England and Wales High Court (Technology and Construction Court) Decisions

12. The arbitrator's reasons were appended to the award. They included the following paragraphs (the original numbering of the footnotes has been retained):

The Reply (8/47):

....

149 The nature of a "price" and the Rule 1 analysis

....

13. The arbitrator considered that Boot were entitled to be paid upon a fair valuation, (ie under Rule 3) and awarded Boot £74,460.83 for work in the area of HRSG and £500,474.59 for work for the Cooling Towers, ie a total of £574,935.42.

14. Boot appeals against these decisions since it maintains that the arbitrator erred in law in his reasoning that for the purposes of the first limb of clause 52(1)(b) (ie Rule 2) it was not reasonable to use the price of £250,880 as the basis for a valuation because it was a mistaken or flawed price in which there could be no confidence and that for that reason, and for other reasons, it was not possible to arrive at a rate which could be applied to the work which fell to be valued under clause 52(1)(b) (Rule 2) whether via clause 55 or via clause 51. In its Notice of Motion Boot sought opinions on the question of law as to whether the word "reasonable" in clause 52(1)(b) had been properly interpreted by the arbitrator and as to whether he had erred in that respect and in other matters. I considered that one question of law covered all the grounds in Boot's application for which leave should be granted. It was:

15. Mr Stephen Furst QC, for Boot, submitted that the arbitrator had wrongly interpreted "reasonable" in clause 52(1)(b). The contract was a remeasurement contract since the contractor was to be paid for the actual quantities of work executed by it applying the rates and prices inserted in the bill of quantities. By clause 11(3) of the ICE Conditions Boot was deemed to have satisfied itself as to the correctness and sufficiency of the rates and prices inserted in the Bill of Quantities and those rates and prices could not be altered even if it could be shown that the contractor had made "errors omissions or wrong estimates in the descriptions rates and prices inserted by the Contractor in the Bill of Quantities" (see clause 55(2)). Mr Furst submitted that if therefore by reason of a mistake a rate or price inserted in the Bill was too high the contractor was nevertheless entitled to be paid at that rate, even where the quantity of work actually carried out was greater than set out in the Bill of Quantities (unless the rate could be adjusted under clause 56(2)). However, an adjustment could not be made under clause 56(2) unless the increase in quantities in itself rendered an adjustment appropriate and in that event the adjustment was to be made only to the extent that the rate was thereby (ie in consequence of the decrease or increase in quantities) rendered "unreasonable" or "inapplicable". Mr Furst therefore argued that the reasonableness of applicability of the rate for the purposes of clause 52(1)(b) was to be gauged strictly by reference to the work carried out and not by reference to extraneous considerations such as how a rate or price was arrived at and whether it was too high or too low.

16. Accordingly, Mr Furst contended that since under clause 52(1)(a) the Engineer had no discretion, and the contractor had to be paid the applicable rate or price, however it might have been arrived at, the same approach should apply under clause 52(1)(b). The principle of valuation in this sub-clause (Rule 2) covered the situation where for some reason there was not a sufficient similarity of the character of the work or it was not executed under sufficiently similar conditions to justify retention of the original contractual rate or price. In that event, the rate or price was to be used as the basis of valuation to the extent that it might be "reasonable" to do so, ie to the extent that the relevant rates or prices in the Bill of Quantities properly related to the varied work or could properly be used as a basis of valuation. If on comparing the work described in the Bill with the varied work it was not possible to continue to use the price in the bill because the difference was so marked then a fair valuation might be made. On the other hand, if the work itself was not so greatly altered then a valuation had to be made on the basis of the contract rate or price. In summary both the Contractor and the Employer were "stuck" with the price or rate in the Bill for the measurement for the works and neither the Engineer nor the arbitrator was permitted to "look behind" a rate or price in order to discover how it was made up or to ascertain whether it was a fair and reasonable to apply the rate or price to the work or to the varied work. The arbitrator therefore had not adopted the correct approach in determining whether it was reasonable to use the price of which Boot was taken to have inserted in the Bill. Further, if GECA's case were correct, as upheld by the arbitrator, then it would enable either party to avoid the consequences of a contractual rate or price simply on the pretext that there was not a sufficient similarity in the varied work for the purposes of Rule 1. The result would be effectively to merge Rules 2 and 3. If Rule 2 could only be applied where the rate or price was in itself "reasonable" then that effectively meant that the exercise to be conducted was what would be fair, ie the principle required by Rule 3. If Rule 2 were to be extended so as to require an Engineer to investigate whether it was "reasonable" to apply a rate or price it would be necessary for the Engineer to investigate the relevant rates or price, to call for the tender make-up and to enter into discussions as to whether or not the contractor had priced that rate or price accordingly or whether indeed even if the rate or price was found to have been miscalculated whether or not some other rate or price elsewhere in the Bill might have either intentionally or unintentionally redressed the disparity.

