ICI v Merit Merrell Technology

Posted on 28/07/2018 · Posted in Expert Witness, Financial Litigation

This case is interesting because it illustrates the importance of following contractual processes and procedures for interim payments under the contract. It is also of note because of the specific comments made about expert witnesses. The judge emphasised that it is of paramount importance that their evidence is impartial and that they, and the legal advisers who instruct them, follow the rules which govern expert evidence.

The case concerned the commissioning subsequent manufacture, construction and installation of steelworks at a new paint factory owned by the claimant company ICI, in the north of England. The defendant, Merit Merrell technology (‘MMT‘), is a specialist engineering piping manufacturer. The initial contract price, based on New Engineering Contract 3 (‘NEC3‘) terms, was for around £1.9m. However, by the time proceedings were commenced this sum had swelled considerably, and ICI had paid the defendant £20.9m.

Good judgment comes from experience, and a lot of that comes from bad judgment.”
Will Rogers

Before this trial commenced the parties had already been involved in no fewer than four adjudications concerning matters such as the production of certain documents, and various staged payments made under the contract. The particular matter at issue before the court in this case was the quality of the welding, whether it was defective and the particular methods used to test whether it was defective. A split trial of liability and quantum was ordered.

The relationship between the parties leading up to the trial had deteriorated considerably. The main cause of friction was the testing methods to be used under the contract to test that the steel had been welded properly. ICI insisted that the defendant (MMT) use radiography testing which is a more stringent, but more expensive, testing regime than other methods Further, experts from both sides were in agreement that possible defects in the weld could only be detected using radiography.

However, on examination of the post-tender meeting notes between the parties, it was noted that 10% dye penetration and visual inspection were to be used, and not radiography. The Judge was satisfied that the welding and inspection system established by MMT was approved by ICI, and its Project Manager, before any actual welding started. Mr. Justice Fraser stated that ICI’s insistence that radiography testing should be carried out was ‘wholly unarguable’ and that MMT could not be held to a higher standard in terms of quality of work than that which had already been agreed: to insist on this would be akin to re-writing the whole contract which had been agreed in 2013. This was despite the fact that the expressly agreed testing regime meant that it was not possible to detect all the different types of defect listed in the relevant British Standard. ICI tried to argue that MMT should be liable for all defects listed in that British Standard to no avail.

As the relationship between the parties had deteriorated prior to trial, ICI had ordered MMT from the site, citing defective workmanship in the welds and repudiatory breach of contract. The judge was critical of this action considering that the reason given was a foil to avoid paying MMT any more money, and was made for commercial reasons only. Although ICI had a contractual right to terminate, it had not been properly exercised by them. Indeed, he held ICI to be in repudiatory breach, a position which was accepted by MMT.

The question of overpayments (and their possible recovery) made by ICI to MMT was considered and the Judge held that these could in principle be recovered from MMT at the quantum trial. ICI had the right to recover any overpayments paid after interim applications, despite the fact that the contract had been terminated.

At the recent quantum trial before the same Judge, the role of expert witnesses came under some scrutiny and criticism. Quantum experts were called by both parties, and it was felt that they were, to some degree, partisan. It was a “matter of concern” that in a case worth £10m there should be “such a preponderance of partisan experts“. The English courts would never be a jurisdiction where partisan expert evidence is the norm, unlike some other jurisdictions. Experts, and their instructing legal advisers, must take ‘very careful note’ of the principles governing expert evidence. It is important that experts of the same discipline, regardless of who is instructing them, should have equal access to the same material. No expert witness should give evidence or opinion on material which has only been available to one side in a trial. And finally the Judge reiterated that it was a matter for the court, not the expert, to decide which version of facts they prefer- what to believe and what not to believe.

Link: Imperial Chemical Industries Ltd v Merit Merrell Technology Ltd [2018] EWHC 1577 (TCC) (21 June 2018)

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