Through The Rude Wind's Wild Lament - ‘Fitness For Purpose' Obligations In Offshore Construction Contracts

As of November 2016, the United Kingdom has just under 7,000 wind turbines. They generate 14.1 gigawatts of electricity, contributing about 11% to the country's electricity requirements. Of that, 5.1 gigawatts are generated by offshore windfarms. Offshore windfarms also generate litigation and arbitration. In particular, two developments (Robin Rigg and Greater Gabbard) have led to decisions by the English Courts clarifying the scope of a contractor's obligation to ensure that works are 'fit for purpose'. We explore these below.

Fitness for purpose - the background

A contractor's obligation to complete the works can be expressed in a number of ways, ranging from requiring the contractor to act with 'reasonable skill care', to complying with 'good industry practice' (or even 'best practice') all the way to warranting fitness for purpose. Fitness for purpose is seen as the gold standard. If the works prove unfit for their purpose, a contractor might still be liable even though it exercised all reasonable skill and care, complied with the specifications, and followed the applicable industry standards.

The FIDIC Silver Book ("Conditions of Contract for Engineering Procurement and Construction/Turnkey Projects") contains an express fitness for purpose obligation in Clause 4.1:

"When completed, the Works shall be fit for the purposes for which the Works are intended as defined in the Contract."

Under English law, quite apart from such an express term, a warranty of fitness for purpose may also be implied where the contractor is carrying out the design. In IBA v EMI Electronics and BICC Construction Ltd (14 BLR 9), the House of Lords confirmed that a warranty of fitness for purpose falls to be implied where the contractor is responsible for the design and holds itself out as having particular skill or expertise - which the employer relies on. The case concerned a television mast that was over 350m tall and of cylindrical design. At the time, it was the highest mast of this design that had been built anywhere in the world. It collapsed after 3 years, as a consequence of 'vortex shedding' caused by winds and asymmetrical ice loading. The contractor argued that it should not be held to having warranted fitness for purpose as the design was complex and pushed the boundaries of how such structures could be built. Their Lordships nonetheless held that:

"... in the absence of a clear, contractual indication to the contrary, I see no reason why one who in the course of his business contracts to design, supply, and erect a television aerial mast is not under an obligation to ensure that it is reasonably fit for the purpose for which he knows it is intended to be used. ... The critical question of fact is whether he for whom the mast was designed relied upon the skill of the supplier (i.e. his or his sub-contractor's skill) to design and supply a mast fit for the known purpose for which it was required".

This implied warranty requires that the works be 'reasonably' fit for their purpose. In IBA v EMI, the Court of Appeal clarified that the mast had to be able to withstand meteorological conditions that were reasonably likely to occur in the relevant location - so entirely unforeseeable natural disasters such as earthquakes or perhaps a hurricane would not be covered by the warranty. In contrast, FIDIC Clause 4.1 seeks to impose an absolute obligation and makes no reference to the works only being 'reasonably' fit for purpose. This is potentially a very onerous provision, although much will depend on how clearly the 'purpose' is defined, as is illustrated by the Robin Rigg decision.

Robin Rigg - Overlapping obligations

The Court of Appeal's judgment in MT Højgaard A/S v E.On Climate and Renewables UK Robin Rigg East Ltd [2015] EWCA Civ 407 demonstrates how an obligation of fitness for purpose can be watered down because the purpose is not expressly defined or stated in any one place in the contract, in circumstances where the contract also imposed 'reasonable skill and care' obligations on the contractor alongside 'fitness for purpose'.

In December 2006, E.On engaged MT Højgaard to design, build and install foundations for 60 offshore wind turbines, part of the 'Robin Rigg' development in the Solway Firth in Scotland. Steel monopiles driven into the seabed were to be used as foundations for the turbines. The towers of each turbine were then to be connected to the top of the monopile. That connection involved a steel cylinder, called a transition piece, which is fitted over the top of the pile. The gap between the transition piece and the pile was to be filled with grout. This 'grouted connection' anchors the transition piece because of friction between the grout and the steel surfaces either side of it. The turbine tower then slots into the transition piece. Grouted connections can be supplemented with welded 'shear keys', which penetrate into the grout and are meant to strengthen the connection. However, shear keys also introduce the risk of stresses near the area of penetration weakening the grout, potentially causing the connection to fail.

MT Højgaard's scope of work included the design of the grouted connection. MT Højgaard's design did not feature shear keys. That was because it had carried out calculations set out in a well-known international standard for the design of offshore wind turbines, DNV-OS-J101 ("J101"): the standard said that these calculations specifically aimed at testing the strength of grouted connections. The results of MT Højgaard's calculations showed...