SSE GENERATION Ltd Pursuer against HOCHTIEF SOLUTIONS AG and Another Defender
| Jurisdiction | Scotland |
| Judge | Lord Woolman |
| Neutral Citation | [2016] CSOH 177 |
| Year | 2016 |
| Docket Number | CA162/12 |
| Date | 21 December 2016 |
| Published date | 21 December 2016 |
| Court | Court of Session (Outer House) |
OUTER HOUSE, COURT OF SESSION
[2016] CSOH 177
CA162/12
OPINION OF LORD WOOLMAN
In the cause
SSE GENERATION LIMITED
Pursuer
against
HOCHTIEF SOLUTIONS AG & ANOTHER
Defender
Pursuer: Moynihan QC, S Smith QC, Barne, Delibegović-Broome & P O’Brien; CMS Cameron McKenna
Defender: Clark QC, Richardson & A Sutherland; Clyde & Co
21 December 2016
Contents
1. Introduction
Summary
Issues
Preliminary Matters
2. The Principal Persons
SSE
Hochtief
Donaldson
Pöyry
Andritz
3. Hydroelectric Tunnels
History
Design & Rock Classification
Methods of Construction
Lined & Unlined Tunnels
Previous Tunnel Collapses
4. The Glendoe Scheme
Geography
Main Features
Headrace Tunnel
Tailrace Tunnel
Turbine
Other Aspects
Head Loss
Aqueduct and Access Tunnels
General Operating Centre
Watering Up and Dewatering
Measurements
5. Award of the Contract
Tender Procedure
6. The Construction Period
Hochtief arrives on Site
Tunnel Boring Machine
The TBM Drive
Task of the Engineering Geologist
Four Excavation Classes
Rock Support Methodology
Mapping Procedure
Geological Database
Signing the REC sheets
What Classes were Predicted and Found?
Conagleann Fault Zone
7. From Watering up to Takeover
8. SSE Operates the Scheme
Takeover
O & M Manuals
National Grid Tests
Monitoring
Glendoe’s Role within the SSE Fleet
Odd Readings
9. The Collapse & Its Aftermath
Detection
Initial Strategy
SSE Informs Hochtief
Tunnel Inspections
10. Relations Cool
Attempts to Reach a Consensus
Conference Call on 25 September
Meeting at Edinburgh Airport on 5 October
SSE Meets HSE on 12 October
Two Further Meetings on 20 and 21 October
Essen Design Workshop on 29 October
Hochtief’s Proposals
SSE Issues an Ultimatum
11. Specialist Investigations
Jacobs
British Geological Survey
Donaldson
12. The Recovery Project
Commercial Pressures on SSE
SSE Selects BAM
Choice of Option E
BAM Mobilises to Site
Scope of the Remedial Works
Contract Changes
13. Why did the Tunnel Collapse?
The Short Answer
A Longer Answer
14. Witnesses & the Burden of Proof
15. Was there a Defect at Takeover?
Scope of the Dispute
Was The Scheme Contrary to the Works Information?
Was The Scheme Contrary to the Design?
16. Reasonable Skill and Care
What did the parties agree about classification?
Standard of Mapping
Joint Inspections in 2008
Three Miscellaneous Issues
(a) Did the REC Sheets Address Long Term Hazards?
(b) Was Hochtief’s Classification System Deficient?
(c) Would Probe Drilling Have Made a Difference?
Conclusion on Reasonable Care
17. Should Hochtief have Returned to Site?
18. Contributory Negligence
19. Causation
20. The Costs of the Recovery Project
Introduction
The Position of the Parties
General Principle
Choice of Option E
Costs Monitoring
Expert Evidence on Costs
Health and Safety
Betterment
21. Individual Heads of Claim
Bypass Tunnel
Downstream Access Tunnel
Concrete Invert
Three Concrete Plugs
Plant & Equipment
Secondary ‘Defects’
SSE Management Time
Progress, Delays & Productivity
Adjudication Award, Insurance & Low Availability Damages
22. The Counterclaim
23. Observations on the Proof
24. Conclusions
25. Appendix
1. Introduction
Summary
[1] Glendoe hydroelectric scheme was constructed between 2006 and 2008. It was the biggest such scheme to be built in Scotland for many years. It failed eight months after take over. A collapse had occurred in a main tunnel. Rock material had fallen from a breach in the crown over several months, leading to a blockage.
[2] The owner was anxious to recover its asset as soon as possible. It was losing substantial amounts of revenue while the scheme was out of commission. It entered into discussions with the contractor about remedial works. They were, however, unable to reach agreement. The main sticking point was money. Each party said that the other should bear the initial liability for the cost of the works. Attempts to broker a compromise were unsuccessful.
[3] Four months passed without a resolution. The owner then issued an ultimatum requiring the contractor to return to site to carry out the recovery project. The contractor declined to do so. In consequence, the owner instructed another engineering concern to undertake the remedial works. The works took much longer and cost far more than expected. The scheme did not begin to generate electricity again until August 2012.
