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||Neutral Citation Number:  EWHC 3074 (TCC)
||Case No: HT-2014-000032
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
TECHNOLOGY AND CONSTRUCTION COURT
||Royal Courts of Justice
Strand, London, WC2A 2LL
||12 November 2015
B e f o r e :
MR JUSTICE COULSON
|| VAN OORD UK LIMITED
SICIM ROADBRIDGE LIMITED
||- and -
||ALLSEAS UK LIMITED
Ms Finola O'Farrell QC, Mr Michael Stimpson and Ms Jennie Wild
(instructed by K&L Gates) for the Claimants
Mr Simon Lofthouse QC and Mr Robert Clay
(instructed by Curtis Davis Garrard LLP) for the Defendant
Hearing dates: 13, 14, 15, 16, 20, 21, 22, 23, 28, 29, 30 July & 28, 29 September 2015
HTML VERSION OF JUDGMENT
Crown Copyright ©
The Honourable Mr Justice Coulson:
- In this case, the Claimants ("OSR") make three disruption and prolongation claims against the Defendant ("AUK") arising out of the onshore laying of a thirty inch gas export pipeline ("the gas export pipeline") in the Shetland Islands in Scotland. At the start of the trial, the claims were said to be for some £10 million (itself a reduction from the original sums sought), together with interest. By the time of OSR's closing submissions, that total had been reduced by about £2 million, a reflection of some of the problems for OSR highlighted in the evidence. OSR's claims are denied, and AUK counterclaim the monies which they paid to OSR on an interim basis in respect of these claims.
- AUK was the Principal Contractor engaged by Total E&P UK Limited ("TEP") to carry out both the offshore and onshore works involved in the laying of gas pipelines, which formed part of the Total Laggan-Tormore gas field development at Sullom Voe, on Shetland. By a Contract dated 18 November 2010, AUK engaged OSR to carry out the procurement, supply, construction, installation, flooding, cleaning, gauging and testing of pipelines, and certain on-shore works. This dispute between OSR and AUK concerns only the onshore work element in respect of the gas export pipeline. This was the work covered by Works Package 10 ("WP10").
- The proposed route of the gas export pipeline onshore was from the Shetland Gas Plant ("SGP"), on the north western coast, to Firths Voe, on the eastern coast. The gas export pipeline was to run in a dogleg: the first half, called the Northern section, ran almost due south of SGP until it reached the public road B9076; the second half, called the Southern section, ran almost due east from the road crossing (RDX 2) to Firths Voe. Just north of the road crossing the gas export pipeline crossed two existing pipelines, the Brent and the Ninian, owned by TAQA and BP respectively. The total length of the gas export pipeline onshore was about 5.7 kilometres.
- OSR were made up of two separate companies, Van Oord UK Limited and Sicim Roadbridge Limited. This latter company was itself formed for the purposes of this project, and was made up of Roadbridge, experienced Irish civil engineering contractors, and Sicim, an Italian company specialising in the carrying out of mechanical works. It is a notable feature of this case that:
(a) The evidence about Roadbridge's performance was generally positive, even from AUK's witnesses;
(b) The evidence about Sicim's performance was generally negative, even from Roadbridge's witnesses;
(c) There was some evidence to support some elements of the Roadbridge claims, although the fundamental problems with that evidence are addressed in Section 4 below. By contrast there was very little (and sometimes no) evidence to support the Sicim claims at all;
(d) The value of the Roadbridge claims was relatively modest;
(e) The value of the Sicim claims was almost always exaggerated, and the subject of numerous conceded reductions before, during and even after the trial. The Sicim claims amounted to about 80% of the value of the OSR claims in these proceedings.
- The works began in September 2011. The mainline works were completed in September 2012. A separate and discreet area of work, referred to as the beach valve, was significantly delayed and not completed until July 2014.