17. In addition, Mr Furst submitted that the arbitrator was also wrong in deciding that it was not reasonable to use a price to obtain a rate or rates without knowing precisely how the price was made up. A rate of £88.93 per m2 was easily derived from the price and to use it as the basis of a valuation would not be a "mingling of methods" (as described in paragraph 156 of the reasons). A valuation did not require further detailed information.

18. Mr Roger ter Haar QC, for GECA, submitted that the arbitrator had construed clause 51(1)(b) correctly. In paragraph 152 of the award he had said that it would not be reasonable to use a contract rate or price unless there was confidence in the nature of the valuation to do so. That lack of confidence was set out in paragraphs 155 to 156 of the award by the process to obtain a rate per m2, bearing in mind that the change from excavation in open cut (as envisaged for 4.45 AOD) to the use of sheet piling (for the new level) could produce additional factors which need to be taken into account in arriving at the valuation, especially where, as here, the price of £250,880 was for in the nature of an extra over item, ie for the additional or different work beyond the excavation which would in any event would have had to have been carried out, and for which provision was already made in the Bill of Quantities. The arbitrator was making a valuation which was ultimately a question of fact. The circumstances were unusual as they stemmed from the exchange of faxes and led to the creation of a figure for the cost of temporary work which would usually be included in the rates for pipelaying. Item C2 in Class I of the Civil Engineering Standard Method of Measurement (CESMM) provides:

19. In addition, Mr ter Haar submitted arguments in support of a counter notice served by GECA which stated that:-

20. He submitted that even if Boot were successful in contending that the arbitrator had misconstrued clause 52(1(b) the award should not be remitted if the arbitrator had reached the right result. Mr ter Haar relied on the dictum of Lord Donaldson MR in Ipswich Borough Council v Fisons plc [1990] Ch. 709 at page 726F-G:

21. Ground 2 was primarily concerned with the nature of the work the subject of the price of £250,880. GECA's argument was that clause 52(1)(a) referred to "work priced in the Bill of Quantities" and clause 52(1)(b) referred to "rates and prices in the Bill of Quantities". Clause 1(1)(h) defined "Bill of Quantities" as "the priced and completed Bill of Quantities". The figure of £250,880 did not appear in the priced Bill of Quantities so it could not therefore have been used as a price for the purposes of clause 52(1)(b).

22. Grounds 3 and 5 are linked and were a development of the previous ground and of the arbitrator's reasoning in paragraph 158. Clause 57 of the ICE Conditions requires compliance with the CESMM. Paragraph 2.3 of the CESMM records that the object of CESMM is "to set forth the procedure according to which the Bill of Quantities shall be prepared and priced and the quantities of work expressed and measured". Paragraph 2.4 states:

23. Section 7 of CESMM deals with Method-Related Charges:

..... ".

24. Mr ter Haar argued that compliance with CESMM was important since precision and accuracy were required in describing and quantifying items of work and in the amounts to be used in valuation. Boot's fax did not satisfy any of the criteria and so the sheet piling work and the figure of £250,880 could not be recognised as an item and a price for the purposes of CESMM or the contract conditions. Unless the work was recognisable as a measurable item its price could not be used under clause 52(1). The work in question ought either to have formed part of pipelaying work or would have been treated as Method-Related Charge. In either case there would have been no price in the Bill of Quantities which could have become the basis of a valuation under clause 52(1)(b). Thus the arbitrator could not have determined a new rate or price under clause 52(1)(b) and accordingly would have had to have made a fair valuation.

