Gone With The Wind: Little Sympathy For Contractors On Design Obligations

Introduction

Energy, engineering and construction disputes often give rise to the issue of what design standard a design and build contractor should be held to. The issue is particularly marked where a contract provides that the contactor must design and build in accordance with a prescribed standard but also that the product must be fit for its intended purpose. What happens when the contractor meets the standard but, through no fault of its own, the product remains unfit for its purpose?

The Supreme Court took the opportunity to address this question in the recent case of MT Høgaard A/S v ON Climate and Renewables UK Robin Rigg East Ltd [2017] UKSC 59. The decision provides some important practical lessons for parties negotiating and drafting design and build contracts.

Background

In Højgaard, the appellants ("E.ON", as employer) had engaged the respondent ("MTH", as contractor) to design and install the foundation structures of two offshore wind farms in the Solway Firth. The parties' bespoke contract contained a variety of provisions relating to the standard to which the foundations were to be designed and built by MTH. In the main contract, clause 8.2 provided:

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

(i) with due care and diligence expected of appropriately qualified and experienced designers, engineers and constructors ...

(x) so that each item of Plant and the Works as a whole shall be fit for its purpose as determined in accordance with the Specification using Good Industry Practice ...

(xv) so that the design of the Works and the Works when completed by the Contractor shall be wholly in accordance with this Agreement and shall satisfy any performance specifications or requirements of the Employer as set out in this Agreement ..."

The employer's requirements included detailed technical requirements. Paragraph 1.6 of the technical requirements provided:

"The Works element shall be designed for a minimum site specific 'design life' of twenty (20) years without major retrofits or refurbishments ..."

Paragraph 3.1 of the technical requirements included the wording:

"(i) ... the requirements contained in this section ... are the MINIMUM requirements of [E.ON] to be taken into account in the design.

(ii) 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."

Paragraph 3.2 of the technical requirements dealt with design and required the contractor to prepare its detailed design in accordance with international standard DNV-OS-J101 ("J101") for the design of offshore wind turbines. Paragraph 3.2.2.2(ii) went on to state that:

"The design of the foundations shall ensure a lifetime of 20 years in every aspect without planned replacement ..."

Unknown to either party, however, the international standard J101 contained a critical flaw. Section 9 of J101 dealt with the design and construction of grouted connections, which connect the bottom of the turbine tower to the top of the monopile. It contained a number of parametric equations, one of which calculated the fatigue strength of the grouted connection and their susceptibility to stress fractures. A constant in that equation was incorrect by a factor of 10. The effect was that using the equation as stated would significantly overestimate the grouted connection's ability...