In the case of MT Højgaard A/S v E.ON Climate & Renewables UK Robin Rigg East Limited and another , the court had to consider responsibility for the substantial remedial costs of €26.25 million in relation to failed wind farms.
The dispute revolved around the foundation structures of two wind farms, designed and installed by MT Højgaard A/S, which failed shortly after project completion. The key question before the courts was the extent of the performance obligation in MT Højgaard A/S' appointment given the various seemingly conflicting provisions in the documents appended to the design and build contract.
In this article we provide a background to the case and outline the judgment from the Supreme Court, highlighting the key takeaways for parties.
In 2006 E.ON sent out tender documents for the Robin Rigg project to various parties, including their 'Technical Requirements', which formed part of the Employer’s Requirements under the eventual contract, with MT Højgaard A/S eventually securing the contract. The
Technical Requirements outlined minimum criteria to be followed including:
Part 3.1 to section 3 of the Technical Requirements also stated that the requirements contained in that section, thus including para 3.2.2.2(i), were the minimum requirements of E.ON to be taken into account in the design.
A critical aspect of J101 was a mathematical formula which showed how the interface shear strength due to friction is to be calculated. The equation relied on the height of surface irregularities being 0.00037 RP, the outer radius of the pile, for rolled steel surfaces.
Tender documents were prepared on the above basis and a contract subsequently entered into which incorporated the technical information. The contract also included an obligation in clause 8.1 of part D
'To design, manufacture, test, deliver and install and complete the Works in accordance with a number of requirements, including that each item of Plant and the Works as a whole shall be free from defective workmanship and materials and fit for its purpose as determined in accordance with the Specification using Good Industry Practice'.
Fitness for purpose was defined in the contract as fitness for purpose in accordance with, and as can properly be inferred from, the Employer’s Requirements. The Employer’s Requirements were stated to include the Technical Requirements.
Works were completed to the foundations of the wind turbines in 2009. During 2009 a serious problem came to light at Egmond aan Zee wind farm, where the grouted connections did not have shear keys - the same approach adopted by MT Højgaard A/S. Those connections started to fail, and the transition pieces started to slip down the monopiles. It transpired that there was an error in the value given for the RP for rolled steel surfaces in the equation for the interface shear strength, which was out by a factor of 10. This meant that the axial capacity of the grouted connections in wind farm foundations at various locations including Egmond aan Zee and Robin Rigg had been substantially over-estimated.
After failures started occurring at Robin Rigg, MT Højgaard A/S and EON started developing a remedial scheme which was carried out in 2014. Proceedings were then commenced to determine who would bear the remedial costs of €26.25million.
The central question on this appeal was whether, in the light of para 3.2.2.2(ii) of the Technical Requirements, which refer to ensuring a lifespan for the foundations (and the Works) of 20 years, Højgaard was in breach of contract, despite the fact that it used due care and professional skill, adhered to good industry practice when complying with J101.
The court rejected the notion that the reference to J101, which contained the flawed RP value, required a different construction from para 3.2.2.2. Both J101 and para 3.2.2.2 were integral parts of the same contract, and the reconciliation of these terms followed ordinary principles of contractual interpretation.
Courts typically uphold the requirement that the item produced complies with the prescribed criteria, even if the design is specified or approved by the customer or employer. Therefore, MT Højgaard A/S assumed the risk by agreeing to work with a design that rendered the item unable to meet the agreed criteria.
The Technical Requirements expressly stated that the relevant sections were the minimum standard only, and it was MT Højgaard A/S‘ responsibility to identify areas where a more robust design was necessary to achieve all other criteria in the Employer’s Requirements. In those circumstances, it was not for the court to have determine which of the conflicting obligations applied, but rather the 'more rigorous or demanding of the two standards or requirements must prevail, as the less rigorous can properly be treated as a minimum requirement'. The court further confirmed this would be the conclusion even without express reference in the contract to the various requirements being minimum standards as this is the only basis on which to reconcile the various clauses.
Furthermore, the court emphasized that para 3.2.2.2 of the Technical Requirements provided a sufficient basis to hold MT Højgaard A/S liable for ensuring a 20 year lifespan for the foundations. The court's interpretation aligned with the natural meaning of the clause and was consistent with ordinary principles of contractual interpretation. The court summarised as stated in previous cases:
“Inelegant and clumsy” drafting of “a badly drafted contract” is not a “reason to depart from the fundamental rule of construction of contractual documents that the intention of the parties must be ascertained from the language that they have used interpreted in the light of the relevant factual situation in which the contract was made”.
The Supreme Court's landmark judgment in the Robin Rigg offshore wind farm appeal clarifies the contractual liability of contractors when compliance with specific technical requirements is at stake. The decision holds MT Højgaard A/S accountable for the failure of the foundation structures and places the responsibility for remedial costs on the contractor, reinforcing the importance of accurate adherence to technical specifications in large-scale projects. This ruling sets a significant precedent for future cases involving similar contract disputes in the renewable energy sector.
For further advice, please contact out construction team.
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