- The three claims made by OSR against AUK in these proceedings are:
(a) A claim for disruption and prolongation arising out of what is alleged to have been unforeseen ground conditions. This claim, which has been through a number of iterations, involves a consideration of the way in which the works were planned and then carried out on the Southern section, between the road crossing at RDX 2 and Firths Voe. OSR say that they originally intended to carry out this work by constructing a stone road 8 metres wide, with the pipe being laid in a trench excavated into the untreated ground to the side. They say that, because peat was encountered at greater depths than they could reasonably have foreseen in the Southern section of the works, they were obliged to build a 13.5 metre wide stone embankment, and lay the pipe within that embankment. This is referred to in the documents as Claim 3. It should be noted at the outset that this claim does not affect the Northern section, where OSR accept that they always intended to build a stone embankment.
(b) A claim for disruption and prolongation arising out of what is said to have been the failure on the part of AUK to obtain permission for temporary crossings from the owners of the Brent and Ninian pipelines, over the route of which this gas export pipeline passed. The claim is based on what OSR say were the deleterious consequences of AUK's failure to obtain permission for OSR to construct and use temporary crossings above these pipelines, in order to facilitate their construction traffic. TAQA and BP (the respective owners of the Brent and Ninian pipelines) never gave permission for these temporary crossings; instead agreement (in the form of formal proximity of agreements) was reached much later, and was related only to the permanent works, that is to say the permanent crossings which had to be constructed to carry the gas export pipeline beneath the existing Brent and Ninian pipelines. There is a related (but logically distinct) claim as a result of AUK's delay in obtaining these proximity agreements. These two claims are referred to in the documents as Claim 2.
(c) A claim for additional supervision costs arising out of the delay in the supply by AUK of the 55 tonne beach valve and cabin. The delivery of the valve was delayed until 2013 and the cabin was delayed until 2014. This claim is not disputed in principle: indeed the work has been paid for. This is a dispute about quantification only, and is referred to in the documents as Claim 4.
- I set out the relevant terms of the Contract in Section 2. I summarise briefly some of the significant events in Section 3. I outline my views as to the evidence of the factual and expert witnesses in Section 4. Then, in Section 5, before going on to deal with the claim for unforeseen ground conditions, I address what was referred to in the documents as Claim 1 which, although now abandoned by OSR, provides an important backdrop against which to consider Claim 3, the unforeseen ground conditions claim. I then deal with Claim 3 itself in Section 6. I deal with the temporary crossings/proximity agreement claim, Claim 2, in Section 7. I address Claim 4, in respect of the beach valve, in Section 8. There is a short summary of my conclusions in Section 9.
- Before embarking on any of these tasks, I should convey my thanks to all counsel for the manner in which the hearing was conducted. The bundle ran to over 70 lever-arch files and, as I explain in greater detail in Section 4 below, the oral evidence of some of the witnesses was less than helpful. Despite this, the hearing throughout was conducted with analytical skill, good humour and considerable patience. The written openings and closings were clear and full, and therefore of great assistance to the court.
2. THE CONTRACT
- The Contract of 18 November 2010 contained 61 Articles, 10 Annexes and 12 Exhibits. Happily, it is unnecessary to set out anything other than a small part of those provisions. In all the quotations below, "the Contractor" is OSR and "the Company" is AUK.
- Article 12 was entitled 'Awareness of Work Conditions'. It was in the following terms:
"12.1 ACQUAINTANCE WITH WORK CONDITIONS
12.1.1 CONTRACTOR hereby declares and warrants that by entering into THE CONTRACT it has fully acquainted itself as to all local, regional, national and SITE conditions which could affect the performance of THE WORK and/or its obligations under THE CONTRACT, including:
(a) the nature and location of THE SITE including means of access thereto,
(b) as applicable, the atmospheric, meteorological, bathymetric, topographic, marine, oceanographic, hydrological, geological, ocean floor, sub-surface, geotechnical, geophysical, lighting conditions and the like,
(c) the equipment, facilities and resources needed for the performance of THE WORK and the remedying of any defect therein, including accommodation, transportation, handling and storage conditions and the like,
(d) the availability of labour, equipment, parts, consumables, procurement items, fuel, water, electric power and other utilities and the like,
(e) the APPLICABLE LAWS, local customs and fiscal and social legislation and practises, import/export regulations and the like,
(f) generally, all and any other local conditions and/or other conditions of THE SITE that affect or may affect CONTRACTOR'S performance of the WORK and CONTRACT obligations.
