Person Marking contractual variation With Red Marker

The risk of ambiguities or conflicting provisions through contractual variation was thrown in to the spotlight recently.

Contractual variation

The recent case of Surrey County Council (“Surrey CC”) v Suez Recycling and Recovery Surrey Limited (“Suez”) contains an interesting commentary on contractual variation and the approach that the Court will take if there is a conflict and/or ambiguity between the original contract and subsequent documents purporting to vary the contract.

The project agreement

Surrey CC engaged Suez to manage its domestic waste disposal obligations. A project agreement was put in place for work to be undertaken in respect of two mass burn energy-from-waste facilities (“the Project Agreement”). The primary dispute resolution procedure in the Project Agreement was an arbitration clause.

Ultimately, the energy-from-waste plants were never actually constructed due to issues with planning. The parties entered into various deeds of variation (“the Deeds”) to change the focus of the project from the energy-from-waste plants to the construction of an EcoPark.

The Deeds did not make any material amendments to the original arbitration clause in the Project Agreement. However, the Deeds did provide that the Courts would have exclusive jurisdiction in relation to any claims or disputes arising.

A dispute subsequently arose between Surrey CC and Suez about the significant delays in the construction of the EcoPark project and other matters. Surrey CC sent a Pre-Action Protocol Letter of Claim to Suez setting out their allegations. In response, Suez claimed that Surrey CC was required to follow the arbitration procedure and could not issue a claim in the Civil Courts.

The legal issue

Proceedings were issued and the key issue for the Court to consider was whether the disputes relating to the EcoPark were subject to the arbitration clause in the Project Agreement.

Decision by the Court

The Judge found in favour of Suez on a number of the issues. The Judge took the view that:-

  1. The Project Agreement was the “master document” and the deeds were supplemental to this. Accordingly, it was more likely that parties intended to retain the dispute resolution procedure set out in the Project Agreement.
  2. Arbitration clauses should be interpreted broadly and therefore the Judge had no issue in finding the clause encompassed the EcoPark project
  3. The sensible interpretation of the documentation was that all disputes arising under the Project Agreement and any variations to the Project Agreement should be determined in the same forum
  4. The reference to the Court in the Deeds was in respect of court intervention, for example, to enable the Court to supervise any arbitration process rather than giving the parties a right to resolve a dispute by way of Court proceedings.

Learning from this case

This case highlights the risk of ambiguities or conflicting provisions when a contract is varied. When you are looking to vary a contract it is important that the original contract is carefully reviewed. If it is intended that a particular clause should be superseded by a subsequent variation, this should be set out expressly in the deed of variation to avoid any confusion arising.

For more information on the implications of contractual variation, or if you require any assistance in this area, please do not hesitate to get in contact with our Commercial Dispute Resolution Team.