HFW successfully acted on behalf of Hochtief in a dispute over a major tunnel collapse at the Glendoe Hydro Electric Plant in the Highlands of Scotland. Hochtief defeated a £200 million claim brought by energy giant SSE by establishing that it was not liable for the collapse.
In December 2016, the Court of Session in Scotland issued its decision in a case concerning liability for the collapse of a section of the headrace tunnel at the Glendoe Hydro Electric Plant. Hochtief completed the project in December 2008, but power generation came to a halt just eight months later, in August 2009.
The water-bearing headrace tunnel was constructed through hard rock using a Tunnel Boring Machine and was designed to be substantially unlined, with only localised support. When the tunnel was dewatered it was found that there had been a major rock fall, and it was eventually ascertained that a 71 metre stretch of tunnel was completely blocked with debris, from the invert to tunnel crown. A further 600 metres of debris only partially filling the tunnel cross section extended in a pile downstream of the fully blocked zone. The length of the tunnel crown which had actually collapsed was never finally established, and was a major area of dispute between the parties. SSE originally asserted it was 270 metres long, later reducing its claimed collapse length to 71 metres. Hochtief meanwhile contended that the actual collapse was in fact a maximum of only 15 metres in length.
SSE also claimed that there were 114 secondary features outside of the collapse zone where the support of the tunnels was supposedly inadequate, and which also constituted defects in Hochtief’s design.
SSE’s position was that the collapse and secondary features were down to inadequate rock support caused by Hochtief’s allegedly incorrect rock classification. This informed SSE’s decision to substantially line the entire headrace tunnel as part of the remedial scheme. Hochtief argued that the secondary features identified by SSE either required no additional support (because they were entirely typical features of an unlined tunnel of this nature) or were normal maintenance features to be expected on a first dewatering of any comparable unlined tunnel and which could have been addressed through the application of localised support, such as additional rock bolts or shotcrete.
History of the Dispute
A dispute arose between SSE and Hochtief concerning liability for the collapse, and who should bear the cost of the remedial works as they proceeded. SSE asserted that the collapse and secondary features were due to defective design because the rock support which Hochtief had installed in the tunnels was inadequate.
An important facet of the dispute was SSE’s presumption from the outset that Hochtief was liable until such point as Hochtief could establish otherwise. This was in part based on SSE’s interpretation of the contract, which reversed the burden of proof in relation to defects of design. The clause in question of the NEC contract provided that “the Contractor is not liable for Defects in the works due to his design so far as he proves that he used reasonable skill and care to ensure that his design complied with the Works Information” .
In the more usual course of things under other contracts, it would be for a party alleging defects (usually the employer) to establish that there is a design error, and that the contractor failed to exercise reasonable skill and care. The NEC form however, places the onus on the contractor to prove that he has not been negligent. This will often require contractors to prove the entire construction process was reasonable and appropriate.
Following the collapse, SSE sought to influence the extent and nature of the remedial works (despite Hochtief being the design and build contractor and liable for the performance of the design). SSE also insisted on Hochtief bearing half the cost of all the remedial works, even though SSE acknowledged that liability had not been established. As a result, the parties failed to agree a basis for Hochtief to undertake the remedial works, and SSE went on to appoint a replacement contractor to execute the recovery works.
The recovery works commenced in March 2010 and primarily consisted of the construction of a massive 605 metre long bypass tunnel around the fully blocked zone but also a major part of the downstream debris pile; the construction of an approximately 500 metre long downstream access tunnel; and the full circumferential lining of approximately 70% of the headrace tunnel.
After SSE made a call on the on demand performance bond, Hochtief commenced an adjudication in 2011, seeking a decision that it was not liable for the collapse. Following a five month process the adjudicator, Mr Robert Gaitskell QC, found that the collapse was an employer’s risk, and Hochtief therefore had no liability to SSE.
The Court Case
In December 2012, SSE commenced proceedings in the Scottish Court of Session, seeking to overturn the adjudicator’s decision, and claiming £200 million from Hochtief (including £130 million for the cost of repairs, and £65 million for loss of profit ).
The case was one of the longest and most technically complex to come to trial in Scotland in recent years and was held between October 2015 and April 2016. The court sat for 87 days and over 73,000 documents in evidence were lodged in the electronic bundle, including 40 expert reports and 103 witness statements.
19 experts gave evidence and there was innovative use of an animation and 3D modelling during the trial to help explain the complex geotechnical concepts which went to the heart of liability. This was also the first occasion in Scotland where expert evidence was taken concurrently, in a procedure colloquially known as “hot-tubbing” .
In finding in favour of Hochtief, the judge considered the contractual provisions whereby the contractor is not liable for defects in his design so far as he proves that he used reasonable skill and care to ensure that it complied with the works information. Lord Woolman held that this provision “placed an important brake on liability” and held that the effect of the contract was that “Hochtief did not guarantee the works”.
The judge found that Hochtief had discharged the burden of proof. In order to get to this position, however, Hochtief had been faced with the considerable challenge of proving a negative: that it had not been negligent. This entailed demonstrating that everything it did – from early design decisions, to the tunnelling and mapping processes, the selection and installation of support, and the on-site processes for undertaking snagging and take over – were all done competently and were not negligent. This contributed, in no small measure, to the length and complexity of the trial.
Hochtief was held not to be liable for the collapse which the judge again confirmed was an employer’s risk event. The judge also concluded that none of the other 114 features identified in the tunnel by SSE were defects. SSE was therefore unable to recover any of the reinstatement costs incurred following the collapse.
One very practical issue arising was the possible adverse impact that the NEC standard wording had on the administration of the contract, and the approach Hochtief was forced to adopt in its defence at the trial. Because the contract reversed the burden of proof, SSE insisted on Hochtief bearing half of all the cost of reinstatement works as a pre-condition to carrying out the remedial works. This contributed to SSE’s decision to appoint an alternative contractor. Furthermore NEC’s reversal of the burden of proof greatly contributed to the length and complexity of the trial.
Hochtief contended that under the NEC forms of contract all damage to the works after Take Over is presumed to be an employer’s risk event until determined otherwise. Unfortunately SSE did not administer the contract to reflect this and appeared to have misunderstood as to what the contract required.