Fluor v Shanghai Zhenhua Heavy Industry Co, Ltd

In assessing contractual damages after a settlement, the court must compare the actual position with the position that would have existed on proper performance, while identifying separately any losses released or waived by the parties. A claimant may recover a reasonable loss of opportunity where damages cannot be measured with precision, but special damages must be pleaded and proved. A global settlement with a third party is recoverable only to the extent that the settlement payment or sacrificed claims are attributable to the defendant’s breach and to losses not waived. The settlement must be objectively reasonable. Labels used in the settlement agreement are relevant but are not conclusive.

Fluor claimed damages from ZPMC arising from defective welding in monopiles and transition pieces manufactured for an offshore wind farm. The court had previously determined liability and held that Fluor’s settlement with the project owner waived specified costs and delays arising from additional testing and remediation required by non-conformance reports. This judgment determined quantum, including the effect of the waiver, the loss of opportunity to install monopiles, vessel and site costs, engineering critical assessment costs, settlement losses, liquidated damages and an interim payment.

1. Damages and waiver. The proper starting point was the counterfactual position in which the contract had been properly performed, compared with what actually occurred. The waiver released the costs and delay consequences of testing and remediation required by the relevant NCRs, including work to both monopiles and transition pieces. Fluor could not recover by apportioning losses according to whether work on an individual monopile had begun before the relevant NCR. The waiver concerned particular costs, not the causes of action themselves.
2. Shipment No 2. Fluor lost an opportunity to install monopiles before NCR 008. Damages were assessed on that basis, taking account of out-of-roundness, weather, vessel availability and installation rates. The court found that seven monopiles could have been installed and awarded the associated counterfactual loss. General damages may be assessed on a best-estimate basis where precise proof is impossible; special damages remain subject to proof on the balance of probabilities, following Parabola Investments v Browallia Cal [2010] EWCA Civ 486.
3. Delay. The loss of opportunity to install monopiles was distinct from critical delay. By December 2009 monopile installation was in float and the critical path lay through transition-piece fit-out and installation. Claims based on later critical delay, including claims for liquidated damages, therefore failed.
4. Mitigation and maintenance. Installing unrepaired structures after obtaining engineering advice was a reasonable mitigation step. The foreseeable consequence that the employer withheld completion certificates did not prevent recovery of reasonable maintenance costs. This followed the mitigation principle in Compania Financiera “Soleada” SA v Hamour Tanker Corp Inc [1981] 1 WLR 274.
5. Settlement with GGOWL. The court examined the substance of the global settlement rather than treating the description “Counter Claim Damages” as conclusive. Applying the principles in Biggin v Permanite [1951] 2 KB 314, Bovis Lend Lease v R&D Fire Protection (2003) 89 Con LR 169 and General Feeds Inc, Panama v Slobodna Plovidba Yugoslavia [1999] 1 Lloyd’s Rep 688, the settlement was objectively reasonable. Fluor could recover £13.825 million attributable to unwaived welding-related losses.
6. Outcome. Judgment was entered for Fluor in the sums identified in the judgment, subject to further directions on overheads, profit, VAT, interest and costs. An interim payment of £1,829,634 and US$5,893,591 was ordered.

The judgment described an earlier liability judgment in the same litigation, delivered on 7 October 2016, followed by this quantum judgment. No citation for that earlier judgment was stated.