12.1.2 CONTRACTOR acquaintance with respect to the conditions related to SITE bathymetry, sea-bed status, geology, sub-surface and to the existing facilities is based on the relevant data and information included in the CONTRACT documents.
12.2 Responsibility of CONTRACTOR with respect to WORK conditions.
12.2.1 Subject to the provisions of sub-article 12.1.2, 12.2.3 and 28.4, CONTRACTOR hereby accepts all responsibility for having properly evaluated all costs and contingencies for successfully performing the WORK and satisfying all CONTRACT obligations and to bear all and any consequences resulting from its improper evaluation. CONTRACTOR undertakes to make no CLAIMS whatsoever or requests for CHANGE ORDERS for price adjustments and/or time extensions based on it's failure to sufficiently acquaint itself with the above mentioned conditions or on it's reliance on COMPANY supplied information and data.
12.2.2 NOT USED
12.2.3 Should CONTRACTOR during the performance of the WORK on SITE encounter sub-surface 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 the CONTRACT DOCUMENTS, and/or
- on the basis of the information and data obtained in performing the pre-installation SITE SURVEYS or of other data available (whether from COMPANY or elsewhere),
- which substantially modifies the SCOPE OF WORK and the CONTRACT PRICE and/or the WORK TIME SCHEDULE and/or the COMPLETION DATE,
Then CONTRACTOR shall give notice thereof to COMPANY and shall be entitled to request a CHANGE ORDER pursuant to Article 22."
Article 15 was entitled 'Work Time Schedule And Progress Control'. This required OSR "to complete the WORK, and each separate designated part of the WORK, on or before the key dates and times for completion set forth in the WORK TIME SCHEDULE" (Article 15.1). Article 15.4 provided a procedure by which OSR was to notify AUK "of all incidents and/or events of whatsoever nature affecting or likely to affect the progress of the WORK…" Article 15.5 was called 'Allowable Time Extensions'.
The Work Time Schedule, which was Exhibit C, provided a programme for the Works. This showed that, for WP10, the onshore civil works for the gas export pipeline would not commence until 30 January 2012. The pull-in of the gas export pipeline was scheduled for April 2012, and the tie-in of the on-shore and off-shore pipeline was scheduled to be completed on 1 June 2012, an overall period of 4 months. The hand over certificate was due on 1 December 2012. The Work Time Schedule did not contain any other information specific to WP10. An attached bar chart did not contain any greater detail, although it appeared to show the four month period starting on 13 February and finishing on 16 June 2012.
Article 22 was concerned with Change Orders. Article 22.2 is what matters for the purposes of this case because that was concerned with 'CONTRACTOR INITIATED CHANGE ORDERS'. Article 22.2 provided as follows:
"22.2 CONTRACTOR initiated CHANGE ORDERS
22.2.1 Upon occurrence of an event affecting the:
(a) Scope of WORK; and/or
(b) the COMPLETION DATE
and provided CONTRACTOR can demonstrate that:
(i) such event is solely due to any act and/or omission by COMPANY, its agents, servants or its other contractors or due to restricted access to SITE. However, this is conditional on CONTRACTOR, its SUBCONTRACTORS or VENDORS not having contributed to the event(s); and
(ii) it could not be foreseen by an experienced contractor; and,
(iii) it would effectively modify the Scope of WORK and the CONTRACT PRICE and/or the critical path of the WORK TIME SCHEDULE,
then CONTRACTOR may submit to COMPANY a request for CHANGE ORDER in accordance with the provisions of this present Article 22.
