PBS Energo AS v Bester Generacion UK Ltd & Anor [2020] EWHC 223 (TCC)

7th Feb 2020

Steven Walker QC successfully acted for the defendant, Bester, in a case that arose from a disputed termination of a FIDIC contract.

On 7 February 2020 Mrs Justice Cockerill DBE handed down judgment in PBS Energo AS v Bester Generacion UK Ltd & Anor [2020] EWHC 223 (TCC). Steven Walker QC and Tom Owen appeared for Bester instructed by Rebecca Williams of Watson Farley Williams.

The judgment finally determines disputes which had been the subject of earlier adjudications in which PBS had been successful. Steven appeared for Bester in connection with the successful defence of an application to enforce an adjudicator’s decision on grounds that the decision had been procured by fraud: see PBS Energo A.S. v Bester Generacion UK Ltd [2019] EWHC 996 (TCC) [2019] BLR 350. That decision is subject to appeal.

The case concerned a biomass energy plant to be located near Wrexham. Equitix employed Bester to design, construct and install the plant as the EPC Contractor. Bester employed PBS as sub-contractor. PBS’s parent, VB, provided a parent company guarantee and was added to the proceedings by Bester so as to avoid the risk of multiple proceedings in the event of default on the part of PBS.

The contracts were based on the FIDIC Silver Book. Until shortly before the PBS/Bester subcontract was signed the draft in play was essentially “back to back” with the Equitix Contract. However, changes to the subcontract were made which ensured that the two contracts were not completely back to back. There was a significant issue as to the effect of these changes.

The works were delayed and each party claimed to terminate the contract between them. PBS claimed to be entitled to terminate on the basis firstly of a failure to pay a milestone payment instalment by the due date, and secondly on the basis of substantial failures by Bester to fulfil its contractual obligations. A number of such failures were particularised. Bester in turn claimed to be entitled to terminate the contract firstly by reason of a failure to comply with a Notice to Correct as regards delay to the project, caused by delay in the detailed design and suspensions of works and by reason of failure to provide necessary permits and assistance. Secondly Bester relied on abandonment of the works or an intention not to perform. Bester claimed liquidated sums set out in the subcontract together and losses suffered as a result of the termination of the main contract.

The Court rejected the grounds relied on by PBS in respect of its purported termination of the subcontract. The Court found that certain payment milestones had not been achieved and this was sufficient to find that PBS’s purported termination was unlawful. The Court went on to consider whether entitlement to payment had arisen under the payment process set out in the subcontract and found that it had not. The Court also considered the proper construction of clause 16.2 (b) of the subcontract and the circumstances in which a late payment might trigger entitlement to terminate.

The Court found that Bester was entitled to terminate the subcontract when it did and in doing so the Court rejected VB’s argument that PBS had been prevented from remedying its breaches by Bester when Equitix terminated Bester’s contract. The Court found that there can be no prevention where the prevention relied on lay at PBS’s own door.

Steven Walker QC and Tom Owen (instructed by Watson, Farley and Williams LLP) for the First and Second Defendants.

To read the full judgment please click here.

7 February 2020

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