Turning of the tide: Super litigation

Full-blown construction litigation in the courts or in arbitration is often criticised as slow, very expensive and Jarndyce-like. At the opposite extreme there is adjudication, which is quick, rough and often wrong. How refreshing, therefore, to come across a case in which the court process was quick, efficient, thorough, tailor-made for the situation and satisfyingly right in its outcome.

The case of Amec Group vs Universal Steels (Scotland) (March 2009) involved an application for a mandatory injunction. Universal had entered into a contract with Amec in 2007 to supply piles for the naval dockyard on the River Clyde. It also had to supply quality assurance documentation for those piles.

However, things started to go badly wrong with the contract. Universal experienced numerous problems with its manufacturing subcontractor in China and also with arrangements for shipping the piles to Scotland. As a result, delivery became more and more delayed and Amec decided to take over shipment of the piles. Universal claimed that it was owed £350,000 and Amec said it had a cross-claim of £500,000. Universal asserted that it had a commercial interest in retaining the quality assurance documentation and refused to hand it over until it was paid what it claimed. It looked like stalemate, with the prospect of full-blown litigation on the horizon.

There was only a small window in May 2009 when the piles could be installed in the Clyde, owing to the changing of tides. if that opportunity was lost, it would have to wait until October

In March 2009 Amec faced a real problem. There was only a small window in May 2009 during which the piles could be installed in the Clyde, owing to the changing of tides. If that opportunity was lost, it would have to wait until October. Furthermore, the Ministry of Defence would not allow the piles to be installed until it had inspected and approved the quality assurance documentation, and to catch the window for installation, the documentation had to be with the ministry by 1 April. It was essential that Amec got hold of it quickly, so it applied to Mr Justice Coulson for an interim mandatory injunction. On 2 March 2009 he made an ex parte order which resulted in the documents being put in the hands of Amec’s solicitors, on the condition that they would not be released to Amec until there had been a full hearing of the application. That took place on 11 March, with judgment given on 25 March.

There was a clear term in the contract stating that Universal would deliver the quality assurance documentation to Amec. However, Universal asserted in the proceedings, apparently for the first time, that during the contract the parties had agreed that the documentation would not be handed over until everything claimed by it had been paid. Whether or not such an agreement had been made was the central issue between the parties.

The guidelines that a court should follow in applications for interim injunctions are well established. They can be found in the cases referred to by the judge: American Cyanamid vs Ethicon (1975), Nottingham Building Society vs Eurodynamics Systems (1993) and NWL vs Woods (1979).

The judge was most unimpressed with Universal’s claim that Amec had agreed that the documentation need not be handed over until Universal had received all that it claimed

There was clearly a serious issue to be tried. On the evidence, the judge felt fairly confident that Amec would win it at trial. He was most unimpressed with Universal’s claim that Amec had agreed that the documentation need not be handed over until Universal had received all that it claimed. He was also satisfied that damages would not be an adequate remedy for Amec if the documents were not handed over, and it was later held that they should have been. They could not be obtained from any other company and, if the window was missed, Amec would suffer significant loss.

Universal was a small company without any substantial assets and it would not be able to make good that loss. On the other hand, if the injunction was granted but Universal later proved its right to retain the documents, it would be adequately compensated by an award of damages against Amec. The balance of convenience lay in granting the injunction so that the installation could proceed. Quick, sensible, and satisfactory.