Author: Gillian Birkby
Is there a difference between a “lifetime of 20 years” and a “design life of 20 years”? The Technology & Construction Court said “no” (sort of) but the Court of Appeal said “yes”. Does the difference matter? Over £19 million of damages was hanging on this question, so yes, it was rather important.
The case involved the construction of an offshore wind farm, which suffered serious failures shortly after construction. The contract documents were lengthy and in parts highly technical. They were also inconsistent with each other, which does happen sometimes. The Employer’s Requirements included the Technical Requirements (TR), which stated that “the works elements shall be designed for a minimum site specific “design life” of 20 years without major retrofits or refurbishments”. But the TR also stated “the design of the foundations shall ensure a lifetime of 20 years in every aspect without planned replacement”. The contract required that the design of the works and the works themselves “shall satisfy any performance specifications or requirements of the Employer as set out in this Agreement”.
The problem arose because the TR included an international recognised standard known as J101, which unfortunately contained a significant error. The construction complied with this standard and the Court of Appeal said that there had been no negligence or lack of professional skill on either side. The question was whether the contractor, MTH, had nevertheless been in breach of a separate obligation to provide a structure with a lifetime of 20 years.
The Court of Appeal made a highly sophisticated analysis. The judge said (perhaps a little wearily) that they had been faced with “contractual documents of multiple authorship, which contain much loose wording”. That is of course no surprise, even for projects on a much smaller scale than a wind farm. Very often the technical documents are prepared by non lawyers; the solicitor drafting the contract does not see them, and the result can be inconsistencies.
In this case the conditions, which took precedence over the other contract documents, required the contractor to exercise due care, professional skill, adherence to good industry practice, compliance with the Employer’s Requirements and so on. They also required that the works as a whole should be fit for purpose as determined in accordance with the specification, using good industry practice. The Court held that this was significant. More onerous obligations were contained in the TR, but they were of lesser legal status. In addition J101, on a detailed examination, did not state that compliance with it would guarantee a lifetime of 20 years for the structure, only that it would lead to a sufficiently high probability that the structure would work as intended for 20 years.
Reading J101 in the context of the other contract documents, the Court said that there had been no 20 year guarantee; most of the TR were concerned with the “design life” of the structure, which did not imply that it would inevitably function for 20 years (i.e. “a lifetime of 20 years”), although it probably would. A contractor could be under an obligation to exercise professional skill and care, and quite separately give a more onerous guarantee of performance, but in this case the contractor had not done so.
There is some comfort here for those whose contract documents are less than perfect, but who wants to spend time and money going to the Court of Appeal to establish which of their inconsistent clauses apply? Spending a little extra time before the contract is signed, to put the contract documents into order, could save a great deal of trouble later on.
Gillian Birkby, Head of Construction, Fladgate LLP (email@example.com)