As is well known, much of the cost and complexity of the initial phase of HS2 stems from the large amount of tunnelling which has to be done. The tunnels through central and greater London must also negotiate a spiders web of utilities, some of which can be avoided, and some of which have to be rerouted. Of course, none of this will come as news to the promoters and constructors of Crossrail/Elizabeth line which necessitated building deep tunnels wide enough to accommodate full size trains built to the full size (heavy rail) standard loading gauge. This in term came in the immediate wake of the opening of HS1 which required the construction of 12.5 miles of tunnels through central and south-east London.
Clearly, much detailed planning was necessary and very close cooperation with utility providers and agreements as to when it would be necessary to divert a utility and who should pay. One difficulty is that, with a project of this scale and complexity it is not possible to nail down all the details at the outset and, as construction gets underway, plans may need to be revised. This is the background to a rare contractual dispute between HS2 and a water utility regarding the necessity of diverting a water main and at whose expense: Affinity Water Ltd v High Speed 2 (HS2) Ltd [2024] EWHC 687 (TCC).
Background
The claimant had responsibility for maintaining a crucial watermain located near Rabournmead Drive in Ruislip; as a statutory water undertaker it had statutory duties to maintain the public water supply pursuant to section 37 of the Water Industry Act 1991. Due to concerns about the impact of tunnelling on the watermain and other infrastructure and the costs of diverting and so forth, Affinity lodged a petition against the Hybrid Bill necessary to furnish HS2 with the requisite powers to build the line. However, they agreed to withdrawer it in return for entering into a contractual agreement whereby HS2 would pay for diverting utilities where this was deemed necessary. The issue of how and when such works should be deemed ‘necessary’ proved to be at the heart of the case.
The agreement consisted of three separate but intersecting documents:-
- The Protective Provisions Agreement (PPA) setting out the main purposes and core obligations of the contract and the need to ensure that at all times Affinity Water was in a position to comply with the aforementioned duties to maintain the public water supply.
- The Asset Protection and Monitoring Agreement (APA) establishing a very detailed set of provisions for monitoring the impact of construction on key infrastructure and determining when works were necessary to protect the water supply.
- The Design Construction Agreement (DCA) which established the precise procedures for instigating and executing works deemed necessary under the APA.
In the litigation at hand a crucial document proved to Schedule 4 to the APA, which took the form of an Excel spreadsheet and listed works deemed necessary after an initial assessment of the route. The watermain in question was listed as requiring diversion (see para [31] of the judgment). As will be seen, the central issue was whether this list was ‘set in stone’ or whether it could be amended in the light of subsequent information and grounds surveys etc.
In September 2017, just a few months after the HS2 Bill had been enacted as the High Speed Rail (London – West Midlands) Act 2017, HS2 concluded that the watermain was not at risk (with the tunnels passing underneath the watermain) and that the works outlined in the schedule 4 spreadsheet were deemed not to be necessary; to this end it was annotated as ‘pass’ in order to indicate the outcome of the assessment. Affinity remained unconvinced. In May 2020 Affinity emailed HS2 setting out their concerns that, notwithstanding the 2017 assessment, they still regarded the asset as being ‘at risk.’ This was followed by a couple of years of toing and froing with both parties disagreeing as to the need for diversionary works. One of the experts whose opinion was sought, a Dr New, succinctly characterised the issue as a classic cost/benefit analysis involving a ‘difficult balance between the occurrence of a very unlikely event coupled with a very significant consequence.’ (see para [75])
Affinity devised a scheme to divert the main which became an increasingly pressing issue once tunnelling had commenced and the tunnel boring machines (TBMs) began making progress towards the site. HS2 maintained that the works were not necessary and did not accept that it would be liable to indemnify Affinity for undertaking such works under the terms of the agreement. As the TBMs drew nearer Affinity instigated legal proceedings seeking an injunction preventing the tunnelling within 100 metres of the main until diversionary works had been completed and a declaration to the effect that Affinity could proceed with the works and be indemnified by HS2 in respect of the costs.
