Getting Termination Right: PBS Energo A.S. V Bester Generacion UK Limited & Anor [2020] EWHC 223 (TCC) And The FIDIC Silver Book

• Published date: 18 May 2020
• Author: Mr Jesse Way
• Subject Matter: Corporate/Commercial Law, Real Estate and Construction, Contracts and Commercial Law, Construction & Planning
• Law Firm: Fenwick Elliott LLP

Introduction

PBS Energo A.S. v Bester Generacion UK Limited is a case with a raft of issues which commonly arise on construction projects. However, the parties' entitlement to terminate was the central issue before the Court and will be the focus of this article. Terminating a contract is a risky business and, if it is not done correctly, it can have disastrous financial implications. This article will consider the PBS decision and discuss the 2017 FIDIC Silver Book ("Silver Book") provisions for termination by a Contractor for a failure to receive payment.

The project concerned was a biomass energy plant to be built in the north of Wales. Ultimately, the plant was never constructed and the case was concerned with the circumstances in which that happened. PBS, a company incorporated in the Czech Republic, specialises in the design and manufacture of power plant equipment. Bester, a UK subsidiary of a Spanish company, specialises in the provision of renewable energy projects. Unsurprisingly, the parties fell out and ended up in Court. PBS, the Contractor, claimed it was entitled to terminate because Bester, the Employer, failed to pay the fifth Milestone payment by the date required and substantially failed to fulfil its contractual obligations. Bester claimed it could terminate the contract because PBS had failed to comply with a Notice to Correct and PBS had abandoned the works or evinced an intention not to perform the contract.

In the end, the Court determined that PBS's basis for terminating the contract was without foundation. The Court held that Bester was entitled to terminate the contract and its reasons for reaching that finding are explained in more detail below.

Facts

On 29 April 2016, Bester contracted with Equitix ESI CHP (Wrexham) Limited ("Equitix") to design, construct, install and commission a biomass-fired energy generating plant and associated works, and later (by a separate contract) to operate the plant ("the Equitix Contract").

On 10 May 2016, PBS and Bester entered into a subcontract ("the Contract") for the engineering, procurement, construction and commissioning of a biomass-fired energy generating plant and associated works at Wrexham ("the Works"). The Contract price was approximately '14 million and the Contract was based on an amended form of the FIDIC Silver Book Conditions of Contract for EPC/Turnkey Projects.

The project commenced in May 2016 but the key programme dates were not met. Disputes arose and, by April 2017...