A row between two members of a construction Joint Venture (JV) has been settled by the court with over £5m in delayed payments being handed over.

Construction and support services business Interserve Construction Limited had teamed up with water treatment plant specialist, Doosan Enpure Limited, to deliver a £38m upgrade to the Horsley Water Treatment Works in Northumberland.

The parties had entered a contract with Northumbrian Water which allowed the financial risks of the project to be shared between the employer and contractors 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.

All went well until concerns arose about costs overruns, with Doosan projecting delays of up to 34 weeks in completion.  Interserve blocked payments out of the JV bank account with Doosan owed over £5m.

The dispute went to court where Interserve argued that Doosan had already been paid more than it was owed under the pain/gain share arrangement.  Doosan countered that Interserve could not block payments without the unanimous agreement of both parties.

The judge concluded that the joint venture agreement set out that each party was entitled 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 ruled that Doosan should be paid £5.3m.

As is often the case, terms from the construction contract were carried over into the JV agreement and perhaps the detail of this had not been fully considered,” said James Burgoyne, Director – Claims & Technical, Brunel Professions.  “The case demonstrates how important it is for JV parties to be very clear about their responsibilities and the exact payment terms under their JV agreement.”

Reports of the case have been published by White & Case, Law Brief Update and Construction Enquirer.

Brunel provides a wide range of PII broking services to construction professionals.  Click here to find out more or call Jonathan Filer on +44 (0)117 325 0752.