Unstable Foundations: Following Industry Standards During Design Not Enough to Absolve Design/Build Contractor of Liability
Construction and Procurement Law News, Q1 2018
MT Højgaard A/S (Respondent) v E.ON Climate & Renewables UK Robin Rigg East Limited, involved the construction of foundation structures for an offshore wind farm. The Supreme Court of the United Kingdom analyzed whether a design/build contractor had liability when the turbine platforms began to fail despite the design/build contractor following industry standards as part of the design process.
In 2006, the E.ON Group sent tender documents to a number of parties related to the design and construction of offshore wind turbines at Robin Rigg in Solway Firth off the western coast of England and Scotland. The tender documents included E.ON’s key functional requirements for the project, including provisions stating that the elements covered by the tender should have a minimum “design life” of twenty (20) years without major retrofits or refurbishments. The tender documents repeatedly emphasized that this design life was a minimum standard, and standards that are more rigorous should be adhered to where necessary. The tender documents also required the design of the foundations for the wind farm installations to conform to a document known as J101, an international standard for the design of offshore wind turbines published by a Norwegian entity. A portion of J101 focused on the design and construction of the grouted connections of the turbine foundations and contained a specific equation for assessing the shear strength of the grouted connections under friction in circumstances where the designer elected not to use “shear keys.”
MT Højgaard A/S (“MTH”) won the tender for the design/construction of the offshore wind turbines. Shortly after MTH completed its work, defects were discovered in the turbine platforms, which resulted from an inaccuracy of the equation in J101 related to shear strength. E.ON sought to hold MTH liable for the defect arguing that MTH breached a fitness of purpose obligation under the design/build contract. MTH refused liability for the defect asserting that it complied with J101 and exercised reasonable skill and care under the contract.
The Supreme Court of the United Kingdom found persuasive E.ON’s argument that the design/build contract imposed a fitness for purpose obligation on MTH to provide turbine platforms that would have a minimum life of 20 years. Specifically, the Supreme Court held that the design/build contract obligated MTH to comply with particular specifications and standards, such as J101, but also to achieve a specific result, a service life of 20 years. Even though MTH’s design work complied with an industry standard such as J101, that compliance was not enough to achieve the required goal under the contract of providing a turbine platform that could last 20 years without major retrofits or refurbishments. The Supreme Court also rejected MTH’s argument that the 20-year service life warranty was non-contractual because it was “tucked away” in the technical requirements portion of the bid documents. The Supreme Court noted that even a “badly drafted contract” would not negate the Court’s duty to interpret the language of the contract using well-established principles of contractual interpretation.
This decision serves as a reminder to design/build contractors to be cognizant of the interplay between industry standards and specifications present in bid and contract documents, and to consider how compliance with those industry standards might not be enough to meet specific fitness or performance warranties made elsewhere in the contract documents.