25. GECA's case under Ground 1 in part subsumed these grounds but was also independent of them in that it assumed that £250,880 could be a price. First, there had been an increase in the temporary works and under clause 56(2) it would have been open to the arbitrator to have decided (which he undoubtedly would have done) that the increase rendered the price "unreasonable or inapplicable" and thus he would have been entitled to take the course that he did under that condition by determining an appropriate amount in lieu. Secondly, clause 52(2) gives the Engineer power to determine that a rate or price is unreasonable or inapplicable if there has been a significant change in the works. Again, the arbitrator would have decided that the nature of the variation ordered to the area of the Cooling Towers and the nature of the increase in quantity in the HRSG rendered the price unreasonable or inapplicable (ie the price for the Turbine Hall temporary works, as opposed to another item of work).

27. First, the arbitrator was in my judgment right to hold that the sum of £250,880 was a price for the cost of work which, if GECA's decision had been known prior to the preparation of the Bill, might have been included in the Bill as an additional EO item for the additional and different temporary piling work required to lay the pipes at the site of the Turbine Hall. Normally the cost of such temporary works would be carried on the rates, as required by CESMM - see Coverage Rule C2 for Class I (quoted above). Paragraph 7.2 of CESMM might suggest that Boot might have been entitled to insert in the Bill of Quantities an item for this work if its costs were not considered to be proportional to the quantities of the other items and if no allowance had been made in the rates or prices for the other items. In such event, that item would not be subject to admeasurement but the costs would be deemed to be a price for the purposes of clauses 52(1) and (2) and 56(2) (see paragraph 7.6). However, I do not consider that, strictly speaking, the work would necessarily have been a Method-Related Charge under CESMM since it was evidently not entirely a voluntary contractor's decision to do the excavation by sheet piling, but one required of Boot by GECA's decision to lower the depth of the pipe. Had GECA made that decision at tender stage then the additional temporary works would inevitably have been part of the work of upholding sides of the excavation and their cost included in the rates or isolated and shown separately, if appropriate. In paragraphs 67 and following of the reasons to the first award the arbitrator does however record that the sheet piling emerged as a development of part of Boot's method statement so it may be that the cost would properly have been regarded as a Method-Related Charge. Since its status was not so clarified it is necessary to see what the contract says.

28. GECA's letter of award stated:-

29. Furthermore, the effect of incorporating the exchange of faxes in the contract must surely be that there has been a deviation from the CESMM which is permissible for the purposes of clause 57 since the opening words of that clause allow a departure: "Unless otherwise provided in the Contract or unless general or detailed description of the work in the Bill of Quantities or any other statement clearly shows to the contrary.. ". In my judgment the incorporation of the agreement in the faxes means that either that the contract read as a whole provides "otherwise" or that there is thereby a statement which clearly shows "to the contrary", namely that the Bill of Quantities in this respect was not prepared in accordance with CESMM to the extent that there was this special EO item for £250,880 which ought to have been included in the rate for pipelaying (or possibly as a Method-Related Charge). I reach these conclusions on the application of clause 57 on the basis that the documents would be so read by someone likely to handle them and to be familiar with them, eg the standard of clarity of expression envisaged will be less than legal boilerplate.

