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UK: Supreme Court decides on MT Højgaard v E.ON case related to design risk in offshore wind farms

  • United Kingdom
  • Energy and infrastructure - Clean energy

07-08-2017

The UK Supreme Court handed down its decision in the case of MT Højgaard v E.ON yesterday. The decision relates to design responsibility – fitness for purpose v reasonable skill and care - and has been eagerly awaited by all parties involved in the construction of complex projects, particularly in the energy sector, and particularly where the contracts are subject to English law. It is those on the Employer side of such projects who will be most happy with what they read.

It has been a rollercoaster ride for the parties – E.ON won the case at first instance in front of Edwards-Stuart J; MTH won the appeal; and now E.ON have been successful in front of the Supreme Court.

The parties were arguing over who should bear responsibility for significant remedial costs of 26.25 million euro associated with failures in the grouted connections to the foundations of offshore wind farms at Robin Rigg in the Solway Firth.

The court had to reconcile apparent inconsistencies between different parts of the contract. In its technical requirements the contract included a reference to an international design standard J101 that incorporated an error in a mathematical formula, meaning that the strength of the foundation structures was significantly over-estimated. Other provisions required the foundations to be designed to have a lifetime of twenty years. The contract also contained a fitness for purpose provision that linked back to the technical requirements.

The UK Supreme Court applied ordinary English legal principles of contractual interpretation in reaching its unanimous decision to allow E.ON’s appeal. It ultimately found that there was no inconsistency, that the design requirements were a minimum, and that “the foundations neither had a lifetime of 20 years, nor was their design fit to ensure one”.

Each case inevitably turns on its own facts and its own contractual wording. Nevertheless this decision is of great interest in its analysis of the meaning under English law of: ‘fitness for purpose’; contractual references to design lifetime; and the obligations on the contractor to ensure that the works comply with the criteria prescribed in the contract.

To quote the outgoing President of the UK Supreme Court, Lord Neuberger, the contractor is “expected to take the risk if he agreed to work to a design which would render the item incapable of meeting the criteria to which he has agreed”.

With complex projects it is notoriously difficult to avoid inconsistencies within the contract documents. This decision is another reminder that parties should do everything they can to ensure careful definition of the scope of the works and clarity about which party should bear responsibility for design risks and whether the design obligation is one of reasonable skill and care or one of achieving an end result of being fit for purpose.

For more information contact

Jonathan Douglas, Partner

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