MT Højgaard A/S v E.on Climate & Renewables UK Robin Rigg East Ltd and Another

JurisdictionEngland & Wales
JudgeLord Neuberger,Lord Mance,Lord Clarke,Lord Sumption,Lord Hodge
Judgment Date03 August 2017
Neutral Citation[2017] UKSC 59
Date03 August 2017
CourtSupreme Court

[2017] UKSC 59

THE SUPREME COURT

On appeal from: [2015] EWCA Civ 407

before

Lord Neuberger, President

Lord Mance

Lord Clarke

Lord Sumption

Lord Hodge

MT Højgaard A/S
(Respondent)
and
E.ON Climate & Renewables UK Robin Rigg East Limited and another
(Appellants)

Appellants

John Marrin QC

Paul Buckingham

(Instructed by Gowling WLG (UK) LLP)

Respondent

David Streatfeild-James QC

Mark Chennells

(Instructed by Fenwick Elliott LLP)

Heard on 20 June 2017

Lord Neuberger

( with whomLord Mance, Lord Clarke, Lord SumptionandLord Hodgeagree)

The background
1

These proceedings arise from the fact that the foundation structures of two offshore wind farms at Robin Rigg in the Solway Firth, which were designed and installed by MT Højgaard A/S ("MTH"), failed shortly after completion of the project. The specific issue to be determined is whether MTH are liable for this failure.

2

As Jackson LJ said in the Court of Appeal, the resolution of that issue turns on "how the court should construe the somewhat diffuse documents which constituted, or were incorporated into, the 'design and build' contract in this case". Accordingly, I turn first to consider the relevant provisions of the contractual documentation.

The relevant provisions of the Technical Requirements and J101
3

In May 2006, the appellants, two companies in the E.ON group ("E.ON"), sent tender documents to various parties including MTH, who in due course became the successful bidders. The tender documents included Employer's Requirements, Part I of which included the Technical Requirements ("the TR").

4

Section 1 of the TR set out the "General Description of Works and Scope of Supply". Part 1.6 set out the so-called Key Functional Requirements, which included this:

"The Works, together with the interfaces detailed in Section 8, shall be designed to withstand the full range of operational and environmental conditions with minimal maintenance.

The Works elements shall be designed for a minimum site specific 'design life' of twenty (20) years without major retrofits or refurbishments; all elements shall be designed to operate safely and reliably in the environmental conditions that exist on the site for at least this lifetime."

5

Section 3 of the TR was concerned with the "Design Basis (Wind Turbine Foundations)". Part 3.1 was entitled "Introduction", and it included the following (divided into sub-paragraphs for convenience):

"(i) It is stressed that the requirements contained in this section and the environmental conditions given are the MINIMUM requirements of [E.ON] to be taken into account in the design.

(ii) It shall be the responsibility of [MTH] to identify any areas where the works need to be designed to any additional or more rigorous requirements or parameters."

There were other references elsewhere to the stated requirement being a minimum. Para 3.1.2 of the TR required MTH to submit a detailed Foundation Design Basis document, which was required to contain, among other things, a statement as to "the Contractor's design choices, including, but not limited to, … departures from, or aspects not covered by, standards, if any".

6

Part 3.2 of the TR was headed "Design Principles", and para 3.2.2 was concerned with "General Design Conditions", para 3.2.2.1 being directed to the "Tender Stage Design", and para 3.2.2.2 to the "Detailed Design Stage". Para 3.2.2.2 is of central importance for present purposes, and, for convenience, I shall treat it as divided into numbered sub-paragraphs. Para 3.2.2.2(i) required MTH to prepare the detailed design of the foundations in accordance with a document known as J101, using the "integrated analysis" method (which was one of the four methods addressed in J101). Para 3.2.2.2(ii) went on to state that:

"The design of the foundations shall ensure a lifetime of 20 years in every aspect without planned replacement. The choice of structure, materials, corrosion protection system operation and inspection programme shall be made accordingly."

7

J101 was a reference to an international standard for the design of offshore wind turbines published by Det Norske Veritas ("DNV"), an independent classification and certification agency based in Norway. J101 included a statement that its "objectives" included the provision of "an internationally acceptable level of safety by defining minimum requirements for structures and structural components", as well as being "a contractual reference document", and a "guideline". Section 2 of J101 contained design principles which were, among other things, aimed at limiting the annual probability of failure to be in the range of one in 10,000 to one in 100,000 — para C201. Section 7 of J101 dealt with the design of steel structures, and para K104 provided:

"The design fatigue life for structural components should be based on the specified service life of the structure. If a service life is not specified, 20 years should be used."

