Murphy loses legal battle over delayed Beckton power plant

Aaron Morby 8 years ago

J Murphy & Sons has lost its fight in the High Court to stop the client of its East London power plant project calling an on-demand bond in respect of a claim for liquidated damages of £8.27m.

Client and contractor are at loggerheads about cost overuns
Client and contractor are at loggerheads about cost overuns

The ruling ahead of attempts to settle claims is the latest blow for the contractor on its fat-fired combined heat and power project in Beckton.

The project, which is now in protracted commissioning and testing, is running nearly 15 months late,  with a handover date still to be agreed by Murphy and client Beckton Energy.

Murphy first revealed the cost of problems on the power plant scheme five months ago when it blamed much of an £16m operating loss in 2014 on the extra cost of building the combined heat and power plant.

The contractor said difficulties with design, cost escalation, supply chain and engine related technical breakdowns all had major impacts on the project.

At the time Murphy said it was reviewing its entitlement for recovery of sums, but had stuck to its policy of booking losses as they emerged.

The £70m engineer, procure and construct contract was awarded following a competitive tender three years ago and was due to be handed over in January 2015.

In the High Court, Murphy had asked the judge to rule whether client Beckton Energy could make a demand on the bond in respect of its claim for liquidated damages before the project engineer had made a determination on the amount of LDs due.

During the case its emerged that Murphy disputes Beckton’s entitlement to any liquidated damages, and claims to have suffered significant delays on the project and requested extensions of time, in particular in August 2014, February 2015, September 2015, November 2015 and December 2015.

Beckton Energy claims that extensions were not granted by the engineer because Murphy had not demonstrated that any event or circumstances gave rise to a claim for extension of time or payment.

The judge ruled the details of the main dispute were not pertinent to contract terms at issue and in a set-back for Murphy ruled that Beckton Energy was entitled to call  the on demand bond under the contract.

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