30. I reject GECA's argument that the CESMM can be used to prevent the figure of £250,880 becoming a price for the purposes of clause 52 or any other condition. I accept that a contractor is generally entitled to assume that the Bill of Quantities has been prepared in accordance with the CESMM (for that is the conventional meaning of the "deeming" provision in clause 55) and therefore that the items and quantities found in the Bill of Quantities are reasonably accurate descriptions and estimates of the work shown on the Drawings and described in the Specification. I also accept that clause 57 is intended also to secure that Bills of Quantities are prepared to a standard of uniformity acceptable to civil engineers and that measurements are similarly to be made to such a standard. In this way a criterion is established by which an error in description may be determined as needing correction under clause 55(2). But these are the general objectives from which there may be deviations as provided by the opening words of clause 57 so it does not follow that there will be an error requiring correction by way of a deemed variation simply because on measurement it is found that the Bill does not comply with CESMM. Thus the contractor (and the employer) must be satisfied that the rates and prices in the priced Bill of Quantities are sufficient, subject to the application of clause 56(2), for there can be no departure from the rates and prices inserted by the contractor in the Bill of Quantities - see the concluding words of clause 55(2): "... there shall be no rectification of any errors omissions or wrong estimates in the descriptions rates and prices inserted by the Contractor in the Bill of Quantities". GECA's argument attempts to make the CESMM govern the meaning of the contract. That is not its function which is to be a guide to the preparation of a Bill and to determining what may be measurable, subject to the opening words of clause 57.

31. Clause 55(2) does no more than restate (in a place where it may be particularly apposite) the fundamental proposition that the contract rates and prices are sacrosanct and not subject to correction. In the ICE Conditions the contractual foundation for the rule that the rates and prices are immutable even though they prove to be too profitable or uneconomic is to be found earlier in the Conditions in clause 11(3)(b): " The Contractor shall be deemed to have ....(b) satisfied himself before submitting his Tender as to the correctness and sufficiency of the rates and prices stated by him in the Bill of Quantities which shall (unless otherwise provided in the Contract) cover all his obligations under the Contract." One of the contractor's obligations there referred to is to accept payment at the contract rates and prices. Mr Max Abrahamson (upon whose opinion GECA relied in opposing leave to appeal) says at page 14 of his well-known commentary on the previous edition of the ICE Conditions:

32. A Bill of Quantities in addition exists to provide the mechanism for valuing variations (see paragraph 2.4(b) of CESMM). In the context of clause 11(3)(b) another obligation of the contractor is to comply with orders for variations given by the Engineer under clause 51. Accordingly, the contract rates and prices must be sufficient for that purpose since clause 52 states the principles upon which the Engineer is to act in valuing variations. If the work is of a similar character and executed under similar conditions to work priced in the Bill of Quantities then the parties to the contract accept that the valuation of the variation will be made in accordance with the contract rates and prices. The fact that the rate or price otherwise applicable may appear to be "too high" or "too low" is immaterial: the parties have agreed that such a rate or price is to be used to value variations or, if clause 55 is applicable, the correction of an error or omission. In his discussion at pages 185-186 of his commentary Mr Abrahamson rightly says of clause 52 (referring back to the passage that I quoted earlier):

33. The words "executed under similar conditions" do not of course refer to economic or financial conditions or considerations (a point which I understood Mr ter Haar to accept). Intrinsic profitability or otherwise of the rate or price is not therefore a relevant consideration to be taken into account in the application of the principle set out in clause 52(1)(a) (ie that called Rule 1 in the arbitration). The work is not executed under dissimilar conditions simply because the applicable rate may result in the contractor being paid markedly more or less than that which might be regarded as "fair", eg more or less than actual or reasonable cost plus profit and overheads. Neither the Engineer nor the arbitrator had therefore authority to apply any other method unless he is of the opinion that the work does not qualify to be valued under Rule 1.

