MT Højgaard A/S v E ON Climate & Renewables UK Robin Rigg East Ltd (No 2)

A construction contract may impose both an obligation to exercise reasonable care and skill and an express obligation to achieve a specified result. Where the contract clearly requires completed works to achieve a minimum service life, that obligation may operate as a warranty even though the contractor must design in accordance with an industry standard. Compliance with an erroneous standard does not necessarily discharge an express fitness-for-purpose obligation.

Contractual provisions must be read together. A requirement to design for a specified life is not inconsistent with a separate warranty that the works will achieve a minimum service life. Where a technical standard requires an evaluation or verification, the obligation may fall on the certifying body rather than the designer, depending on the standard’s language and contractual context.

The claimant contractor designed, fabricated and installed foundations for 60 offshore wind turbines under a contract with the defendants. The foundations used grouted connections designed in accordance with DNV-OS-J101, an industry standard containing an erroneous value for a design variable.

The grouted connections began to fail within two to three years, requiring remedial work costing €26.25 million. The defendants alleged that the contract warranted a minimum 20-year service life and, alternatively, that the claimant had negligently failed to comply with requirements concerning the interaction of axial and bending loads, the allowable R_P/t_P ratio, and experimental verification.

The central issues were whether the contract imposed a strict service-life obligation and whether the claimant had breached the relevant contractual and technical requirements.

1. Contractual warranty. The claimant assumed full responsibility for design. Read as a whole, the contract required the foundations to have a minimum service life of 20 years. The references to designing for a 20-year life did not conflict with that obligation. The claimant therefore warranted the service life, subject to the expressly identified qualification concerning the coating system. Compliance with J101 did not relieve the claimant of that warranty. The foundations failed within two to three years, constituting a breach.
2. Co-existing obligations. Obligations to exercise reasonable care and skill and to achieve a particular result are not mutually incompatible. A contractor may be liable for failure to achieve the stipulated result even where it has complied with a specified design or standard. The court applied the approach in The Steel Company of Canada Ltd v Willand Management Ltd [1966] SCR 746 and Greater Vancouver Water District v North American Pipe and Steel Ltd [2012] BCCA 337.
3. Construction principles. The contract had to be read as a whole and in its commercial and factual context. Clear language had to be applied even if it produced an improbable commercial result. The court followed the principles stated in Rainy Sky SA v Kookmin Bank [2011] 1 WLR 2900.
4. Design allegations. The claimant was not required to produce test data under clause 10.5.1 because the accepted tender basis was a design without shear keys. The assumption under paragraph A202 of J101 that axial and bending loads could be assessed separately was reasonable, supported by a respectable body of industry opinion, and accepted by the certifying body. No breach was established on that issue.
5. The claimant failed to evaluate the allowable upper limit of the R_P/t_P ratio as required by J101. However, an appropriate buckling check would have supported the adopted value, so the failure caused no loss.
6. Paragraph D101 of J101 was directed principally to the body verifying the design. In any event, DNV’s decision not to require experimental verification indicated that it considered the available documentation sufficient.
7. E.ON was entitled to a declaration that the problem arose from breach of clause 8.1 of the Conditions and section 3.2.2.2 of the Employer’s Requirements. The form of relief and costs were reserved.