22.2.2 (i) In the event of FORCE MAJEURE CONTRACTOR may similarly submit to COMPANY a request for CHANGE ORDER but in such a case shall only be entitled to an extension of time as provided for in sub-Article 15 5 paragraph (f),
22.2.3 In the event of damage or loss to the RESULT OF WORK caused by the act and/or omission by any THIRD PARTY and occurring on or between WORKSITES, CONTRACTOR, subject to the provisions of CHAPTER VI, may also similarly submit to COMPANY a request for CHANGE ORDER, but in such a case shall only be entitled to an extension of time as provided for in sub-Article 15.5, paragraph (g) unless the provisions of Chapter VI also allow compensation of cost to CONTRACTOR.
22.2.4 NOT USED.
22.2.5 CONTRACTOR shall issue such request for CHANGE ORDER to COMPANY within a maximum of five (5) days of the occurrence of any such event. CONTRACTOR shall prepare at its own cost and, within twelve (12) days (or any other mutually agreed period of time) from the occurrence of such event, submit to COMPANY an evaluation of all its consequences with fully substantiated supporting documents, failing which and notwithstanding any other provisions of the CONTRACT, CONTRACTOR shall not be entitled to any claim based on the occurrence of such event. COMPANY shall respond to CONTRACTOR within sixteen (16) days (or any other mutually agreed period of time) from the submittal to COMPANY of the evaluation.
Articles 22.3 and 22.5 were concerned with the quantification of Change Orders. They referred to Exhibit B, which was the Contract Schedule of Rates and Prices. The particular provisions relevant to this dispute are as follows:
22.2.6 CONTRACTOR shall not be entitled to any payment thereunder prior to receipt of a CHANGE ORDER signed by COMPANY."
"22.3 Adjustments due to CHANGE ORDERS
22.3.1 Price Adjustment
Effects of CHANGE ORDERS or the CONTRACT PRICE shall be evaluated by CONTRACTOR who shall give preference in priority to a lump sum price adjustment based on CONTRACT PRICE lump sum breakdowns set out in EXHIBIT B and deduced by analogy or interpolation.
When the above procedure is not applicable, unit rates, attached to separate items of the WORK as set out in EXHIBIT B, or mutually agreed detailed unit prices deducted therefrom by analogy or interpolation shall be used. In such a case, the variations of quantities involved shall be determined by difference between the new quantities and the previous corresponding quantities, evidenced by supporting documents agreed by both PARTIES. CONTRACTOR shall always provide COMPANY with the opportunity and access to check said quantities.
When remuneration on a lump sum or unit rate basis is not applicable, time rates (daily and hourly rates) shall be considered. In such a case, CONTRACTOR shall have the obligation to submit for APPROVAL any expense to be incurred in relation to the considered change and for each day of the performance of the change all and any measurement sheets with all the components involved.
For CHANGE ORDERS solely related to material purchase, the valuation should be based on VENDOR QUOTATIONS on a reimbursable "cost + fee" basis as set out in EXHIBIT B, it being understood that reimbursements shall be made on presentation of satisfactory justification with appropriate supporting documents.
22.5 Disputes concerning CHANGE ORDERS
In effect, these provisions identify five options, or "Limbs" as the experts called them, for the valuation of Change Orders or COR's. Limb 1 envisaged a lump sum price adjustment based on the Contract Price. Limb 2 envisaged the use of unit rates by reference to Exhibit B or by analogy or interpolation. When remuneration on neither a lump sum nor a unit rate basis was applicable, Limb 3 envisaged time rates, which were said to be daily and hourly rates referable to each day on which the change was to be performed and "measurement sheets with all the components involved". These expenses "to be incurred" had to be approved by AUK. Limb 4 related only to material purchases and is irrelevant to the claims before the court. Finally, if the parties could not agree on any of those options, then Article 22.5 provided a Limb 5 which was a valuation that was "fair and appropriate to the circumstances". Mr Kitt, the expert quantity surveyor instructed by AUK, has largely, but not exclusively, valued the works using Limb 5. Mr Lester, the expert instructed by OSR, has principally used Limbs 2 and 3, although the rates used in his Limb 2 calculation were actually derived from payments made for other COR's, whilst the rates used in his Limb 3 calculation are said to have come from the Contract itself.
