Unforeseeable Ground Conditions: The Obrascon Case Reaches The Court Of Appeal

The decision of Mr Justice Akenhead in the Obrascon case featured in Issue 10 of IQ last year, where we reviewed the implications of the judgment in relation to termination by the Employer and serving contractual notices. The case has now reached the Court of Appeal1, where Lord Justice Jackson considered certain discrete elements of the original judgment.

To recap, Obrascon ("OHL"), a Spanish civil engineering contractor, was engaged, under an amended FIDIC Yellow Book, to construct a road around Gibraltar Airport. Mr Justice Akenhead held that, amongst other things, the Employer had effectively terminated the contract under clause 15 of the contract. The issues on appeal primarily related to the following conclusions of Mr Justice Akenhead:

The amount of contaminated soil which OHL encountered was not more than an experienced contractor should have foreseen. Therefore OHL was not entitled to an extension of time or additional payment under clause 4.12 of the Conditions in respect of contamination. OHL, in breach of clause 8.1, failed to proceed with due expedition and without delay. The Employer validly terminated the contract pursuant to clause 15.2. Unforeseeable ground conditions

Under the basic scheme of clause 4.12, if a contractor encounters adverse physical conditions which he considers to have been unforeseeable, then the contractor must give notice to the engineer as soon as practicable.

Physical conditions are defined as meaning:

"natural physical conditions and man-made other physical obstructions and pollutants, which the Contractor encounters at the Site when executing the Works, including sub-surface and hydrological conditions but excluding climatic conditions". By clause 1.1.6.8, "unforeseeable" means:

"not reasonably foreseeable by an experienced contractor by the date for submission of the Tender". Here, there was ground contamination which arose from the military activities on the site over previous centuries and from the use of the site as an airfield in the twentieth century. Airfield activities generated further contamination, for example aircraft fuel and substances used for de-icing runways. All these matters were clearly spelt out in the desk study provided to tenderers in 2008. The study included a plan showing a rifle range at the north-east corner of the isthmus, where the tunnel was due to be built. Most of the contamination was confined to the made ground, although some of the hydrocarbons penetrated deeper...