VA Tech Wabag UK Limited -v- Morgan Est (Scotland) Limited
Case reference:
[2002] ScotCS 160
Thursday, 30 May 2002
Key terms: Construction Consortium Agreement - PFI - Construction Contract - Novation - Payment Certificate - Distribution of Bank Account Sums
The Pursuers, Va Tech and the Miller Group Limited entered into a Construction Consortium Agreement. In accordance with that agreement they were to jointly offer to design, procure and construct a sludge treatment centre at Daldowie and, if their bid was successful, carry out those works. The offer was successful. Va Tech and Miller Group entered into a Construction Contract with SMW Limited a subsidiary of Scottish Power for the design, procurement and construction of the works. SMW had been established for the purposes of the provision of the works under the PFI. In September 2000 the Miller Group novated their part of the Construction Consortium Agreement and the Construction Contract to Morgan, the Defenders.
In accordance with the Construction Consortium Agreement money received pursuant to the Construction Contract was to be paid to Va Tech and Morgan in accordance with percentage quotas set out in the Construction Consortium Agreement. A joint bank account had been set up for that purpose. In order that money paid into the account could be paid out to the parties the consent of both parties was required.
Payment Certificate No. 24 was issued and paid. There was a dispute between Va Tech and Morgan about the extent of the works carried out by them in respect of the Construction Consortium Agreement. The Defenders, Morgan, refused to consent to the distribution of the monies in the joint bank account. The Pursers sought a declaration that that the Defenders were not entitled to withhold agreement or otherwise prevent the prompt distribution of monies received in the joint bank account pursuant to the Construction Consortium Agreement.
Lord Drummond Young held that the question turned upon the construction of the Construction Consortium Agreement. That Agreement was only to be adjusted in accordance with variations made to the Construction Contract, and Va Tech’s claim was independent of that contract and therefore Va Tech was obliged to consent to the distribution of the money held in the joint account. The Defenders could have pursued the dispute over the ancillary services provided by adjudication. They were merely attempting to achieve an illegitimate negotiating position by interrupting the pursuer’s cash flow.
In accordance with the Construction Consortium Agreement money received pursuant to the Construction Contract was to be paid to Va Tech and Morgan in accordance with percentage quotas set out in the Construction Consortium Agreement. A joint bank account had been set up for that purpose. In order that money paid into the account could be paid out to the parties the consent of both parties was required.
Payment Certificate No. 24 was issued and paid. There was a dispute between Va Tech and Morgan about the extent of the works carried out by them in respect of the Construction Consortium Agreement. The Defenders, Morgan, refused to consent to the distribution of the monies in the joint bank account. The Pursers sought a declaration that that the Defenders were not entitled to withhold agreement or otherwise prevent the prompt distribution of monies received in the joint bank account pursuant to the Construction Consortium Agreement.
Lord Drummond Young held that the question turned upon the construction of the Construction Consortium Agreement. That Agreement was only to be adjusted in accordance with variations made to the Construction Contract, and Va Tech’s claim was independent of that contract and therefore Va Tech was obliged to consent to the distribution of the money held in the joint account. The Defenders could have pursued the dispute over the ancillary services provided by adjudication. They were merely attempting to achieve an illegitimate negotiating position by interrupting the pursuer’s cash flow.