Assignment – accrued and future rights

Energy Works (Hull) Ltd v MW High Tech Projects UK Ltd and OUTOTEC (USA) INC [2020] EWHC 2537 (TCC) concerned a power plant. The main contract was an amended IChemE Red Book 5th edition, 2013 and the subcontract an amended IChemE Yellow Book 4th edition, 2013. The main contract was terminated by the Employer (EWHL) and the subcontract was assigned to EWHL. All well and good, until EWHL commenced proceedings against the contractor (MW) for damages estimated to be in the sum of £133m for the costs of rectifying defects, delay damages and additional costs. MW disputed the claim and pursued a counterclaim against EWHL. MW sought to claim against the subcontractor (O) in respect of sums claimed by EWHL.

The Court had to decide preliminary issues as to the effect of the assignment from O to EWHL and whether MW could pursue its claims against O as direct claims under the sub-contract or under the Civil Liability (Contribution) Act 1978 (CLA).

O’Farrell J held that the effect of the assignment was to assign not only future rights but also MW’s accrued rights against O. MW was not without a remedy; it could pursue O, by contribution proceedings under the (CLA).

The Judge observed: “It would have been possible for MW and O to have limited the rights that could be assigned to EWHL. However, they did not do so. There is no careful drafting in the Main Contract or Sub-Contract, or in a bespoke assignment notice or deed, setting out the parties’ intention to divide the accrued and future rights under the Sub-Contract as between MW and EWHL”.

It is perhaps rare for major power plant contracts to be terminated. Where they are, the parties may have to react under considerable time and financial pressures to get work flowing again. It is understandable that accrued rights were not reserved to MW, and the Court refused to intervene to restore a contractual link between MW and O. Fortunately the CLA provided a route for MW to pursue its claim. However, the CLA provides that “any person liable in respect of any damage suffered by another person may recover contribution from any other person liable in respect of the same damage (whether jointly with him or otherwise)”. The Court analysed the various claims by EWHL against MW and decided that some of the MW claims against O were not for the same category of damage and so could not be pursued under the CLA or by MW under the sub-contract.

This was a case on preliminary issues and contains some helpful concluding comments about considerations relevant to applying for hearing of preliminary issues.

A link to the full judgment can be found here.

For advice concerning construction contracts and construction issues, please contact Jan Grimshaw on 07702 846850 or Sean Randall on 07984 979349.

Kerry Dyer, Trainee Solicitor.

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