200505 IR Compliance with & Cessation of Appendix A to Annex 23

05/05/2020: To Highways England Request for Internal Review Your ref: FOI 101027

On 16/03/2020, Highways England’s General Counsel’s Office wrote:

‘Please note that these provisions ( Appendix A, Annex 23)  Kier Highways now price unscheduled damage claims using a fixed schedule of charges, derived from first principles using the Construction Industry Joint Council (CIJC) Working Rule Agreement and Civil Engineering Contractors Association (CECA) Schedules of Equipment Rates. These are both nationally recognised standards.’  Read more here.

Request & Response to assist the Internal Review of questions 1 to 9 inclusive, seeking information about this development:


  • Q1. between you and your contractors, relating to the amendment to the contract

A1. This information is legally privileged, and we are therefore refusing this part of your request in accordance with Section 42 of FOIA.

a) To what information are you referring? I anticipate there would be substantial exchanges between you and your contractors prior to the involvement of any correspondence covered (potentially) by ‘privilege’; concerns/questions being exchanged, meetings, emails etc. 
b) The signatories are Highways England Company Limited & Kier Highways Limited
c) To what type of privilege are you referring and
d) how is this engaged?
e) please provide all information not subject to such privilege. 

Th request extends to the above.


  • Q2. the new contractual terms which apply to such claims and the agreed variations of such Contracts

A2. The deeds of variation to the Asset Support Contracts (ASCs) for Area 3 and Area 9, as agreed
and executed, are attached. (Deed of Variation – Area 3 Deed of Variation – Area 9)

a) No agreement appears to be in place for Areas 6 & 8 yet we understand this Area’s contracts (ASC) is based upon Area 9 and includes Appendix A to Annex 23. Please explain the position regarding same and why it appears to have been excluded. 


  • Q3. why it was decided that appendix A should be varied

A3.I can confirm, in accordance with Section 1(1)(a) of FOIA, that we do not hold this information.

a) This is illogical.  Someone made the first approached, discussed the issue and began to progress it. 

A3 Cont’d. However, I can offer an explanation of the reasons for this decision. Kier Highways Ltd are the contractor under the ASCs for both Area 3 and Area 9. The two contracts contained differing
contractual provisions and both parties felt it necessary to take steps to bring the contracts into
alignment. The deeds of variation achieve this.

The process provided an opportunity to ensure that both contracts reflected the legal basis for the
recovery of damages as confirmed by the Court of Appeal in the case of Coles v Hetherton.

b) to what differences are you referring.

c) There must exist an exchange; someone thought to make the amendments after years of operation, discovered and reacted to ‘two contracts containing differing contractual provisions’

d) The variation appears unnecessary; Kier has never complied with the contact provision Appendix A to Annex 23 and you have not enforced it since the contract inception in Area 9, 01/07/2014. The information sought and to be provided will address:

i. the need for the change
ii. why the change occurred in the manner described i.e. why the Appendix A process was not applied to both contracts

e) your response regarding Coles is not understood. ‘Coles’ acknowledged a reasonable difference, of about 25%. Area 9 sees an uplift of 25.29%, it is not at odds with Coles.

f) Your response regarding ‘Hughes’ is not understood, please explain. ‘Hughes’ is clear:

i. It would be odd if a tortfeasor was liable to Highways England for diminution in value of a damaged chattel in one sum if sued by Highways England itself and in a different sum if sued by Highways England via BBMM (a contractor)

g) Your conduct is the antithesis of Hughes. Your conduct results in the situation being ‘odd’ and means:

i. A Third Party is liable to Highways England for diminution in value of a damaged chattel in one sum if sued by Highways England itself and
ii. in a different (substantially higher) sum if sued by Highways England via BBMM

h) the information provided does not explain how the new process satisfies the above aspect of the judgement you have cited. Please address this.

i) I also anticipate all information that addresses the various proposals considered, to include that adopted and why, given I have been raising issues about the charging methodology since late 2015 and you have been aware of Appendix A non-compliance, no action was taken previously

j) the withholding of the information at ‘2’ above does not enable me to make informed comment, to understand the extent of the variation.

k) Please provide ALL variations, not just the deed applying to the use of Appendix A.

l) I anticipate the information will also address why the variation was backdated to 07/01/2019 i.e. why this specific date.


