ENERGY
OFFSHORE WIND FARM CONSTRUCTION:
COURT OF APPEAL REVERSES 20 YEAR SERVICE LIFE WARRANTY
DECISION FOLLOWING THE ROBIN RIGG GROUTING FAILURES
MT Højgaard A/S v E.ON Climate and Renewables UK Robin
Rigg East Ltd and another [2015] EWCA Civ 407.
The Court of Appeal has held that MT Højgaard is not
responsible for the cost of remedial work to the grouted
connections of the foundations at the Robin Rigg offshore
wind farm, overturning last year’s first instance decision in
the Technology and Construction Court (TCC). In reaching
its decision, the Court of Appeal has made a number of
observations that will be of interest to contractors and
developers.
The background facts and the contract
In 2006 MT Højgaard (MTH, the contractor) agreed to design,
fabricate and install 60 wind turbine foundations at the Robin
Rigg offshore wind farm for E.ON Climate and Renewables
(E.ON, the employer).
In carrying out the design of the foundations, and the grouted
connections in particular, MTH’s designer, Rambøll, relied on
the international standard DNV-OS-J101 (J101). But J101
contained a fundamental error that resulted in a significant
overestimation of the axial load capacity for wind turbines
with grouted connections. Rambøll was unaware of this error
when it carried out the design.
In 2009 it was discovered that movement was taking place in
the grouted connections, following which the error in J101
came to light. All of the foundations required remedial work, at
an agreed cost of €26.25 million.
The contract stated at clause 8.1 that, amongst other things,
MTH “shall ... complete the Works”:
i.
ii.
iii.
iv.
“with due care and diligence”;
“in a professional manner in accordance with ... Good
Industry Practice”;
“so that the Works, when completed, comply with the
requirements of this Agreement”; and
“so that each item of Plant and the Works as a whole
shall be free from defective workmanship and materials
and fit for its purpose as determined in accordance with
the Specification”.
The Technical Requirements within E.ON’s tender documents
(which became part of the contract) were contradictory. This
was a key issue in both the TCC and the Court of Appeal
decisions. Those Technical Requirements stated that the
foundation design would “ensure a lifetime of 20 years in every
respect without planned replacement”, which appeared to
constitute a warranty that the foundations would function for
20 years. However, all of the other provisions in the Technical
Requirements were directed towards a design life of 20 years.
Furthermore, J101 (which was also incorporated into the
contract) was itself confusing in this respect, as it referred to
both a service life and a design life of 20 years.
The TCC decision
The Judge, Mr Justice Edwards-Stuart, held that:
i.
ii.
iii.
iv.
the Technical Requirements required MTH to provide
foundations with a service life of 20 years, which was
additional to, but not inconsistent with, MTH’s other less
onerous obligations such as compliance with J101;
MTH was in breach of contract as the foundations did not
have a service life of 20 years;
Rambøll was not negligent in its design of the grouted
connections; and
MTH was not in breach of a number of other specific
contract terms upon which E.ON relied.
As a result, the Judge held that MTH was responsible for the
cost of the remedial work.
The Court of Appeal decision
The Court of Appeal overturned the TCC decision. In reaching
its decision, it held that:
i.
ii.
iii.
iv.
the Technical Requirements did at first sight contain a
warranty that the foundations would function for 20
years;
however, there were many other references in the
Technical Requirements that were directed towards a 20
year design life;
if a structure has a design life of 20 years, that does not
mean that inevitably it will function for 20 years, although
it probably will;
J101 itself is intended to lead to offshore structures with
a design life of 20 years;
v.
repeated use of the word “minimum” in the Technical
Requirements did not convert the requirement for a
design life into a requirement for a guaranteed
operational life;
vi. the fitness for purpose warranty was to be read in
accordance with, and was qualified by, the Technical
Requirements and J101; and
vii. a reasonable person in the position of E.ON and MTH
would know that the normal standard required in the
construction of offshore wind farms was compliance with
J101 and that such compliance was expected, but not
absolutely guaranteed, to produce a life of 20 years.
This case therefore still highlights our previous comments
regarding the potential value to an employer of an absolute
warranty by a contractor to achieve fitness for purpose or
some other requirement, versus the considerable risk to which
a contractor is exposed if it provides such a warranty. Absolute
warranties are common in engineering and construction
contracts, including those used in the offshore oil and gas and
wind farm sectors. Many of the popular standard forms, such
as the LOGIC standard contracts, include absolute fitness for
purpose obligations. The risks to contractors of accepting
these provisions has now been clarified and should not be
underestimated.
This judgment also reinforces the importance of clear contract
drafting, the risk of contradictory language and terminology
(in this case “design life”, “service life” and even “lifetime”), and
the problems that can arise when various documents from
different sources are incorporated into a contract at different
levels within the order of precedence without ironing out
inconsistencies. If E.ON had really wanted a binding 20 year
service life warranty, it should have insisted on that provision
However, there was a small sting in the tail for MTH. The Court featuring prominently within the conditions of contract, rather
of Appeal agreed with E.ON that: (i) MTH failed to justify, with than being tucked away in the Technical Requirements.
test data, its decision to omit shear keys within the grouted
connections, in breach of the Technical Requirements; and (ii) Contacts
MTH failed to carry out experimental verification of the design For more information please contact:
of the grouted connections, in breach of J101. However, the
Judge held that even if MTH had complied with those
provisions, that would not have led to any change in design.
E.ON was therefore only awarded nominal damages of £10 for
the breach of the Technical Requirements, and the Court held
that no loss flowed from MTH’s breach of J101.
In conclusion, therefore, the Court of Appeal held that there
were only limited references in the Technical Requirements to
a 20 year service life: those references were inconsistent with
the remainder of the Technical Requirements and with J101,
and were too slender a thread upon which to hang a finding
that MTH gave a warranty of 20 years guaranteed operational
life for the foundations.
Comment
A number of points emerge from the decision:
Although the previous finding concerning a 20 year service life
warranty was reversed, in finding that there was a 20 year
design life warranty the Court of Appeal still upheld the
previous comments of the TCC that an express obligation to
construct a work capable of carrying out a defined duty (e.g. a
20 year service life or fit for purpose) can, if the contract
wording is sufficiently clear, override the obligation to comply
with the plans and specifications. If this is the case as a matter
of contractual interpretation, then the contractor will be liable
for the failure of the work notwithstanding that it is carried
out in accordance with the plans and specifications.
Chris Kidd
Partner, London
[email protected]
Mark de la Haye
Senior Associate, London
[email protected]
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