Pharos Offshore Group Limited v Keynvor Morlift Limited

A contractual estimate of the time required for works is not a fixed completion period where the contract describes the programme as indicative. The reasonable time for performance must be assessed in the circumstances actually encountered, including weather, tides, conditions and matters within the contractor’s control. A contractual deeming provision concerning site conditions does not convert an indicative programme into a fixed obligation, although it may require appropriate preparedness. Liquidated damages provisions requiring delivery by a specified date do not apply where no date was specified and the obligation was to complete within a reasonable time. Contractual wording accidentally omitted during a variation is construed in its factual context.

Pharos supplied a remotely operated jet-trenching vehicle, equipment and personnel to Keynvor Morlift Limited for seabed embedment works forming part of the Viking Link project. The equipment arrived later than the scheduled mobilisation date because of customs delays. The works were affected by weather, tides, seabed conditions, equipment failures and operational difficulties.

Pharos claimed unpaid contractual charges. KML alleged breach of warranty, failure to exercise reasonable skill and care, delay and entitlement to liquidated damages, and counterclaimed damages. The principal issues were whether the contractual reference to 10 days capped Pharos’s charges, whether the mobilisation date was binding, how weather and site conditions were allocated, whether the equipment was fit for purpose, and the parties’ respective losses.

1. Contractual duration and construction. The reference to 10 daily units represented an indicative programme, not a fixed or maximum period. The contract distinguished fixed lump sums from daily rates and used “not to exceed” wording expressly for additional equipment. Pharos was therefore entitled to daily charges for the reasonable period required to complete the works. The court construed the contract objectively and as a whole, taking account of the relevant factual background.
2. Reasonable time. Reasonable time was assessed with hindsight by considering the indicative estimate, whether it was exceeded, the causes of delay and the extent to which those causes were within Pharos’s control. Weather and tidal downtime outside Pharos’s control formed part of the assessment. Clause 18 did not make seabed conditions irrelevant or narrow the reasonable-time obligation, although lack of preparedness for known conditions could make delay unreasonable.
3. Weather and mobilisation. The removal of the words providing for weather downtime did not reallocate that risk. The evidence showed that the wording had been unintentionally overwritten when the purchase order was revised to add equipment costs. The parties had not agreed a binding mobilisation date of 9 June 2022 through an implied contractual mechanism. In any event, the equipment arrived within a reasonable time and caused no operative delay because the MBES survey could not have been completed earlier owing to weather. KML’s liquidated damages claim failed because no specified delivery date existed.
4. Fitness for purpose and breach. The use of lay-flat hoses was sub-optimal but did not make the system unfit for purpose. The UTV-670’s inability to cope with some seabed gradients likewise did not establish unfitness or negligent selection. However, excessive downtime caused by sub-standard ancillary equipment constituted breach, and the resulting operational degradation had to be reflected in the reasonable-time assessment.
5. Outcome and quantum. The adjusted counterfactual showed eight days of culpable delay. Pharos was awarded £507,402.76 plus VAT, subject to set-off and interest. KML’s counterclaim succeeded in £113,214.63. The parties were directed to agree interest, failing which the court would determine it.