  • Q4. the basis upon which the amendments were made; on whose instigation the discussions, exchanges and considerations and how it can be said Appendix A to Annex 23 no longer applies

A4. I consider your request for the exchanges and considerations concerning amendments to be a
repeat of the request made at point 1. As mentioned, these are legally privileged, and we are
withholding this information in accordance with Section 42 FOIA.

a) The request is more akin to Q3. Information will be held.
b) The signatories are Highways England Company Limited & Kier Highways Limited
c) To what type of privilege are you referring and
d) how is this engaged?
e) please provide all information not subject to such privilege

A4 cont’d.With regards to the remainder of your request under point 4, I can confirm, in accordance with Section 1(1)(a) of FOIA, that we do not hold this information, but I am able to offer an explanation on our reasoning for these amendments.

As referred to above, the case of Coles v Hetherton confirmed the legal basis for recovery of
damages and the amendments were made with these provisions in mind. The case established that a Claimant is entitled to recover the diminution in value of the chattel that has been caused by the negligence of a tortfeasor. It was stated the diminution in value of the chattel or reasonable cost of repair will always be a question of fact for the trial judge to determine if it is in dispute.
A copy of the judgement is attached for reference. This approach and the use of national standards as an approach to establish reasonable costs was subsequently followed in the case of Highways England v Peter Michael Hughes.

a) You are selective in your citing the Judgements and your statements are not pertinent to my request but appear to be an excuse to present information intended to deter challenging your actions or those of contractors in your name.

b) You avoid reference to ‘reasonable’ and the percentage uplift associated with the judgement; akin to that in Area 9 if utilising the prescribed process in Appendix A.

A4 cont’d. Appendix A to Annex 23 no longer applies in Area 9 ASC because it was removed by a deed of variation which was properly agreed to and executed by the parties.

a) Please explain and demonstrate ‘properly’ agreed; an agreement necessarily required someone raising the issue, discussion, consideration likely amendments until the final document was agreed upon. I await all information

b) The above logically contradicts your ‘not held’ responses.


  • Q5. relating to your belief and that of your contractor that the new provisions can be forced upon
    Insurers

A5. I can confirm, in accordance with Section 1(1)(a) of FOIA, that we do not hold this information, but I am able to offer an explanation of our position.

The parties to the contract are Highways England Company Limited and Kier Highways Limited.
No insurance company is party to the contract and none of the agreed terms of the contract are
binding upon them. If an insurer wishes to dispute liability or quantum on a claim, then they are
entitled to do so and have recourse through the Courts should the matter be incapable of resolution.

a) I anticipate the amendment and/or reply would

i. include consultation with insurers and refer you to https://highwaysengland.co.uk/thirdpartyclaims/

ii. explain how the process supersedes the NSoRC i.e. results in a more fair, reasonable set of rates. Highways England having spent months compiling the NSoRC, in respect of which I still await information

b) Successful implementation of a Schedule could only be achieved through consensus with insurance companies, and a recognition that the repair costs were reasonable and supported through good evidence of damage. The FoIA response would detail how the costs are considered ‘reasonable’. In this case, more realistic than the NSoRC to which your CEO and General Counsel referred to as reasonable.

As stated in the Court of Appeal it will then be for the Court to determine the correct measure of diminution in value or the reasonable cost of repair. An insurer will be bound by a Judgement of the Court.

c) Highways England appear to believe it is only insurers who are bound by the Court. You continue to issue proceedings based on exaggerated, non-contract compliant processes and selectively cite judgements.

i. With regard to Hughes, as an example, the 10% uplift was excluded but still you add this to claims.


  • Q6. about the change in pricing to Highways England as a result of this change: are Highways England subject to the same process and if so, why this was agreed, if not, why does this not apply to your Authority.

A6. I can confirm, in accordance with Section 1(1)(a) of FOIA, that we do not hold this information,
but I am able to offer an explanation of the position.

a) Please explain your Authority not holding this information. It is a closed question that requires a ‘yes’ or ‘no’ answer. Either you are subject to the deed and new rates or you are not.

b) The pre-deed position was simple; HE and TP were to be charged the same base rate (defined costs) a.k.a. ‘actual cost’. To this was to be added an uplift; in Area 9 about 25.29% to a TP and about 7.4% to HE.

c) 01/2019 you apparently discovered there was no schedule of base rates, though we [possess much of the information, as do you and your contractors.

