How obvious is a ‘manifest error’?

Under a PFI contract with the City Council, Amey agreed to maintain Birmingham’s road system. The roads to be maintained were defined by reference to a data set, 60% of which was based on hypothetical figures. Both parties knew this. The City Council noticed that Amey was only maintaining those roads based on the hypothetical model and not the road network which actually existed. One particularly striking photograph showed a cul-de-sac road, which had been resurfaced only up to an arbitrary point, leaving the old surface unrepaired beyond that line.

Amey argued it was not contractually obliged to update the data. The City Council disagreed, and the dispute reached the Court of Appeal. The contract required an independent third party to issue milestone certificates tracking Amey’s progress. These certificates could be set aside only in cases of fraud or ‘manifest error’. Milestone certificates had been issued which relied upon the data Amey had not updated. The City Council sought an order to set these aside for ‘manifest error’ and to require Amey to update the data set.

In IIG Capital v Van Der Merwe, the Court of Appeal held that a manifest error is ‘one that is obvious or easily demonstrable without extensive investigation’. The test was approved in North Shore Ventures v Anstead Holdings, although the court added that some errors are only obvious if the court reaches a particular conclusion on a point of law. Such errors cannot be proven ‘immediately and conclusively’ to be incorrect, but may still be ‘manifest errors’.

The Court of Appeal held that Amey was contractually obliged to update the data set. The milestone certificates were therefore based on incorrect data which should have been updated. Applying IIGCapital and North Shore, the court held this error was sufficiently obvious for it to set aside the certificates for ‘manifest error’ – despite the fact the error only crystalised in light of the court’s ruling.