34. In my judgment, the same approach must apply to Rule 2 for that is no more than a continuation of Rule 1 to deal with the position where the factors mentioned in Rule 1 are not present - similarity of work or conditions. If the varied work is work of a dissimilar character or to be executed under dissimilar conditions then the contract clearly maintains the principle that a valuation ought to be made if there is a contract rate or price applicable or which could be used as a basis for valuing the variation. The fact that the result of the use of the contract rate or price might not be reasonable is as irrelevant as it is under the first principle. In terms of the language used in clause 52(1)(b) the reason is simple: the contract rate or price is already unreasonable before the variation is ordered; it is not made unreasonable by the execution of the variation. The word "reasonable" in clause 52(1)(b) refers only to the extent to which it is feasible to use a given contract rate or price as the basis for the valuation, irrespective of its amount. Thus if the effect of the variation was that work took 25% more effort to carry out then one might normally expect there should be little difficulty in using the original contract rate or price and to adjust it to make appropriate allowances for the fact that the labour and plant elements included in it were or might be affected. Elements of the price though unaffected by the extra effort would not be changed. If therefore the contractor had mistakenly priced the contract under a misapprehension as to the capacity of the plant required for the operation in question, that mistake could not be rectified under clause 52(1)(b) however "reasonable" it might appear to the contractor to do so. The mistake could not be eliminated by adjustment in assessing the additional resources required and would have to be perpetuated to the potential detriment of one or other of the contracting parties. No adjustment could possibly be made under the first principle; no adjustment should be made under the second principle for it is to be assumed when using the rate or price as a basis that it is otherwise sufficient for the operations in question. To allow a variation falling within clause 52(1)(b) to be used as a pretext to unravel and correct mistakes made by a contractor in the pricing of a contract would, in my judgment, be completely inconsistent with the wording of such a contract and the philosophy to be derived from it. That is not to say that in practice an Engineer or an arbitrator may not very occasionally bend Rule 2. Mr Abrahamson says (at page 186):

35. The object of the principle that rates and prices are sufficient for the purposes of clause 52 is also to enable the parties to know where they stand. Both will have a budget for the project. The contractor will be assessing revenue against costs to see whether he would come out on the right side. The employer will have embarked upon the project on the basis that the cost of the work is justifiable in business terms. They need to know with reasonable certainty what the effect of a proposed variation may be. It is particularly important for an employer who may take a decision to make a change on the basis of a forecast of its likely cost which in turn is based on the assumption that the contract rates and prices (or contractually permissible deviations from the contract rates and prices) will be all that he has to pay. It would be quite unacceptable if that expectation proved to be vitiated because under clause 52(1)(b) the valuation that would otherwise have been made on the basis of the rates or prices could be upset and replaced by one more costly to the employer and favourable to the contractor in order to extricate the latter from the consequences of his own misjudgment or other slip. Similarly, a contractor who priced the contract intelligently on the basis that the change was likely to be made would be justifiably irate if the Engineer or an arbitrator could operate clause 52(1)(b) to cut back the valuation that would otherwise be made under Rule 2 because it would produce an untoward "windfall" gain for it would be one which the contractor had counted on making, ie it was not a "windfall" at all but part of the risks of contracting which produce thrills as well as spills.

36. I agree also with Mr Furst's next submission that the effect of the arbitrator's interpretation and GECA's case is that it effectively merges Rules 2 and 3 since if the intrinsic "reasonableness" of a rate or price is an additional criterion to be satisfied (beyond the work or the conditions being dissimilar) then that is tantamount to enabling a fair valuation to be made whenever the first two criteria are met. The words in clause 52(1)(b) "the rates and prices shall be used" are clear and mandatory. There will be little point in such a clear statement if they are only to be used if it was otherwise "fair to do so". A fair valuation when used as an alternative to a valuation by or by reference to contract rates and prices generally means a valuation which will not give the contractor more than his actual costs reasonably and necessarily incurred plus similar allowances for overheads and profit for anything more would confer on him an additional margin for profit and would not be fair to the employer. Fairness is an objective test which takes into account the position of both parties. It is surely not right to use a fair valuation to compensate a contractor for a loss suffered elsewhere and unconnected with the work in question.

