Van Oord UK Ltd & Anr v Allseas UK Ltd

[2015] EWHC 3074 (TCC)

In this case, the Claimants (a JV known as “OSR”) made a number of disruption and prolongation claims against AUK arising out of the onshore laying of a thirty-inch gas export pipeline in the Shetland Islands in Scotland.

Article 2.2.3 of the Contract provided that should OSR encounter subsurface conditions different from those described in the Contract Documents which an experienced Contractor could not reasonably have been expected to foresee following an examination of those documents and data which substantially modified the scope of work, contract price or completion date then notice should be given. Mr Justice Coulson referred to the 2014 judgment of Mr Justice Akenhead in Obrascon Huarte Laine SA v Her Majesty’s Attorney General for Gibraltar which was upheld by the CA this year ([2015] EWCA Civ. 712). Here the Judge refused a claim based on allegedly unforeseen ground conditions.  One of the disputes there centred on the contractor’s case that, if the ground conditions were not expressly identified in the geotechnical information provided pre-contract, then they had a claim for unforeseen ground conditions. Mr Justice Akenhead rejected that approach saying:

“I am wholly satisfied that an experienced contractor at tender stage would not simply limit itself to an analysis of the geotechnical information contained in the pre-contract site investigation report and sampling exercise. In so doing not only do I accept the approach adumbrated by Mr Hall [the defendant’s geotechnical expert] in evidence but also I adopt what seems to me to be simple common sense by any contractor in this field.”

The problem for OSR here was that their pleaded case was almost entirely based on the results of a probe survey, which was irrelevant to the Article 12 claim because it was not a Contract document.  Accordingly, the subsurface conditions were not different from those described in the Contract documents. The Judge noted that contractors are provided with all available information as to ground conditions, but ultimately it is a matter for their judgment as to the extent to which they rely upon that information. It is wrong in principle for a contractor to argue that, merely because, in some particular locations, the conditions were different from those set out in the pre-contract information, those different conditions must somehow have been unforeseeable. That is a matter of common sense:

“Every experienced contractor knows that ground investigations can only be 100% accurate in the precise locations in which they are carried out. It is for an experienced contractor to fill in the gaps and take an informed decision as to what the likely conditions would be overall.” 

OSR’s claim had in fact already failed at the first hurdle.  They had failed to give proper notice. Article 22 provided a maximum of five days for the claim request to be issued following the occurrence of the relevant event. There was an additional seven days (making twelve days in all) for the production of full substantiation. The article made it plain that a failure to comply with these provisions would disentitle OSR to any claim. There was no challenge to the Article itself and OSR maintained that they did comply with these provisions.

OSR said that they discovered unforeseeable ground conditions on 11/12 October 2011. Therefore a notice should have been provided by OSR no later than 17 October. It was not. The Judge rejected the suggestion that on 11/12 October OSR thought that the deep peat excavated at the start of the Southern section was merely an isolated pocket and as such it was not thought to be a claim event until a few days later when a notice was given, namely on 19 October 2015.  The problem for OSR was that there was no evidence to support this. The notice of 19 October was therefore not within five days of the relevant event, and so was out of time.

In fact the Judge did not accept that the letter of 19 October was a notice under Article 22 in any event. The last paragraph of the letter made it plain that it was “notification in accordance with Article 15.4 … where we are to notify you of events affecting progress of the work”. It made no reference to Articles 12 or 22. Article 15 dealt with the possibility of an extension of time. In other words, this was not a notification of unforeseen ground conditions under Article 12 or a request for a Change Order under Article 22. There was a further notice submitted on 22 November 2011. This was where OSR provided full substantiation of the claim. As the Judge again noted, this was also far outside the seven days for the provision of all relevant financial information.

Finally, the claim was put on an alternative basis, by way of a claim for damages for breach of implied terms as to cooperation, hindrance and prevention. This follows the 1985 case of London Borough of Merton v Stanley Hugh Leach Ltd (1985) 32 BLR 51. Whilst the Judge was prepared to accept that, in some instances, particularly where there are straightforward claims for failure and default on the part of an employer, there may be room for implied terms like these, he made it clear that he did not understand how such terms could be of any relevance to a claim for unforeseen ground conditions.  The claim fell to be analysed under the express terms of the contract. It could not be rescued by alleged breaches of these implied terms. This was a claim triggered by ground conditions and has nothing whatsoever to do with hindrance, prevention or lack of cooperation on the part of AUK.

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