Design Obligations: Fitness For Purpose

As Karen Gidwani explains, last year brought the conclusion to the long-running case of MT Højgaard A/S v. E.ON Climate and Renewables UK Robin Rigg and another ("MTH v. E.ON")1. Fenwick Elliott acted for MTH.

This was a case concerning the principles of contract interpretation in the context of a fitness for purpose clause. It was finally decided by the Supreme Court in E.ON's favour. This article focusses in more detail on some of the arguments made by MTH and the treatment of those arguments by the Supreme Court.

A key issue to consider with this case is whether there is a trend now by the courts to take a more literalist approach to the interpretation of contracts. This is a trend that has been denied recently by the Supreme Court in Wood v. Capita Insurance Services Ltd2, but in some of the cases that have emerged since Arnold v. Britton3 (decided after the Court of Appeal decision in MTH v. E.ON) the court does appear to be more willing to look at the letter of the contract, placing less weight on intention and surrounding circumstances.4

The background

In 2006, E.ON engaged MTH to design, construct and install 62 foundations for the offshore wind farms at Robin Rigg, in the Solway Firth.

The foundations were designed and constructed as monopiles, with a transition piece that sat over the top of the monopile. The transition piece linked the monopile with the turbine tower. The transition piece was joined to the monopile by a grouted connection. The annulus between the monopile and the transition piece was filled with grout. The load from the transition piece was passed to the monopile not through adhesion of the grout as you might expect but instead by friction.

This type of grouted connection had a long history of usage in the oil and gas industry on jacket structures. However, the monopiles contemplated for offshore wind farms were much larger in diameter than the jacket structures used in oil and gas projects.

Det Norske Veritas ("DNV") is a long-standing maritime organisation based in Norway which, amongst other things, publishes codes and standards for use on offshore projects. These are adopted for use in projects throughout the international shipbuilding and energy industries as codes which provide an acceptable level of safety for owners, investors and contractors. In 2004, DNV issued its first international standard (DNV-OS-J101 ("J101")) aimed solely at the construction of offshore wind farms. J101 contained a section on the design and construction of grouted connections and set out a parametric equation to be used to ensure adequate load-bearing capacity of the grouted connection for the relevant construction.

The conditions of MTH's contract with E.ON were loosely based on a FIDIC contract. The conditions included general obligations on the contractor at clause 8.1, and in particular:

"8.1 The Contractor shall, in accordance with this Agreement, design, manufacture, test deliver and install and complete the Works:

. . .

(x) so 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."

The contract documents were numerous and diffuse, but it was agreed between the parties that the Technical Requirements, which formed part of the contract, were the Specification. The Technical Requirements ("TR") consisted of over 300 pages and comprised 14 sections, including section 1 (General Description of Works and Scope of Supply) and section 3 (Design Basis).

TR 1.6 set out the Key Functional Requirements of the works including that the works should be designed for a minimum site-specific design life of 20 years without major retrofits or refurbishments. TR 1.6 also stated that works were to be designed and installed in accordance with international codes and standards, and that where the design differed from such standards then the adopted design basis had to be at least the equivalent of the requirements of the designated standard.

TR 3 contained a number of references to a design life of 20 years. TR 3.1 stated that:

"the requirements contained in this section and the environmental conditions given are the MINIMUM requirements of E.ON to be taken into account in the design. It shall be the responsibility of MTH to identify any areas where the works need to be designed to any additional or more rigorous requirements or parameters."

TR 3.2.3 stated that J101 and its normative references applied and that MTH's design was to be in accordance with international and national rules with a stated hierarchy; and J101 was at the top of that hierarchy.

TR 3.2.5 stated that the design of and construction of the grouted connections were to be carried out using J101.

The key section of the TR for the purposes of the ligation was the second paragraph of TR 3.2.2.2 (referred to in the Supreme Court as TR 3.2.2.2(ii)). TR 3.2.2.2 stated:

"The detailed design of the foundation structures stall be according to the method of design by direct simulation of the combined load effect of simultaneous load processes (ref: DNV-OS-J101). Such a method is referred to throughout this document as an 'integrated analysis'.

The design shall be optimised using an integrated foundation, transition piece, and tower model with combined wind and wave loading . . . The design of the foundations shall ensure a lifetime of 20 years in every aspect without planned replacement...