Bristows’ SnippITs - Good faith, lost chances, and concrete consequences: Matière v ABM

This post is the latest in the Bristows’ SnippITs series, which pulls together the key practical takeaways from recent court decisions for the tech sector and beyond.

The recent TCC decision of Matière v ABM provides some useful guidance on the extent of express obligations of “good faith” in commercial contracts, whilst also demonstrating the potential difficulties of bringing actionable claims for loss of opportunity.

Key takeaways

1. Meaning of “good faith”: The core meaning of a duty of good faith is to act honestly. However, bad faith may include conduct which would be regarded as commercially unacceptable to reasonable and honest people, even if not necessarily dishonest.
    
2. Utility of good faith clauses: Given the long term and collaborative nature of JVs and other “relational” or “partnership”-style arrangements increasingly seen in tech deals, it is not unusual for the parties to insert express good faith obligations. Although often used where the parties are unable to agree to more specific obligations, they can prove a powerful tool when one party’s conduct falls below par.
    
3. Difficulties with loss of chance claims: Loss of chance claims can often arise in these relational-style contracts, for example as a result of a supplier’s delay, a client may lose the chance to secure a lucrative contract. Parties in this position, however, should be aware of the significant evidential hurdles in establishing a clear link between the breach and the lost chance.

Background: A Joint Venture That Cracked

The dispute concerned a failed joint venture (JV) between French infrastructure firm Matière and UK-based engineering company ABM. 

The parties jointly tendered for the HS2 Green Tunnels Project, with Matière being responsible for designing and installing the Green Tunnels and ABM being responsible for the manufacturing process. 

The  main contractor was itself a JV between Eiffage Genie Civil and Kier Infrastructure and Overseas Ltd (EKJV). Following stage one of the tender, EKJV appointed Matière/ABM as its strategic partner under a professional services contract but later terminated this contract and contracted directly with Matière instead. 

ABM cried foul, claiming Matière acted in bad faith by undermining the JV and seizing opportunities for itself. Matière sued for £373k in unpaid invoices. ABM counterclaimed, with its primary case being damages of nearly £19m for loss of the chance of winning and performing the HS2 contract.  

ABM’s Counterclaim

ABM’s counterclaim was based on Matière breaching the general obligations of good faith that were expressly set out in both the 2019 Consortium Agreement and 2020 Collaboration Agreement that governed the JV and HS2 tender. Both of these agreements included broad duties of good faith, including: 

“…in the course of their performance of their obligations pursuant to any associated PSC each of ABM and Matière shall act in good faith toward the other and use reasonable endeavours to forward the interests of the co-operative enterprise.”

ABM alleged that Matière had undermined its proposal for a new factory in Scunthorpe to manufacture the tunnels by highlighting issues with the location to EKJV and assisting with investigations into alternatives without ABM’s knowledge. 

ABM claimed that Matière’s conduct had reduced its chances of winning the HS2 contract from “virtually certain” to “virtually nil”. ABM evaluated this lost chance at 90% of its claimed lost profit, which it calculated to be £18.92m (alternatively £16.62m).

Court’s findings: Good faith

The court first considered the scope and extent of the good faith obligation between the parties. It found that the duty of good faith in this context amounted to a requirement that ABM and Matière would act honestly with each other and would not conduct themselves in a manner which would be regarded as commercially unacceptable to reasonable and honest people. 

Following previous caselaw, it also found that this was contractual relationship where the duty of good faith also extended to wide obligations of fidelity to the bargain which had been made, not undermining that bargain or the substance of the commercial benefit.  

The Court found that Matière’s actions in undermining ABM’s Scunthorpe factory to EKJV at various points had breached the above obligations.

Court’s findings: Loss of chance 

In order for its claim for loss of chance to succeed, ABM had to prove both that: (i) it had a real or substantial chance of winning the HS2 contract (over 10%); and (ii) Matière’s breaches were the dominant cause in a reduction of that chance. 

Although the Court agreed that ABM’s prospects of being appointed had gone from real and substantial (but not virtually certain) at the time of the earliest breach to negligible some months later, it did not consider that ABM had proved Matière’s breaches had played a material part in this decline. The court gave three reasons for this:

• At the various points that Matière had undermined the Scunthorpe factory it was in response to or at the behest of EKJV and with its encouragement. In this regard, EKJV was the “master” and Matière was merely its “servant”.
   
• There were other factors unrelated to Matière that affected the prospects of the JV winning the HS2 contract, including concerns about ABM’s performance on other projects.
   
• ABM was never actually in a position to fund the construction of the Scunthorpe factory as proposed in its final offer.

ABM’s counterclaim therefore failed on causation grounds. 

Matière’s claim for unpaid invoices was allowed in full. 

Conclusion

In the end, while Matière’s conduct fell short of JV spirit, it wasn’t enough to cement ABM’s multi-million pound claims.