Should the PARTIES fail to reach agreement on CHANGE ORDER conditions, COMPANY shall have the right to establish such conditions, including means and amount of compensation and the proposed invoicing schedule thereof, and any adjustments to the WORK TIME SCHEDULE it considers, in good faith, fair and appropriate to the circumstances, and to instruct CONTRACTOR to proceed with the modifications to the Scope of WORK, the WORK TIME SCHEDULE or any other part of the CONTRACT and CONTRACTOR agrees to so proceed."
Although Article 23 was entitled 'Applicable Laws, Customs Regulations, Authorisations', it is relevant to the dispute in this case because of the claim arising out of the failure to obtain permission for the temporary crossings over the Brent and Ninian pipelines, and the delay in providing the proximity agreements for the permanent crossings. Article 23.4 was in these terms:
"Obtaining Authorisations by COMPANY
COMPANY shall be responsible for obtaining all permits and authorisations from all local, state or national government authorities or public services undertakings as can only be obtained by COMPANY, including permits and authorisations which are necessary for the execution of the WORK at SITE, including in respect of the SITE access and of the right to construct and operate the PLANT on SITE.
CONTRACTOR shall, however, remain responsible for providing COMPANY with any necessary documentation required by COMPANY in respect of applications for such permits and authorisations."
Article 28 was entitled 'Site Requirements'. Article 28.1 provided as follows:
"Access to SITE
Subject to compliance with APPLICABLE LAWS and COMPANY regulations and procedures as contained within the CONTRACT, COMPANY shall allow CONTRACTOR and its SUB CONTRACTORS including contractors of ASSIGNED CONTRACTS, free and timely access to SITE in accordance with the WORK TIME SCHEDULE, and subsequently for warranty matters."
Article 30 was concerned with the Contract Price. That was said to be 'full compensation for the complete performance of the Work in full compliance with the CONTRACT. Exhibit B showed that the total for Work Package 10 was £9,428,769, meaning that the original claims in these proceedings amounted to a doubling of the lump sum agreed. Within the total, the figure for preparatory works, including the temporary access road, was £747,346. The lump sum for trench excavation was £1,363,120. The figure for pipeline installation was £1,963,400.
Article 30.4 specified that:
"all rates, sums and prices set out in EXHIBIT B or specified in CHANGE ORDERS shall be deemed to be all-inclusive for the WORK relative thereto carried out and/or completed in accordance with all CONTRACT REQUIREMENTS and, unless expressly otherwise specified in EXHIBIT B are deemed to include:
- Overheads, profits, contingencies, depreciation, head office charges, managerial and administrative expenses, or preliminaries and contract administration…all down time and time lost (except as expressly allowed under CONTRACT) including breakdowns, repair time, waiting on weather or for approvals or authorisations to be obtained by CONTRACTOR for the performance of the WORK…
- Labour, supervision, engineering, administrative and managerial personnel…
- All CONTRACTOR'S obligations, liabilities, duties, risks under the terms of the CONTRACT…
And in general everything necessary for the complete performance of the WORK, in full compliance with the CONTRACT, except if specifically stated in the CONTRACT as being supplied by COMPANY."
Exhibit A was concerned with the Scope of Work. For the trench excavation element of WP10, the document made plain that OSR's scope of work included:
"Evaluate and select the optimal trench excavation method(s) with respect of the soil conditions, bedrock, WORK SITE access and the proximity of existing facilities. Soil conditions are peat and various cohesive and granular soils and approximately 15-20% weathered rock with an UCS of up to five MPa. This includes construction requirements for an embankment type design, if applicable…
Contractor shall hard-pack the trench bottom and ensure it is level and free from rocks or debris."
There were some drawings which were incorporated by reference into the Contract. They were not the subject of any of the witness statements, and were only belated referred to in the oral evidence. I deal with them in Section 6 below, when addressing Claim 3.
