Obrascon Huarte Lain SA v HM Attorney General for Gibraltar
| Jurisdiction | England & Wales |
| Judge | Mr. Justice Akenhead |
| Judgment Date | 16 April 2014 |
| Neutral Citation | [2014] EWHC 1028 (TCC) |
| Docket Number | Case No: HT-11-63 |
| Court | Queen's Bench Division (Technology and Construction Court) |
| Date | 16 April 2014 |
[2014] EWHC 1028 (TCC)
Mr Justice Akenhead
Case No: HT-11-63
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
TECHNOLOGY AND CONSTRUCTION COURT
Royal Courts of Justice Strand, London, WC2A 2LL
Andrew White QC and Andrew Fenn (instructed by Pinsent Mason LLP) for the Claimant
Nicholas Dennys QC, Fiona Parkin QC and Simon Crawshaw (instructed by Corbett & Co. International Construction Lawyers Ltd and Triay Stagnetto Neish) for the Defendant
Hearing dates: 11–14, 18–21 and 25–28 November and 2–5 and 16–19 December 2013 and 23 January 2014
Introduction
1. These proceedings are brought by Obrascon Huarte Lain SA (“OHL”), a substantial Spanish civil engineering contractor, against the Government of Gibraltar (“GOG”), in relation to a contract for the design and construction of a road and tunnel under the eastern end of the runway of Gibraltar Airport. Unfortunately, after over 2 1/2 years of work on the 2 year project and when little more than 25% of the work had been done, the contract was terminated. Issues arise as to who was legally and factually responsible and at risk for the state of affairs which led to the termination of the contractual relationship.
2. Although the overriding issue revolves around the termination and whose actions were or were not justified in relation thereto, the main underlying issue revolves around whether the extent and amount of contaminated materials in the ground to be excavated were or were not reasonably foreseeable by an experienced contractor at the time of tender; if not so foreseeable, that would not be OHL's risk. OHL's case is that the amount and location of contaminated materials was such that it had to re-design the work particularly in the tunnel area which it did after the original contract period had expired. Such re-design having been approved, it is OHL's case that it was ready, willing and able to proceed with the work but it was unable to proceed with the works due to various obstacles put in its way by GOG when GOG purported to terminate the contract.
3. This judgment is set out under the following heads:
• Introduction
• The Contract and Its Background
• The Contract Terms
• The Issues
• The Witnesses
• The Chronology
• Contamination Issues — Ground and Soil
• Contamination Issues — Water
• The Design Process
• Rock Issues
• Extension of Time
• Termination Issues
• Clause 15.2(a) Ground for Termination
• Clause 15.2(c) Ground for Termination
• Clause 15.2(b) Ground for Termination
• Effectiveness of 28 July 2011 Notice
• Miscellaneous and Consequential Issues
The Contract and Its Background
4. Gibraltar sits on the southern end of Spain albeit to the western end of Spain's south coast. The famous and geographically striking 400 metre high Rock is joined to the mainland by a relatively narrow isthmus. It comprises about 640 hectares and is about three-quarters of a mile wide at most on the east-west axis. Much of the building is to the south and west of the Rock, although much of Gibraltar is built upon. Just south of the Spanish town of La Linea and on the flat part of the isthmus sits Gibraltar Airport. For many years, and indeed as it has turned out still, there runs Winston Churchill Avenue from the Spanish border due south and it runs over the Airport runway so that the road needs to be closed when there are aircraft movements on the runway, causing congestion to both the north and south of the runaway. Some 6,000 road vehicles and 7,000 pedestrians used it every day. By about 2005, GOG had decided to resolve this problem by running a new dual carriageway road eastwards along the edge of the runway on both the north and south sides and at the eastern end to construct a twin bore tunnel (to carry the traffic) which was to be under the end of the runway at that location. The proposed road and the tunnel was to be located relatively close to the eastern coast line much of which comprised a sandy beach (the “Eastern Beach”) which was popular with the public particularly in the summertime. At the same time, GOG intended to provide extensive new airport facilities including a new terminal building.
