The Supreme Court has unanimously ruled in favour of energy company E.ON in a dispute over repair costs for an offshore wind farm.
According to the court, Danish company MT Højgaard (MTH) should be liable for failings that came to light soon after the Robin Rigg wind farm was completed.
The dispute concerned who should bear the €26.25 million (£23m) remedial costs. The Supreme Court’s decision reversed an earlier Court of Appeal ruling and restored an initial determination by the High Court.
Between 2007 and 2009 MTH undertook the design, manufacture and installation of the foundations for the farms, located between the Scottish and English coasts.
However, it was later discovered that due to an error in the international standard used in the design, the capacity for load bearing in the foundations had been over-estimated and they would need repairing.
The High Court found that MTH was responsible, primarily because the contract provided that it ensure the life of the foundations for 20 years.
The Court of Appeal overturned that ruling in 2015, prompting E.ON to take the case to the Supreme Court.
In yesterday’s decision, the Supreme Court said the relevant provisions of the contract and specification 'effectively imposed a warranty on MTH’.
Giving the lead judgment, Lord Neuberger said it was up to the contractor to identify areas where the works needed to be designed more carefully.
‘Generally speaking, the contractor is expected to take the risk if he agreed to work to a design which would render the item incapable of meeting the criteria to which he has agreed,’ he added.
‘The foundations neither had a lifetime of 20 years, nor was their design fit to ensure one,’ the judgment said. ‘The technical requirements expressly prescribe only a minimum standard. It was the contractor – ie, MTH’s – responsibility to identify areas where the works needed to be designed in a more rigorous way.’
Daniel Wood, partner at international firm Gowling WLG, which represented E.ON, said parties entering into contractual arrangements should 'expect to be bound by the terms that they have agreed'.
'In this particular case, the contractor was found to be responsible for the failure in an imposed design code, it being established that - on the contractual wording used - this was a risk that it had agreed to take. If costly disputes are to be avoided, parties must therefore ensure that their agreements accurately reflect their intentions. The courts will not allow parties to escape from a bad bargain. If the words are clear, they will be enforced,' he added.
A spokesperson for E.ON said the ruling showed that MTH were obliged to design the grouted connection between the monopile and the transition piece to have at least a 20-year design life.
'Since E.ON had discovered within the first two years that the design would not last for 20 years, then MT Hojgaard were found to be in breach of contract,' they said.
The spokesperson added that MTH's argument that it had based its design in compliance with a specified international standard J101, which was subsequently discovered to contain an error, did not absolve MTH from their contractual obligation.
MTH was represented by onstruction specialists Fenwick Elliot.