The judgment
The first point to note is that Affinity sought a summary judgment; thus, in order to fend off the application, HS2 had to establish that it had a ‘real’ as opposed to merely a ‘fanciful’ prospect of success (see para [84]). Arguably, this set the bar very high for Affinity and, indeed, this appears to be borne out by the judgment.
Mrs Justice Cockerill accepted that matters were not as clear cut as Affinity had suggested and that some of the terms of the agreement had a distinctly provisional feel about them. For example, various provisions seemed to anticipate that ‘further design and analysis would be required before any substantive work was carried out.’ (see [96]). Furthermore, a need to conduct a settlement analysis before the start of tunnelling again suggested that the schedule of works set out in the spreadsheet might have to be revisited in the light of subsequent information. (see [99]). Moreover, there were numerous references to the project being a ‘work in progress’ indicating that the need for certain works or decisions as to how they should be designed would need to be reviewed on a regular basis. (see [100]). This was underscored by the fact that there were columns in the spreadsheet allowing for such modifications to be made. (see [101]).
Having said that, the Judge accepted that the spreadsheet surely had to be more than a ‘shopping list’ (see [102] from which it was possible to ‘pick and choose’ which works should be kept and which should be omitted or modified. Nevertheless, this had to be balanced against the degree of flexibility which had clearly been built into the agreement.
See [103]
Thus, there was a ‘realistically arguable case that there was no contractual obligation to divert the Main in the APA and/or the DCA.‘ (see [104]). She was fortified in this conclusion by the ‘factual matrix’ the key elements of which are set out in para [106]:-
- in 2017 no significant assessments had been carried out meaning that any agreements entered into were necessarily provisional.
- The agreement was intended to put in place a framework designed to protect the interests of both sides and provide a mechanism for agreeing what works were necessary.
- The long list of potential works needed to be placed into the context of the passage of the Hybrid Bill in 2017. HS2 wanted to ensure that it had the land and powers to carry out all necessary works including diversions of utilities. As a result, the plans annexed to the Bill identified more land than was actually needed in order to allow for works that might be needed. If a utility was not identified and no provision made for acquiring the specific land and access rights before the Bill was enacted, it would have been necessary to use the ‘land-take powers’ to acquire the land and wherewithal to undertake the works from scratch, which would have been a much more ‘time-consuming process.’ Thus, ‘There is evidence that for this reason, an “if in doubt, list” approach was taken. In the case of pipelines, HS2’s evidence suggests that was done by describing works that might be required as “divert”.’
In the light of these factors, Cockerill J had no doubt that HS2 had an arguable case and the matter could not be disposed of in a summary manner (see [110]).
Comment
The case shows the difficulty of putting in place contractual agreements before the start of construction when many uncertainties remained regarding what ground conditions would be encountered and where important design choices had yet to be made. The agreements which were put in place had to balance the need for some degree of certainty (needed for any legal agreement) against sufficient flexibility to enable modifications to be made as unknowns became known. However, in order to avoid a situation whereby the Schedule 4 spreadsheet was reduced to little more than a ‘shopping list’ of possible works from which it was possible to pick and choose which works were deemed necessary, it was important to have a built in and thorough and balanced review process in which both parties could fully engage. The judge accepted that the agreements were sufficiently robust in this respect.
Although Affinity did not succeed in having the case disposed of in a summary manner, it would have been open to them to proceed with the litigation, although they appear not to have done so as there do not appear to be any further reported courts proceedings. Moreover, the website of a contractor engaged by Affinity (Aliaxis) refers to the innovative techniques it used to undertake diversionary works resulting from ‘time constraints’ which might be a reference to the imminent arrival of the TBMs. Of course, it cannot be known whether or not the parties reached any form of settlement or deal behind the scenes after the reported proceedings. It should also be pointed out that other water mains owned and operated by Affinity also had to be diverted (see, for example, Shire Lane diversion undertaken by Barhale) but the contractual arrangements in these instances appear to have worked by smoothly in that litigation did not arise.