3. SIGNIFICANT EVENTS
As noted above, the original plan was for the trench excavation and the laying of the gas export pipeline to take place in 2012. However, on 31 March 2011, Mr Smit, AUK's project manager, wrote to OSR, to ask them to examine the feasibility of undertaking WP10 in 2011. OSR was asked to prepare a detailed dossier advising on the benefits to the Contract Price and the Work Time Schedule, as well as the completion date, if the change was agreed. The general view was that it would give rise to a significant saving, because the work would be done in the summer and autumn of 2011, rather than the winter and spring of 2012.
OSR were certainly not averse to the proposal. Thus, on 27 May 2011, Mr O'Rourke produced the first version of their Project Execution Plan. Amongst other things, the document provided as follows:
"Work on the Export Gas Pipeline is programmed to commence of 1st August 2011. This date is based on the assumption that planning will be granted for the works at the planning review meeting on the 27th July 2011…
There are a number of third party services to be crossed such as BP and TAQA oil pipelines, water mains, electrical cable and telecom cables. OSR would propose to carry out trial holes on any services to be crossed as soon as possible starting no later than 1st July and completing on 1st August 2011. The information from the trials would enable confirmation of design assumptions or the design of alternatives.
The overall sequence of the works, from the 1st August 2011 will require OSR to open two main work fronts. The first section will be from the SGP to the B9076, KP2700, and the second section from the B9076, KP2700 to Firth Voe, KP5475. The reason for opening both at the same time is to allow mechanical works to commence as soon as possible using the fair weather periods and daylight hours during August and September. Due to the deep sections of Peat from the SGP to B9076 a narrow running track, the civil works will have to be fully complete prior to mechanical operations commencing…
The ground conditions from the B9076 to Firths Voe are significantly better than those from the SGP to B9076. The peat is shallow, less than one metre, allowing fast to right of way preparation. For this reason we propose to commence work on this section at the same time as the SGP to B9076 section. This will allow mechanical work to commence on this section from 17th August 2011, working from the B9076 to Firths Voe. The section from B9076 to Firths Voe has an additional access point at RDX3 which greatly helps with access. The road crossings will be worked on simultaneously with the spread starting with RDX2 starting in early August 2011…
The pipe pull of the 30 inch pipeline will be executed in April 2012 but as an alternative this work will be executed in early November 2011. "
The Project Execution Plan also contained a section entitled 'Important Dates and Assumptions'. These were noted as:
"1. Planning granted 27 July 2011.
2. Project commencement 1 August 2011.
3. Welding pre-qualification carried out from June to mid-July.
4. Pipe available for pre-quals, early June 2011.
5. Allowed stockpile stone in SGP prior to 1 August.
6. All third party agreements in place for 1 August 2011.
(b) Land entry
7. Pipes delivered to site by 1 August 2011.
8. All bends available in accordance with schedule. See also appendix 3 – client supplied items."
This plan was reviewed and approved by Mr De Graaf of AUK. It was then the subject of a second review on 16 June 2011 by TEP. On 11 July 2011 they said that the plan could be proceeded with, subject to the document being revised to incorporate their comments.
Although the 'Important Dates and Assumptions' remained the same as set out in the preceding paragraph, TEP's comment 1 said that the achievement of planning on 27 July was "a large assumption and is dependant on AUK? OSR providing information in a timely manner". Moreover, comment 5, which dealt with access, stated that "NO access from the B9076 across the two existing pipelines has been requested from the third party". In other words, TEP were making it clear at the outset that, at that time, OSR had not requested any temporary access across the Brent and Ninian pipelines owned by TAQA and BP.
The reference to access across the pipelines was a reference to any temporary crossings at surface level that might have been required by OSR to facilitate the carrying out of the Works. It did not refer to the crossing of the gas export pipeline itself because, by this time, it had already been agreed that the gas export pipeline would pass underneath the Brent and Ninian pipelines and would be constructed using a form of construction known as "trenchless crossings". The relevant events were:
(a) On 13 January 2011 there was a design meeting to discuss the permanent crossings of the Brent and Ninian pipelines. Depending on the depth of cover above the pipelines, the proposal at that stage was to lay the gas export pipeline over the top of the existing pipelines.