37. The arbitrator also decided that it would be reasonable under clause 52(1)(b) not to use the price as a basis of valuation because of difficulties in extracting a rate because, for example, it would be necessary to arrive at a notional breakdown of the price. First, I leave aside recourse to clause 52(4)(c) which in many circumstances enables the Engineer or arbitrator to obtain information which would be material to arriving at the supposed breakdown of the price. A contractor is generally under no obligation to provide any information as to how a tender or contract rate or price was arrived at. The make-up of a tender is often commercially sensitive. In addition it is not a worthwhile exercise since assumptions made at tender stage, for example about the selection or the availability of plant, may not materialise in practice. Nevertheless the contract rate or price may be justifiable in terms of the plant actually used. In this case however, GECA introduced an additional particular condition of contract C5(1):

38. In my judgment clause 52(1)(b) by itself may require the Engineer (or an arbitrator) to derive a rate from a price (just as a sub-rate or other element of a rate has to be derived from a rate) in order to value work on the basis of the contract price or rate. In this contract that task was to be facilitated by the application of Special Condition C5 so any potential objections to that interpretation on the grounds of difficulty in obtaining information could not be raised. They would in my judgment have been unfounded even if the Special Condition had not existed since valuation under clause 52(1) clearly requires the Engineer to fix new rates without necessarily having any build-up of the rates upon which the new rate is based. I have already concluded that the fact that the rate that might be derived is unusually low or high does not mean that it is not to be used - indeed it has to be used, even though there may be a lack of confidence that it is realistic. The arbitrator's other reservation (in paragraph 158 of his reasons) about the figure of £343,240 for further temporary works may lead to a modification of the rate but that is an element of the valuation.

39. For these reasons I consider that the arbitrator misconstrued clause 52(1(b) and took into account matters which were not in law relevant and which were "extraneous", to adopt Boot's adjective. I have dealt with Grounds 2 - 5 of GECA's counter-notice. Clause 56(2) does not in my judgment apply. It is concerned only with a change in "actual quantities executed in respect of any item", ie an item in the Bill of Quantities. The only item in the Bill of Quantities was the EO or other item for work in the Turbine Hall. The increase in the quantities of piling work occurred elsewhere. I do not consider that clause 56(2) applies to work which is to be treated as a variation under clause 55(2) for that clause states that such work is to be valued as if it were a variation so a separate code applies to it. Secondly, and in any event, valuation under clause 56(2) operates in the same way as valuation under clause 52(1)(b), ie Rule 2. The test in clause 56(2) is whether the "increase or decrease of itself shall so warrant". This is in my judgment a clear reference to the need to look to the trigger of the work itself to decide whether that change - and not an error built into the rate or price - makes it reasonable to consider whether the rate or price should be altered. The rate or price is unreasonable in itself because of the error not because of the change. The words "of itself" thus also clearly mean that any error in the rate or price is not to be corrected. In addition clause 56(2) says that the alteration of the rate or price has to be done "in consequence thereof". This is a further indication that the causal chain starts with the change itself and ends at a revision of the existing rate and not with a revision of the constituent but erroneous elements of the rate itself before or in addition to any revision occasioned by the change in the increase or decrease. What has to be established is whether the increase or decrease in itself rendered unreasonable any rate or price for, if so, an appropriate increase or decrease in that rate or price has then to be made. Thirdly, a fair valuation cannot be made under this clause. There can be only an alteration in the rate or price. Indeed it would be very odd if there could in effect be a fair valuation under clause 56(2) for that would mean that there could be a different valuation for an increase of decrease under clause 56(2) which was not the result of an error or omission qualifying under clause 55 for valuation under clause 52(1)(b). The ICE Conditions, 6th ed, are a rational set of contractual provisions. They have been put together to be read as a whole. Any differences in treatment are clearly signalled. One has to take the obvious example of the definition of "cost" in clause 1(5) which does not permit a contractor to recover profit which would otherwise be recoverable under, for example, a valuation made under clause 52(1).

40. I similarly reject the GECA's case that the arbitrator's decision to value under Rule 3 could have been justified under clause 52(2). The purpose of clause 52(2) is plain: it supplements the principle set out in clause 52(1). There is however a clear distinction between the two sub-clauses. The valuation of the varied work itself is dealt with in sub-clause (1). Work which is not in itself varied pursuant to an order of the Engineer under clause 52(1) is the subject of sub-clause (2) if it is affected by the nature or amount of the varied work. However, sub-clause (2) first requires an investigation into the relationship of the nature or amount of the variation to the nature or amount of the whole of the contract work for it does not automatically follow that because an item of the work is affected by a change then the rate or price for that item is itself to be altered and replaced by a fair valuation (which is of course permissible under this sub-clause by its concluding words). That is only to be done if as a result of investigation of the relationship it is thought that the rate or price may be rendered unreasonable or inapplicable. (Under clause 52(2) notice has to be given presumably so that records may be kept as provided by clause 52(4)(c).)

