A legal battle over a seven-year highways maintenance contract between Amey and Cumbria County Council has resulted in Amey being award £5.3M by the High Court.
The case involved claims and counterclaims over the contract that started on 1 April 2005. The court judgement issued last week documents a key date of 2008 when Cumbria carried out a review of the service.
According to the judgement, this review was “prompted, it appears, by a perception of widespread dissatisfaction with the state of Cumbria’s roads”. It resulted in the decision to bring the services back in-house when the contract expired in 2012, despite Amey offering “significant” price cuts to get a contract extension.
“From 2009 onwards the relationship between Amey and Cumbria had steadily deteriorated, so that by the time the contract expired a number of claims and counterclaims had already been intimated, with Cumbria making substantial deductions from Amey’s final monthly payment applications, and with both parties actively preparing to pursue claims against the other under the final account process,” said the judgement.
Cumbria County Council said Amey was paid £272M throughout the lifetime of the contract, but Amey said the Council owed it money for the work covering more than 1,000km of roads. Amey’s work under the contract included maintaining the roads throughout winter including 11,000 salt stores, minimising environmental impact by installing rain filters and stores and managing and improving 28,000 street lights.
A statement from Amey said: “Amey worked with Cumbria Council for almost a decade and we are proud to have served the county for this time delivering high quality highways services.
“In 2013, when the contract concluded, there were a few items to be closed out. These are now concluded and we welcome the decision of the court.”
A statement from Cumbria County Council said: “The council held money back from Amey’s final payment. The council did this because of what it firmly believed were issues of poor performance and overcharging.
“During the final phase of the contract evidence showed poor performance by Amey and the judgment notes ‘poor workmanship’ on highway patching. This was obviously unacceptable to the council and to the Cumbrian tax payer.
“The final figure as agreed by the judge will now be paid to Amey from the council’s reserves using monies originally held back to cover any final settlement due to Amey as a result of the dispute.”
Amey was represented by law firm Pinsent Masons. Its construction disputes expert John Williams said: “There is a lot to take from this very long judgment. It serves as a cautionary tale for employers considering whether to withhold or deduct sums from a contractor prior to it having established and tested the robustness of what is said to form the basis for the deduction.
“But perhaps the most interesting part of this judgment can be found in the Court’s commentary on the County Council’s use of statistical sampling and extrapolation for the purposes of converting what was, on one level, a fairly standard and modest defects counterclaim into a very significant claim.
“The County Council’s objective was simple: it wanted to be able to claim substantial damages based on a review of a relatively small sample of alleged defects by extrapolating the results of that review over a much larger population. For that reason, for organisations who are party to term maintenance contracts, where there is often a high volume of repeat work, this Judgment could make worthwhile reading.”
The Council is now considering whether to appeal.