A Supreme Court case that was decided yesterday will have ramifications for the entire construction industry. We have prepared the following summary:
E.ON appointed MT Højgaard A/S (“MTH”) to design, build and install two offshore wind farms.
E.ON’s fitness for purpose standard was that the foundations of the two offshore wind farms would last for 20 years without the need for replacement. Despite this standard, the foundations needed repair shortly after construction.
The contract contained conflicting information in relation to the fitness for purpose standards required.
The Supreme Court held that where two fitness for purpose standards coexisted the ‘more rigorous or demanding of the two standards or requirements must prevail’ (paragraph 45). The Supreme Court also stated that a minimum standard was just that – a minimum. Consequently, MTH was under a duty to improve upon the design to ensure adherence to the fitness for purpose standards.
The outcome of the appeal to the Supreme Court was the reinstatement of Edwards-Stuart J’s first instance decision: MTH breached its fitness for purpose obligations under the contract and is liable for the costs of the remedial works to the wind farms.
This is an enormously significant decision, which will have ramifications for the entire construction industry. Sharpe Pritchard’s construction team will provide a full report and analysis.