Commercial judge dismisses part of claim in dispute over settlement contract for Aberdeen harbour extension

About this case:

• Citation:
  [2025] CSOH 37
• Judgment:
  External link
• Court:
  Court of Session Outer House
• Judge:
  Lord Sandison

Dragados UK Ltd sought payment of just over £1.247 million in terms of a Settlement Agreement between itself and the defender under which it could claim back some costs of instructing a sub-consultant. The defender maintained that most or all of the pursuer’s claim was irrelevant and fell to be dismissed without enquiry.

The case was heard by Lord Sandison, with Howie KC appearing for the pursuer and Borland KC and Broome, advocate, for the defender.

Obliged to continue

On 20 December 2016, the defender engaged the pursuer as main contractor to design, manage, and construct a project to expand Aberdeen’s harbour by way of an extension at Nigg Bay. The form of the contract was a modified version of the NEC3 Engineering and Construction Contract (Version A). The following day, the pursuer employed a design sub-consultant, Ove Arup and Partners Ltd, to carry out various services for them.

Following difficulties with the project, on 8 June 2020 the parties entered into a Settlement Agreement to resolve the differences between them. Under this agreement, the pursuer would receive a sum in settlement of its claims against the defender and was relieved from its obligations to carry out further management or construction works, but was to remain responsible for such design, management and construction work as had already been carried out. It was also obliged to continue to secure the completion of particular design packages as set out in a part of the agreement referred to as the CDTC.

The Agreement envisaged that the pursuer might in certain circumstances continue to instruct Arup in connection with the completion of the overall design of the works over and above the CDTC and set out the basis upon which the defender would reimburse the pursuer for costs it might incur in doing so. After a settlement agreement was reached between Arup and the pursuer in connection with this further work, the pursuer sought £1,247,542 from the defender, the sum it considered the defender was due to reimburse to it.

Senior counsel for the defender submitted that it was apparent that the pursuer sued on the basis that it had a liability to Arup arising in relation to the claims for which reimbursement was sought. However, it did not offer to prove at what level it had settled these claims. Further, a large part of the pursuer’s claim was based on its construction of clause 7.8.4 of the Agreement, however the conditions for invoking that clause had not been met.

No such instructions

In his decision, Lord Sandison said of the argument of general irrelevance: “All that the pursuer has to aver in order to make out a relevant case of the kind which it advances is that a liability was incurred by it to Arup which was covered by the terms of clause 7.8, or that Arup required from it the payment of reasonable and verified fees for reviewing the accuracy of those drawings. That that liability and that requirement were subsumed into a greater settlement between the pursuer and Arup which did not attribute particular values to them is of no consequence, so long as the court can determine their value.”

He continued: “The remaining issue is the more complex one of the proper construction of clause 7.8.4 of the Settlement Agreement. An extensive analysis of that Agreement and the changes which it effected to the Construction Contract was undertaken in the course of the debate, but ultimately the resolution of the issue which divides the parties in this connection turns on the wording of section 7 of the Agreement alone, with its other parts providing little or no assistance in the question of its proper construction.”

Turning to the construction of the clause, Lord Sandison said: “One is ultimately left simply to ask what meaning the language of the contract would convey to the hypothetical reasonable reader seized of the relevant background circumstances. Such a reader would, in my view, appreciate that the commercial background did not much assist in the determination of the point in dispute, and indeed that little or nothing outside the terms of section 7 itself of the Settlement Agreement was useful in enabling a choice to be made between the competing contentions.”

He concluded: “The proper construction of section 7 is that the clause 7.8.4 indemnity upon which the pursuer relies necessarily came into operation if and only if the defender or the Project Manager issued instructions to the pursuer to operate or administer the Arup Existing Appointment so as to procure the performance by Arup of design work beyond completion of the CDTC. Since it is common ground that no such instructions were ever issued, the pursuer’s case based on clause 7.8.4 falls to be regarded as irrelevant.”

The case was thereafter put out by order to determine the precise averments to be refused probation.