The project execution plan was revised again on 1 September 2011. Amongst the changes was a "major assumption" on the part of OSR that PWHT (that is to say, pre-welding qualifications) would not be required. In addition, some of the dates in the 'Important Dates and Assumptions' section had slipped. Of particular relevance was the indication that all third party agreements were now required to be in place for 5 September 2011. When Mr O'Rourke sent this document to Mr De Graaf, he said that he had incorporated some but not all of Mr Smit's comments.
(b) However, shortly thereafter, it was decided to explore the possibility of laying the gas export pipeline beneath the two existing pipelines. By 10 February, OSR had already produced a method statement for this work using what was called the trenchless technique. This showed the gas export pipeline being placed in a tunnel driven beneath the two existing pipelines.
(c) This method statement went through at least nine revisions between February 2011 and March 2012.
(d) By the time that the main works started on site at the beginning of October 2011, everyone knew that it was very likely that the permanent crossings would be constructed using the trenchless technique and would therefore pass underneath the two existing pipelines. That was what OSR showed on the programme that they produced in October 2011 (see paragraphs 32-37 below).
A programme was issued as part of this revised project execution plan. This programme, referred to by Ms O'Farrell QC in her closing submissions as "the September programme" was not referred to in OSR's pleaded claim, nor was it the subject of any oral evidence. However, during her closing submissions, Ms O'Farrell QC sought to rely on it. This was principally because it showed the trenchless crossings beneath the Brent and Ninian pipelines being carried out at the same time as the main pipeline work. She submitted that this demonstrated that OSR had an entitlement to carry out those crossings at that time and that subsequent events (when it was acknowledged on all sides that permission for the permanent crossings would not be available until January 2012, so that the trenchless crossings would have to be carried out after the main works) automatically gave rise to an entitlement to a claim.
I do not accept that submission. In my view, the September programme had no status at all. First, it was not pleaded as being relevant to the claims now being made, nor did any witness suggest that it was. Secondly, the September programme was simply part of an ongoing process by which OSR were endeavouring to identify what the likely programme of works would be if the start date for the onshore works was moved forward to 2011. Thirdly, as demonstrated below, I find that the parties agreement in October about the bringing forward of the start date, in the knowledge that the permanent crossings work would be carried out separately and after the main works had been finished, meant that it cannot now be argued that the September programme gave rise to any additional or different entitlement. Fourthly, I find that such a submission is contrary to the agreement between the parties that no claims would be made if the onshore works were brought forward.
On 5 October 2011, AUK wrote to OSR confirming that the WP10 works would be brought forward to 2011. In the letter, AUK expressly recognised that, although there was a discount for this possibility in the tender, no such discount would be applicable, "subject always to OSR confirming there will be no claims for additional resource, resequencing or stand-by arising from risk events including adverse weather conditions within the revised execution plan which effectively commenced at the end September 2011. This does not exclude stand-by due to events or actions attributable to AUK". It was common ground that the parties thereafter proceeded on that basis, namely that OSR would make no claim for additional monies consequential upon the decision to bring forward the start date to October 2011.
In consequence of this confirmation, OSR produced a new programme. This was dated 8 October 2011 and was referred to in the evidence as 'the October Programme'. It is an important document because, although it is not pleaded as such, the evidence established that it was the programme which OSR have used in making their prolongation and disruption claims. It identified a start for the WP10 works on site of 24 September 2011 (fencing, peat turving etc) and a completion date of the mainline works of 16 January 2012, with the trenchless crossings shown as being carried out thereafter, between January and May 2012. The pull-in works were shown for April 2012, the same date as in the original Contract.
