MT HØJGAARD A//S v E.ON Climate and Renewables UK EWCA CIV 407: Fitness for purpose

KEYWORDS: FITNESS FOR PURPOSE

KEY TAKEAWAY

This case highlights the difficulties that can arise where different design obligations are spread across various arguably inconsistent contract documents.

The issue at the heart of this case is who should pay rectification costs where:

the contractor has complied with an established, but incorrect, international design standard; and compliance with the standard means that the contractor cannot satisfy the 20-year fitness for purpose warranty. The Court was asked to interpret the effect of this specific fitness for purpose warranty, in conjunction with more general warranty provisions. The Court of Appeal overturned the trial Judge's decision, holding that the contractor was not under a "fitness for purpose" obligation and had met the more general requirements of reasonable skill and care by complying with the standard, regardless of the error.

Construction contracts commonly include express undertakings in regards to design or suitability. The implications which flow from these can generate disputes when the contract also contains obligations to perform work in accordance with certain standards. This case considers the effect of such a provision, which stipulated design in accordance with an established, international standard that was subsequently found to be flawed.

The facts

E.ON engaged MTH to design, fabricate and install the foundations for 60 wind turbine generators in Scotland. The Contract required MTH, amongst other things, to carry out the Works with due care and skill and to ensure they were "fit for purpose". Importantly, the "fitness for purpose" requirement was to be determined in accordance with the Specification (also referred to as the Technical Requirements) using "Good Industry Practice", which was defined as the skill to be reasonably expected of an experienced contractor, in a manner consistent with international standards. The Technical Requirements were found within a separate document, the Employer's Requirements schedule. They obliged MTH to comply with the internationally recognised design standard, J101, and included a requirement that the foundation structures "ensure a lifetime of 20 years in every aspect without replacement".

Each turbine foundation required a monopile and transition piece held in place by a grouted connection with or without shear keys. MTH's subcontractor designed the grouted connection in accordance with international standard J101. Unfortunately...