5. Gibraltar was ceded to the United Kingdom in 1713 by the Treaty of Utrecht and since then has been continually occupied by it and the local population. It was besieged and bombarded in a number of campaigns by Spain in the 18 th century, particularly in the 1780s and then during the Napoleonic wars. It became a strategically important military and naval base in the 18 th and 19 th centuries and later a base for the RAF which used the runway for its military purposes. It was attacked and bombed by Vichy French, Italian and German armed forces in the Second World War. Happily, it has not had to face military attack since that time. Its population is now about 30,000, albeit it has numerous visitors, partly due to its financial standing and partly due to the convenience of its location as a starting-off point for holidaymakers to Spain. Given its historical legacy, particularly with its historical and continuing military and RAF connections and the use of the now expanded international Airport, the area around the Airport and its runway have been used relatively intensely for a considerable period of time.
6. In 2006, GOG retained engineers, Gifford Ltd (“Gifford”), to investigate the options and with their assistance decided on the route of the new dual carriageway and tunnel; this became known as the “Frontier Access” road and tunnel. Gifford are well known engineers and had a close connection with Gibraltar. In 2006, GOG also retained Gibraltar Land Reclamation Company Ltd (“GLRC”) as project manager for the project. GLRC had been and was retained on a significant number of GOG projects over the preceding years. After producing an “Outline Feasibility Study” for the project in October 2006, Gifford completed a contaminated land desk study in April 2007 which set out environmental and historical information about the site of the proposed works. Gifford's formal retainer from GOG was signed in February 2007. In July 2007, following a site investigation, including 28 boreholes, sampling and testing, a Soil Investigation Factual Report was produced by a Spanish company called Sergeyco; this report covered an area which encompassed the areas proposed for the new dual carriageway and tunnel as well as for the new terminal buildings. Gifford was also retained at this time to produce what later became known as the “Illustrative Design” which was to be available to tenderers, albeit that the successful tenderer was to be responsible for the design whether it selected the “Illustrative Design” or its own design. Gifford produced various general arrangement drawings, plans and profiles which comprised the Illustrative Design. By the time that contractors were invited to tender, GOG had decided upon the site and route for the proposed dual carriageway and the tunnel.
7. In November 2007, GOG issued an invitation to tender to a number of potential tenderers for the design and construction of the proposed works. These tenderers included OHL. At about this time, an “Environmental Statement” (“ES”) had been prepared for GOG in relation to the proposed works as well as all the new airport terminal work; this was prepared by a company called Environmental Gain Ltd (“Engain”) and was prepared in connection with the planning application for the airport, road and tunnel works; Gifford contributed towards the “Land Contamination” part of the ES. This was to be incorporated in the Contract between the parties. The ES amongst other things provided information about the site and its surroundings as well as dealing with the likely significant environmental effects of the works proposed and providing advice on mitigation measures. The ES was forwarded to the tenderers by way of Tender Addendum No. 2 on 21 Dec 2007. GOG also issued Tender Bulletin Number 1 at about this time which sought to reply to queries raised by various tenderers, materially as follows:
“Q1.7 — Could you tell us where the landfill is to tip the products from the tunnel excavation and demolitions' If there is none, could you tell us where there are possible storage areas for later use and the additional cost of this storage'
A1.7 — Disposal of material is the Contractor's responsibility under the contract and no off-site storage areas have been identified.”
8. Tenders were received on 14 March 2008 with OHL being the lowest by some £8m at £26,533,400.95 and Ferrovial Agoman next at £34,865,232. By letter dated 25 April 2009 GOG asked the tenderers to price certain additional works, including the construction of a new Fuel Farm and Simple Approach Lighting System (“SALS”) for the Airport. On 27 June 2008, GOG raised with OHL various questions for clarification of its tender, including requesting an explanation of “how your submission addresses protection of the aquifers, particularly during construction of the embedded walls”. OHL replied in July 2008: “Our embedded walls do not reach the lower aquifer and there is no risk of contamination of the potable water…OHL guarantees that the potable water will not be contaminated in any way”. This was subsequently incorporated into the Contract at Annex 10.
9. Although OHL submitted the lowest tender, Gifford had reservations about this tender, in particular its programming proposals (said to be very short) and its geotechnical parameters (said to be very optimistic). At first, GOG accepted the tender of another contractor, Ferrovial, but it declined to proceed. Following further discussions with and clarifications from OHL, GOG accepted OHL's revised tender by letter dated 20 October 2008.
10. The Contract between the parties was...
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