MDA Law
Tees Esk & Wear Valleys NHS Foundation Trust v Three Valleys Healthcare Ltd & Anor (2018) EWHC 1659 (TCC) (29 June 2018)
Judge: Mrs Justice O’Farrell DBE
This case involved a dispute regarding a Project at Roseberry Park Hospital in Middlesbrough. The NHS Foundation Trust (“the Claimant”) sought an order as to the validity of notices, which it served pursuant to a Funders Direct Agreement (“FDA”), with the intention of terminating the Project Agreement.
On 12 December 2007, the Claimant entered into a special purpose vehicle agreement (“TVHL Agreement”) with Three Valleys Healthcare Limited (“First Defendant”), for the design and construction of the hospital and provision of operational services (“the Project Agreement”).
On 12 December 2007 the Claimant, the First Defendant and the Second Defendant entered into the FDA, in respect of the financing of the project. The FDA was attached as a schedule to the Project Agreement.
Disputes arose between the Claimant and the First Defendant in respect of the services provided by the First Defendant. In 2016, the Claimant obtained adjudication awards in its favour, allowing it to terminate the Project Agreement.
The FDA contained provisions that require the Claimant to give notice to the Second Defendant as a condition precedent in order to exercise its termination rights under the Project Agreement. On 1 June 2017, the Claimant served the termination notice on the Second Defendant under the FDA. The validity of the termination notice was not in dispute.
On 29 June 2017, the Claimant served its notice as per paragraph 3.2.2 on the Second Defendant, which included details of amounts allegedly owed to the Claimant by the First Defendant under the Project Agreement and other accrued liabilities or obligations on the part of the First Defendant.
Paragraph 3.2.2 of the FDA states:
”…containing details of any amount owed by Project Co to the Trust, and any other liabilities or obligations of Project Co of which the Trust is aware (having made proper enquiry) which are: (a) accrued and outstanding at the time of the Termination Notice; and/or (b) which will fall due on or prior to the end of the Required Period, under the Project Agreement.”
The Claimant’s case is that the notices served under the FDA were valid and therefore entitled it to terminate the Project Agreement. The Second Defendant argued the following: (a) the Claimant had failed to comply with its obligation under the paragraph 3.2.2 notice of the FDA; (b) that the notice was not sufficiently clear and unambiguous to constitute a valid notice; and (c) that there was no evidence that the Claimant made a proper enquiry as stipulated by the FDA.
Justice O’Farrell held the following:
- The purpose for which the Claimant is required to serve on the Second Defendant, prior written notice of its intention to terminate the Project Agreement, and written details of amounts owed and other liabilities and obligations on the part of Project, is to enable the funders to decide whether or not to exercise their step-in rights under the FDA;
- Paragraph 3.2.2 provides that: “The Trust shall not terminate … the Project Agreement … without giving … a notice …”. This functions as a condition precedent to the Claimant’s entitlement to terminate the Project Agreement;
- Therefore, as a condition precedent to termination under the Project Agreement, the Claimant must provide details in its paragraph 3.2.2 notice of:
- amounts owed, of which the Claimant is aware: which are accrued and outstanding at the time of the termination notice (para.3.2.2(a));
- amounts owed, of which the Claimant is aware, which will fall due on or prior to the end of the Required Period (para.3.2.2(b));
- other liabilities and obligations, of which the Claimant is aware, which are accrued and outstanding at the time of the Termination Notice (para.3.2.2(a)); and
- other liabilities and obligations, of which the Claimant is aware, which will fall due on or prior to the end of the Required Period (para.3.2.2(b)).
- Paragraph 3.2.2 does not impose an obligation on the Claimant to notify the Second Defendant of sums owed of which it is not aware. Furthermore, it is not required to provide quantum details of claims that do not give rise to an obligation to make payment or where the quantum has not yet been ascertained.
- The obligation on the Claimant to notify details of claims under paragraph 3.2.2 is limited to claims of which it is aware “having made proper enquiry”. This requires the Claimant to make proper enquiry but does not require it to provide evidence of such enquiry to the Second Defendant. There is no express provision imposing such an obligation and no room for the implication of such term.
- The paragraph 3.3.2 notice contains sufficient details to comply with the requirements of the FDA. The descriptions are sufficiently clear and unambiguous to enable the funders to understand the nature and basis of the claims.
- The Second Defendant’s case is rejected as the FDA draws a distinction between amounts owed, which must be quantified, and other liabilities and obligations, which do not have to be quantified.
In conclusion, the court granted the order as sought by the Claimant.