Section 9 of J101 dealt with the design and construction of grouted connections. Part A included reference to shear keys, which, it was explained, "can reduce the fatigue strength of the tubular members and of the grout". Part B of section 9 set out a number of equations applicable to such a design, including one ("the Equation") which showed how the interface shear strength due to friction is to be calculated, namely:

Precisely what the Equation actually means need not be spelled out. What is important for present purposes is that it was stated beneath the Equation that d should "be taken as 0.00037 Rp for rolled steel surfaces" (Rp being the outer radius of the pile, and d being the height of surface irregularities).

8

Para 3.2.3.2 of the TR required MTH's design to accord with "international and national rules, circulars, EU directives executive orders and standards applying to the Site" and it went on to state that a defined "hierarchy of standards shall apply", as listed. Ignoring those standards which were irrelevant or not in force, the first in the list was J101. Para 3.2.5 required the contractor to design and construct grouted connections in accordance with J101. Para 3.2.6 stated that "[a]ll parts of the Works, except wear parts and consumables, shall be designed for a minimum service life 20 years" (sic).

9

Section 3b of the TR was headed "Design Basis for Offshore Substations and Meteorological Mast". Para 3b.5.1 stated:

"The design of the structures addressed by this Design Basis shall ensure a lifetime of 20 years in every aspect without planned replacement. The choice of structure, materials, corrosion protection system operation and inspection programme shall be made accordingly."

Para 3b.5.6 provided that "[a]ll parts of the Works, except wear parts and consumables shall be designed for a minimum service life 20 years."

10

Section 4 of the TR dealt with "Approvals and Certification". Para 4.4.3 provided that MTH should obtain a Foundation Design Evaluation Conformity Statement from the Certifying Authority within six months of the commencement date.

11

Section 10 of the TR covered "Structural Design and Fabrication" (Wind Turbine Foundations), and para 10.1.1 required MTH to appoint "an accredited Certifying Authority … to independently evaluate the adequacy of his foundation design." Para 10.5.1 was in these terms:

"The Contractor shall determine whether to employ shear keys within the grouted connection. If shear keys are used, the design and detailing shall take due account of their presence for both strength and fatigue design to the satisfaction of the Certifying Authority and the Engineer. If shear keys are to be omitted then the Contractor shall demonstrate with test data that the grouted connection is capable of transmitting axial loads at the grout/steel interface without dependence upon flexural (normal) contact pressures, which may not always be present, to the satisfaction of the Certifying Authority and the Engineer. Such demonstration shall also account for joint performance under different temperature conditions."

12

Para 10.24.9 of the TR stated that the "recorded potential difference exceedance" was not so great as to "cause accelerated anode depletion to such extent that the anode material provided is fully utilised before the end of the structure operational 20 year life".

13

Having been selected as the contractor for the works, MTH duly set about preparing its tender in accordance with Employer's Requirements and J101. MTH's design provided for (i) monopiles with a diameter of just over four metres, (ii) transition pieces about eight metres long, weighing approximately 120 tonnes, and (iii) grouted connections without shear keys. MTH explained at the time that no shear keys were specified because, taking d as 0.00037 Rp, application of the Equation indicated that the grouted connections, as designed, had more than sufficient axial capacity to take the axial load.

14

After E.ON had accepted MTH's tender, MTH duly commenced design work, and in November 2006 it submitted a detailed Foundation Design Basis document, as required by para 3.1.2 of the TR.

The relevant provisions of the contract
15

On 20 December 2006 E.ON and MTH entered into a written contract ("the Contract") under which MTH agreed to design, fabricate and install the foundations for the proposed turbines. Part C of the Contract contained a List of Definitions. "Fit for Purpose" was defined as "fitness for purpose in accordance with, and as can properly be inferred from, the Employer's Requirements". "Employer's Requirements" was stated to include the TR, which were themselves attached as Part I of the Contract. And "Good Industry Practice" meant "those standards, practices, methods and procedures conforming to all Legal Requirements to be performed with the exercise of skill, diligence, prudence and foresight that can...

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