A dispute over a £38m upgrade to the Horsley Water Treatment Works in Northumberland led to a court appearance for the Joint Venture (JV) partners.
Water treatment plant specialist Doosan Enpure Limited had partnered with construction and support services business Interserve Construction Limited to deliver the upgrade. Their contract with Northumbrian Water allowed the financial risks of the project to be shared under a ‘pain/gain’ agreement. Northumbrian Water was to make monthly payments into the JV bank account, from which Doosan and Interserve would take payments to cover their work.
The agreement worked well until until concerns arose about delays and costs overruns. When Doosan projected delays of up to 34 weeks in completion, Interserve blocked payments out of the JV bank account – with Doosan owed over £5m.
In court Doosan argued that Interserve could not block payments without the unanimous agreement of both parties, but Interserve claimed that Doosan had already been paid more than it was owed under the pain/gain share arrangement.
The judge ruled that the JV agreement allowed each party to receive payment in accordance with its costs and that any adjustments for the pain/gain agreement should be made at the conclusion of the project. He ordered Interserve to pay Doosan £5.3m.
James Burgoyne of Brunel Professions said that it is quite unusual for disputes between JV partners to end up in court. “But this case demonstrates how important it is for JV parties to be clear about their responsibilities and the exact payment terms at the outset,” he added.
Categorised in: Construction/Property News
This post was written by James Burgoyne