| Date | 19 September 1996 |
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| Judgment | Keller Limited -v- Morrison/Bilfinger & Berger JV. 24 May 1996 |
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| The Issue | Defence of failure of consideration. |
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| Implication |
Failure of consideration may only operate as a defence to a claim for work done, if the work is of no or minimal value, or if there is a breach going to the root of the contract. |
printWhen work is carried out so poorly as to be of no value, it is often open to the other party to argue that there has been a total failure of consideration, in order to avoid payment. This, amongst other points, was raised by the defendants in the recent case of Keller -v- Morrison/Bilfinger & Berger JV. The JV was employed by British Railways Board, later Railtrack, to construct an under-bridge south of Bedford on the main line north from St Pancras. The new bridge was to accommodate the new Bedford southern by-pass. The bridge was to be constructed at a point where the railway ran across an embankment some two metres high and it was considered necessary to grout the embankment to ensure that it would be stable during excavations. Notwithstanding that the main contract, based upon ICE 5th Edition, was amended to provide for design by the main contractor, a general specification was incorporated into the documents which stated that the pressure grouting was to be carried out in one continuous operation until refusal or emergence of the grout from the surface of the soil. It also specified that grout was not permitted within the track ballast. The engineer, in addition, provided a method statement which in itself called for the subcontractor to prepare a comprehensive grouting method statement which was duly produced and approved by the engineer. In the event the grouting operations were generally unsuccessful. Of 120 holes grouted, grout surfaced from the ballast under the track in the case of 69. Various experts were called to give evidence: were the pressures too high, were the grout mixes inappropriate, were the monitoring instruments too crude? In the end the judge held that the combination of ineffective monitoring and insufficiently controlled pressure led to the excessive degree of breakout of grout into the track ballast. That constituted failure on the part of the subcontractor to carry out the works in a good and workmanlike manner, and thus the subcontractor was in breach of an implied term to this effect. The JV had had considerable difficulty with their client Railtrack. The existence of quantities of grout in the track ballast had apparently rendered it impossible for Railtrack quickly to rectify a twist fault in the track alignment and in consequence a 10 mile per hour emergency temporary speed restriction had been imposed. In consequence the JV had caused tests to be carried out on the embankment. Those tests showed an absence of grout in every sample. Indeed when subsequently the embankment was being excavated, daily visual inspections and sampling of the soil confirmed that little or no grout was present. Firstly, the JV claimed damages representing the cost of the additional testing of the embankment together with the cost of delay arising out of the time that those tests took. The judge held that none of this was recoverable. He considered that the JV's testing of the embankment for grout was totally unnecessary. The speed restrictions and suspension order issued by Railtrack was a consequence of contamination of the ballast by grout and not due to insufficient grouting of the embankment itself. As a separate platform for their argument, the JV also submitted that the subcontractor had not effectively grouted the embankment as there was no or minimal grout in the embankment. Accordingly they contended that they were not bound to pay for the grouting since there was a total failure of consideration. It was agreed that a total failure of consideration would occur when the works were of no value or of minimal value or, alternatively, if the breach of contract went to the root of the obligation under the subcontract. The judge commented that this was of course a self-contradictory position for the JV to argue. On the one hand they suggested that there was a negligible quantity of grout in the embankment; on the other they complained of track-heave caused by the grouting. Counsel for the JV tried to wriggle out of this by saying that there was so little grouting in the right place that the works had no significant value. He added that causing heave of the track was not the way to do the job and accordingly this breach would go to the root of the contract. His Honour Judge Richard Havery QC was not impressed. He said that when there was a breakout of grout into the track ballast it was manifest that not all of the grout could have broken out. Notwithstanding the testing, a certain amount of grout must have remained in the embankment. Accordingly he rejected the defence of failure of consideration. Therefore the JV would be obliged to pay for the grouting works by the subcontractor. Against this of course they would be able to set-off their counterclaim for damages for breach of contract arising from contamination of the ballast with grout, insofar as they could establish a direct loss flowing from this problem.
CJ-9631
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