In 2018, HHJ Godsmark considered a claim made by Balfour Beatty Mott MacDonald (BBMM), then National Highways Area 10 contractor, against an insurer whose driver caused damage to the Strategic Road Network (SRN). The insurer challenged BBMM’s pricing; it appeared the rates were excessive. BBMM was charging Third-Parties using CECA rates but, for the same work, billing National Highways using much lower figures; BBMM had ‘AGREED rates‘ with the Authority for repairs where the total is over £10,000’ (line 15 of the judgment).
However, BBMM informed a Court the ‘agreed’ charges to bill National Highways were not an appropriate set of rates with which to bill drivers, fleets, hauliers or their insures (Third Parties) following damage caused by collisions, spills or fires because the pricing was SUBSIDIZED. The Judge accepted this explanation and the figures stood. But hang on … armed with the rates and understanding how they were subsidised, the ‘true’ figures could be determined.
- CMA asked the Authority how the subsidy was applied; in possession of the equation, we could reverse engineer the figures.
- National Highways replied: there is NO subsidy
It appears the amounts BBMM bill National Highways are an alternative measure, that the Court was misled by BBMM who have subsequently presented the judgement in disputed matters to secure payment of far higher sums.
It may help to understand why BBMM would be billing the Authority and Third-Parties separately; there is a ‘threshold’, akin to an insurance policy ‘excess’, below which BBMM were not paid by National Highways:
- Where the estimated cost of repair is above £10,000 (“above-threshold”), BBMM charges National Highways for the repair who may then itself seek to recover costs from the Third-Party.
- But below £10,000, BBMM contractually agreed not to bill the Authority but to pursue the negligent Third-Party themselves.
The judgement (which can be read here) conveys the desire to find some other schedule of rates, something different to CECA, with which to recalculate the claim. But no one could suggest anything else (line 33 of the Judgement).
But what of the rates BBMM charged National Highways for the same people, plant and materials undertaking the same works (repair of the SRN) above threshold; surely these were a perfect alternative and could supplant CECA? Not according to BBMM’s witness:
- BBMM do have agreed rates with the Authority for repairs (lines 15, 29 & 62) BUT …
- they were ‘subsidised by the lump sum paid under the agreement’ (line 30, 32, 33 & 62), they are ‘discounted’ (lines 31) and therefore artificial (line 32 & 33)
The Judgement concluded:
‘I hope that this judgment resolves a number of contentious issues in this type of claim which should enable claims to be presented and settled at minimal cost. Subject to any appeal,
I would expect the conclusions here to carry some weight with District Judges in at least Nottinghamshire, Derbyshire and Lincolnshire.’
Third-Parties were stuck with CECA because no one suggested to the Judge any third method of calculating repair costs (line 62).
But what of the elephant in the room? If the rates are indeed subsidised, as above, understanding the subsidy we could reverse engineer the figures BUT … we have addressed this; there was no subsidy! Accordingly, the rates used to bill National Highways appeared to be the perfect fit … we asked to be provided them. We then learned of a further contradiction:
- there were NO AGREED RATES between BBMM and the Authority – contrary to the Judgment (line 15)
Our attempts to obtain the figures BBMM used when billing National Highways, we were the subject of further contradictions and semantics, for example, the ‘RATES’ we were seeking were actually ‘COSTS’ and therefore our request for information was flawed. Really? Authority staff use ‘RATES’ and ‘COSTS’ synonymously! The issue is soon to be before an Information Tribunal and for those with an interest or possibly some of the 100-odd outstanding Area 10 claims (the contract concluded 04/2019):