themselves. This significantly reduced the overall value of the council’s counterclaims.
NEC contract learning points and implications for the construction industry
This judgment highlights the importance of adhering to procedural and documentary obligations in NEC contracts, particularly where the contract includes mechanisms for performance monitoring and quality assurance in the Works Information. It also clarifies that final assessments under the NEC framework do not require comprehensive evidence for every item already agreed as finalised, unless there are grounds to reopen them.
The judgment also offers guidance on the evidential use of sampling in construction disputes. It confirms that while sample-based claims are allowed when inspecting every item is impractical, the sampling process must be both statistically sound and unbiased. Failure to ensure representativeness will render such claims unreliable.
Finally, the case highlights the procedural importance of clear and thorough pleadings. Cumbria’s failure to submit a properly structured fallback claim resulted in its exclusion from consideration. This acts as a warning that unpleaded arguments will not be accepted, regardless of the circumstances.