VAN OORD UK LTD v DRAGADOS UK LTD

[2021] CSIH 50, Inner House of the Court of Session, Lord President Carloway, Lord Menzies and Lord Woolman, 5 October 2021

New Engineering Contract – Reduction in rate payable to contractor – Spirit of mutual trust and confidence

The parties entered into a subcontract under which the defender, Dragados UK Ltd, sub-contracted aspects of a project for the design, management and construction of the Aberdeen Harbour Expansion Scheme, to the pursuer, Van Oord UK Ltd. The subcontract was based on the third revision of the New Engineering Contract. During the course of the subcontract, the defender transferred approximately one third of the dredging works to two other companies and it informed the pursuer that it intended to reduce the sum to be paid to the pursuer in respect of the work which remained to be done under the “compensation event” provisions of the subcontract. The pursuer unsuccessfully challenged the validity of the reduction in payment at first instance but appealed to the Inner House of the Court of Session where its appeal was successful.