A6 cont’d. These changes apply to below threshold damage repair claims. There have been no changes for
above threshold claims. As previously explained at considerable length, Highways England seek
to recover most of its actual cost of repairs from negligent parties. Highways England are subject
to the same legal tests as any other Claimant when pursuing a claim for damages.

a) As requested, at considerable length; please supply the ‘actual costs’ you state you are subject to.

b) That you are subject to the same legal tests your response should explain how you can satisfy the findings of HE vs. Hughes, a judgement you have cited and therefore considered:

i. Why is a defendant subject to one sum if sued by Highways England itself and in a different (substantially higher) sum if sued by Highways England via Kier?

c) You are NOT subject to the new process. You have retained the lower ‘actual cost’ process and instigated a higher charging schedule for below threshold matters; assisted or encouraged a monopoly contractor to apply higher rates to Third Parties than they do when billing yourselves for the same works.

d) You do not explain how the process addresses an issue, namely ‘The contractual arrangements between Highways England and its service providers, often containing separate regimes for claims above and below a £10,000 threshold, and different pricing methodologies, have led to varying labour and equipment rates and therefore significantly different repair costs being applied to similar repairs. Understandably, this has led to disputes over the reasonableness of individual claims (often of relatively low value), delays and under-recovery.’

e) Noting you have taken time to consider the issue of rates and (01/2019) apparently having discovered the lack of a schedule agreed with your contractor, please confirm:

i. You have now agreed a schedule of rates with the contractor and
ii. Supply same and
iii. Provide the schedule to be used by Kier Highways

f) If you did not take the opportunity to agree a schedule of rates, noting this was said to have been overlooked in every post 2012 ASC (contract) please explain why a schedule was not agreed, save for sub-threshold claims i.e. why you have ‘authorised’ your contractor to substantially increase their rates whilst keeping yours to a minimum(cost).

g) Additionally, please explain your consideration of this conduct in relation to the Judgement you cite, Highways England v Peter Michael Hughes from which the following, pertinent information, is taken:

You state that the cases before Cardiff County Court have been priced using the procedure set at Appendix A to Annex 23.


  • Q7. I am seeking all information in support of your statement; the information you have received,the enquiries you have made, to confirm this stated compliance and
  • Q8. Why you believe the Appendix A process of ‘defined cost’ (£) plus ‘TPCO’ (percentage uplift) has been engaged, how you have identified this and

A7&8. I can confirm, in accordance with Section 1(1)(a) of FOIA, that we do not hold this information.

a) Why is this information not held?

b) Alex Bingham has stated the cases before Cardiff County Court have been priced using the procedure set at Appendix A to Annex 23. How has this statement been verified, where is the evidence of this?

c) Since late 2015 I have been raising the issue of costs and since 01/2017, when Appendix A (which you kept secret) was discovered, I have questioned and submitting allegations about non-compliance with the contract.

d) To date, Kier have never complied with Appendix A to Annex 23. It therefore appears odd that you and they would reword the contract, that they may actually comply with same. I expect the disclosed information to address this anomaly, to deal with the history of the agreement.

e) Mr Bingham’s statements are incorrect. Yet he has categorically stated the charges are contract compliant. On what basis, by reference to what information?


  • Q9. From what date Appendix A to Annex 23 was in force in each Area and on what date it ceased to be in effect.

A9. Appendix A to Annex 23 was not part of Area 3 ASC. Appendix A to Annex 23 in Area 9 ASC
ceased to have effect from 7th January 2019.

a) Appendix A may not have been part of the Area 3 ASC but Kier applied the process to Area 9 and all other Areas it managed, to include TfL. This claim has bene presented to Courts in conjunction with compliance with the use of actual (defined) cost plus uplift percentage. However, the process was not complied with, Third Parties and the Courts were deceived.

b) There are currently matters before Cardiff Court, stayed, that should be priced in accordance with Appendix A but which are not. I await the explanation for the date of effect being 07/01/2019.

c) Please confirm all S. Wales and outstanding matters will be priced in accordance with Appendix A to Annex 23.