41. I do not consider that clause 52(2) could have been operated so as to justify the arbitrator's award. First, clause 52(2) states plainly that the opinion that must be formed is that "any rate or price contained in the Contract for any item of work is by reason of such variation rendered unreasonable or inapplicable". For the reasons that I have already given the price of £250,880 is rendered not unreasonable or inapplicable by any variation so clause 52(2) cannot therefore apply. It would be odd if it could be used.

42. Secondly, the arbitrator decided that there had been an error or omission from the Bill in relation to the area of the HRSG. Although by clause 55(2) the value of that work is to be ascertained in accordance with clause 52 the work itself is not otherwise a variation under the contract. Clause 52(1) is concerned only with variations "ordered by the Engineer in accordance with clause 51". Sub clause (2) must therefore also be concerned with variations ordered by the Engineer in accordance with clause 51. The correction of errors in or omissions from the Bill is not a variation of the Works since all that has happened is that the Works required to be executed in accordance with the other contract documents, primarily the Drawings and Specification, have not been fully or properly set out in the Bill. It is significant that in contrast the contract specifically makes increases and decreases in the original billed quantities variations (where the quantities may be greater or less than those stated in the Bill of Quantities) since clause 51(4) states, in effect as a proviso, that no order in writing is required for them. Accordingly the arbitrator could not for this reason have made a fair valuation of the works in the area of the HRSG under clause 52(2).

43. Thirdly, clause 52(2) might have been applied in relation to the variation which required sheet piling in the area of the Cooling Towers but GECA's case does not, in my view, fall within clause 52(2). The work itself will be valued under clause 52(1). It would only be if, for example, the execution of the sheet piling work in the Cooling Towers area had the effect of rendering the price for the sheet piling work in the Turbine Hall unreasonable or inapplicable that clause 52(2) might be applied to the latter work, eg the effect of having to carry out sheet piling work for the CWP near the Cooling Towers meant that, for example, there was a diversion of resources away from the Turbine Hall so that the Turbine Hall work was carried out uneconomically so that the price for the Turbine Hall work might be thereby rendered unreasonable and inapplicable (assuming always that the balancing or relationship exercise so justified). The commentary in Keating says: "This is equivalent to a "fair valuation" under sub-clause (1) but applied to other work" [my emphasis]. This reason also would apply also the work for the HRSG if, contrary to my earlier reasons, it might in principle fall to be considered under clause 52(2).

44. Fourthly, CEGA's case seems to assume that, having established a rate or price under clause 52(1)(b), that self same rate or price could be varied or displaced under clause 52(2) and result in a fair valuation. . However clause 52(2) only applies to "any rate or price contained in the contract". It therefore does not apply to rates or prices established under, for example, clause 52(1). Accordingly if the varied work is not eligible for a fair valuation under clause 52(1) the applicable rate or price arrived at under that sub-clause cannot be replaced by a fair valuation under clause 52(2).

45. Therefore the arbitrator erred in his decision that Rule 2 did not apply because it was reasonable not to use a price where the price has been reached by mistake or error and for the other reasons that he gave. The grounds relied on by GECA in its counter notice do not justify the award. It does not seem to be necessary to hear Boot's application for further reasons which concerns another part of the award. The orders will be:

99. 2. The award of 14 September 1998 will be remitted to the arbitrator with the opinions of the court as set out in this judgment to enable him to make a valuation pursuant to clause 52(1)(b) of the Conditions of Contract of the additional and temporary sheet piling work in the areas of the HRSG and the Cooling Towers on the basis of the price of £250,880 for such work in the Turbine Hall.