[4] This litigation arises out of the collapse. The owner seeks to recover about £130 million. It maintains that various provisions in the contract imposed obligations on the contractor to undertake the remedial works. The contractor disputes liability. It contends that: (a) it completed the works in accordance with the contract, (b) the owner assumed the risk of the collapse at takeover, (c) the scope and cost of the recovery project is unreasonable, and (d) it was entitled to carry out the remedial works.
Issues
[5] There are several key questions in this case. Why did the collapse occur? Could it have been foreseen? Is the contractor to blame? Is the owner also partly to blame? Were the remedial works reasonable and necessary? The contract itself distinguishes between employer’s risk events and contractor’s risk events. It also prescribes the circumstances where the contractor is obliged to carry out the remedial works.
[6] At the core of the dispute lies a deceptively simple issue. It relates to the construction of the tunnel. Did the contractor misclassify the rock and in consequence fail to install the correct support? The owner submits that the answer is Yes. The contractor takes the opposite position. It maintains that it exercised reasonable skill and care in the design and construction of the tunnel and is therefore not liable.
Preliminary Matters
[7] At an earlier stage, the contractor argued that the joint insurance policy governed the matter and that the owner was precluded from bringing this action. Following a debate I issued a decision in favour of the owner: [2015] CSOH 92. The contractor undertook not to reclaim that issue prior to the proof. In closing submissions I learned that the owner has made a claim under the policy, which is the subject of arbitration. If it received an award that would have to be taken into account in respect of any damages it received in this action.
[8] I fixed the proof to take place over two court terms. At the end of the first term, the parties made a joint application to set aside a third term to deal with quantum. I refused that request.
[9] It is important to keep in mind the distinction between the collapse and the blocked section of the tunnel. The location, length and scale of the blocked section are known. The same parameters in respect of the collapse remain unknown.
[10] To avoid verbiage, I have rounded up most sums and measurements.
2. The Principal Persons
SSE
[11] I shall refer to the Scottish & Southern Electricity group of companies as ‘SSE’. SSE owns and operates a fleet of 80 hydroelectric power stations. Ten lie in the Great Glen area close to Glendoe. The SSE fleet contains a total of 214 tunnels with a combined length of 320km. Despite its substantial tunnelling experience, SSE took a limited role during the construction of Glendoe. Its project manager, Mr Neil Sandilands, said that was because “the process was being carried out by one of the world’s top contractors and supervised by one of the world’s top consultants.”
Hochtief
[12] Hochtief Solutions AG is a long-established engineering contractor with its headquarters in Germany. It has constructed rail, road and hydroelectric tunnels throughout the world. It set up an internal joint venture chaired by Bert Hoekstra to deliver the Glendoe scheme. It comprised various Hochtief divisions, including Hochtief UK Construction Ltd. I shall refer to the joint venture as ‘Hochtief’.
Jacobs
[13] SSE appointed Jacobs Gibb Ltd and Jacobs UK Ltd (together ‘Jacobs’) to act as its engineering geology consultant at Glendoe. Jacobs had an important role in relation to the design of both the original scheme and the recovery project. During the construction of the original scheme, it also had a supervisory function. Mr Sandilands described Jacobs as being SSE’s “eyes and ears in the tunnel”.
Donaldson
[14] SSE engaged Donaldson Associates Limited (‘Donaldson’) to provide technical advice on the recovery project. It also appointed Professor Andrew Sloan of Donaldson to act as its expert in this case.
Pöyry
[15] Hochtief retained Pöyry Energy JV (‘Pöyry’), a Finnish company, as its sub-contractor for the design of the civil works. Mr John Ager of Pöyry regularly visited the tunnels to monitor the works and liaise with Hochtief.
Andritz
[16] Hochtief also engaged Andritz, an Austrian company, to be its mechanical and electrical sub-contractor. In the early 2000s, SSE refurbished 25 of its power stations. Andritz was involved in that project, which standardised the electronic signals sent out by each plant. It therefore had some knowledge of SSE’s operations.
3. Hydroelectric Tunnels
History
[17] The science of tunnelling dates back to antiquity. Its modern history is linked to Scandinavia. After the First World War there was a shortage of steel for industry. Norwegian engineers discovered that water can be taken through unlined tunnels, provided that there is enough rock cover to counteract the water pressure inside the tunnel. The unlined tunnel concept was further developed in the 1950s as it afforded substantial savings in cost and time. Norway is now completely dependent on hydropower and has several thousand kilometres of unlined tunnels.
Design & Rock Classification
[18] There are risks to a tunnel at each stage of its life: excavation, watering up, operation and dewatering. It is crucial to ensure that the correct level of support is installed within the tunnel. Otherwise it may collapse. There are several recognised...
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The site
...simply undertook to exercise reasonable skill and care in the performance of its works: see SSE Generation Ltd v Hochtief Solutions AG [2016] CSOh 177 at [159]–[164], per Lord Woolman (considering the NEC2 form of contract. he appeal from Lord Woolman’s judgment was allowed by a 2–1 majorit......
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Litigation
...litigation are not bound by the agreement unless they expressly agree to be bound. 562 Any joint statement produced as a Solutions AG [2016] CSOH 177 at [156] and [258], per Lord Woolman (appeal allowed, for unrelated reasons: [2018] CSIH 26); Burr, “Hot-Tubbing with Witnesses of Opinion: C......
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Defects
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