Neutral citation: RWE Npower Renewables Ltd v JN Bentley Ltd [2014] EWCA Civ 150

NEC contract topics: Ambiguity and inconsistency (17.1), Contract Data, Sectional Completion (X5), delay damages (X7), Works Information

Form of contract: NEC3 Engineering and Construction Contract (June 2005 edition with June 2006 amendments)

Main areas of law: Contract interpretation, order of precedence.

 

RWE Npower Renewables Ltd engaged JN Bentley Ltd to carry out civil engineering works for a hydroelectricity generation project in Scotland. The agreement, based on the NEC3 Engineering and Construction Contract (June 2005 edition with June 2006 amendments), comprised several documents including Contract Data Parts 1 and 2, bespoke amendments, Works Information, Site Information, and post-tender clarifications. The dispute was being heard on appeal from the High Court: (2013) EWHC 978.

At the centre of the dispute was the inclusion of an order of precedence clause giving priority to Contract Data Part One. The contract included Option X5 (Sectional Completion) and Option X7 (Delay Damages). Section 2 of the works concerned the completion and testing of the intake, penstock pipeline, tailrace, and the powerhouse to enable hydro plant installation. The contract date for completing this section was 27 May 2011. However, the Works Information contained additional details, stating that Section 2 included the completion of the entire penstock pipeline and related facilities, with a key date for testing being 24 November 2010.

Delays occurred, and a dispute arose regarding the extent of work required to complete section 2. RWE contended that full completion and testing of all components listed in the Works Information was required by the contractual date. Bentley argued that the scope should be limited to what was needed to allow hydro plant installation, as stated in Option X5.

 

The central legal issue was whether Bentley's obligation to complete section 2 was defined by the detailed requirements stated in the Works Information or the more general language used in the Contract Data under Option X5. Bentley maintained that a conflict existed between these documents and that, under the order of precedence clause, Contract Data Part One (which included Option X5) should prevail. Bentley also argued that Option X5 only required enough pipeline to be complete for the hydro plant to be installed, not the entire system.

RWE submitted that the contract should be read as a whole and that both the Works Information and Option X5 could be interpreted consistently. They asserted that full completion and testing of the relevant infrastructure was required by the stated date in Option X5.

 

At first instance, Mr Justice Akenhead found that the two clauses could be read together. He determined that there was no material inconsistency between Option X5 and the Works Information. Instead, he concluded that the more detailed description in the Works Information, was complementary to the general terms in Option X5. He held that Bentley was required to complete the full penstock pipeline by the contractual date for section 2.

The Court of Appeal upheld this judgment. Lord Justice Moore-Bick emphasised the need to read the contract as a whole. He accepted that the Works Information and Option X5 could both be given effect without contradiction. Even if a discrepancy had existed, the clause with greater detail in the Works Information would have provided valuable context for interpreting the obligation. The court rejected the view that the order of precedence clause was triggered, noting that such clauses apply only when the discrepancy is irreconcilable. Moore-Bick LJ gave an illustrative example: a direct contradiction such as one clause requiring something to be painted white and another requiring black.

The Court of Appeal ultimately held that Bentley’s obligation was to complete and test the entire pipeline system as described in the Works Information by the date stated in the Contract Data. The appeal was dismissed, and the earlier declaration granted in favour of RWE was affirmed.

 

This case reinforces that under the NEC3 contract, courts will strive to reconcile seemingly conflicting provisions rather than defaulting to an order of precedence. The decision confirms that a clause providing general obligations (such as Option X5) can be clarified and supported by another clause offering more details in the Works Information. An order of precedence clause does not guarantee its application. Unless provisions are truly irreconcilable, courts are unlikely to allow such clauses to override a harmonised interpretation.

Contractors and Project Managers should be aware that the likelihood of a true ambiguity or inconsistency, as referred to in clause 17.1 of the standard NEC forms, arising under the contract is significantly reduced when reading the contract as a whole.

The decision also illustrates that the courts are capable of interpreting the NEC conditions of contract with relative ease by applying a common sense approach to the contractual language and applying this to the context of the project stated in the supporting contract documents e.g. Contract Data and Works Information. As Mr Justice Akenhead observed in the first instance proceedings:

 

“It needs to be borne in mind that much of the language of these conditions is in the present tense, although that factor does not seem to impact upon contractual interpretation…”