The October programme allowed for the fact that, by the time it was created, it was understood by all parties that the proximity agreements in respect of the permanent crossing of the Brent and Ninian pipelines would not be available until 16 January 2012. That date is shown in the programme as the date for the proximity agreements. Thus, by reference to the AUK confirmation of 5 October 2011, and the agreement that there would be no claims as a result of the bringing forward of the start date, OSR cannot now claim additional monies because the proximity agreements were not going to be available until 16 January 2012. In accordance with their own October programme, they acknowledged that the trenchless crossings work would not start until that date.
It is worth noting that Mr O'Rourke, who prepared the October programme, was cross-examined in detail about it. He made a number of concessions which culminated in him agreeing that the programme was 'fundamentally flawed'. In particular:
(a) In at least one instance, the programme showed a pipe being lowered into a trench which had not yet been programmed to be excavated;
Mr Caviglia of Sicim was also cross-examined about the October programme and, rather more reluctantly, made similar concessions. In addition, he said that the programme was in error because it showed the lowering operation beginning on the same day on the Northern section as it finished in the Southern section, which was impossible (there were simply not the resources on site to achieve that). Mr Caviglia also admitted that between September and October, and the preparation of the two programmes to which I have referred, the time periods for the mechanical works were compressed. It was not entirely clear how or why this had come about. I was not persuaded on the evidence that the new, compressed periods in the October programme were achievable, so that was a yet further way in which the programme was an unreliable basis for OSR's subsequent claims.
(b) On another occasion, the programme showed an area of trench excavation in the Northern section occurring after the pipe had been both coated and lowered into the (non-existent) trench;
(c) Whilst everyone was agreed that fencing of the area to be excavated was the first activity, the programme showed that some activities, such as turving, was being completed before the fencing;
(d) A section of pipe between KP 3850 and KP 4100 was omitted altogether.
In Appendix 8 attached to AUK's closing submissions, from paragraph 5(6) to paragraph 8, a further point is made about the last section of pipeline on the beach at Firths Voe which was also overlooked by the programme. It is said that, when a proper adjustment is made for this, it would result in an additional 2.5 weeks being added to the overall duration. This point was not tested in evidence but it was not the subject of any response submissions and, on its face, appears to support my view that the periods in the October programme were unrealistically shortened. It is also a material factor when considering delays at the end of the project.
I shall return to the October programme when considering some aspects of OSR's claim. For present purposes, however, it is sufficient to note my view that, because Mr O'Rourke himself described the programme as being 'fundamentally flawed', it is an unreliable basis for the calculation of any claim, much less claims said to be worth £10 million odd at the start of the trial. Despite that, no other programme was put forward by OSR.
I should also say that, in the rush to try and get the work up and running in 2011, no-one ever paused to consider that, because of the delays prior to the confirmation in October that the start date would be brought forward, the work was not going to be done in the summer of 2011, but in the late autumn and winter of 2011, with some of the works going into 2012. The advantages of the early start had therefore been reduced, if not eliminated altogether. In addition, the works were still the subject of uncertainties (welder qualifications and third party permissions, to name but two) which put the proposed completion dates at obvious risk.
It is necessary to set out the general sequence in which these works would be carried out. First, the area over which the pipeline would be laid would be fenced off. The peat/topsoil would then be excavated down to the solid base. The contract required the peat to be retained and stored, so that it could be reused to cover the excavations once the pipeline had been laid. There is reference in the documents to turving, which is the cutting out of the surface vegetative peat in sections (or turves) of approximately 2.5m x 1m x 400mm deep, using a special excavator to preserve the roots.
A stone embankment was then constructed. The stone embankment ran the whole length of the pipeline. It had two functions. First it provided a suitable road on which the plant and construction traffic could travel. Secondly, a trench would be excavated within the embankment in order that the gas export pipeline could then be installed within it. It was OSR's case that such an embankment was always intended for the Northern section but that, in the Southern section, they had intended to build a stone road, and then use the road to excavate a trench for the pipeline. The trench would be to the side of the road, in solid ground. In the event, this never happened and an embankment was built in both sections.
The mechanical works involved a number of stages. First there was the setting out of the pipeline along the intended route, laying the sections of pipe end to end. This was the process known as stringing. The next operation was bending, which involved the cold bending of the pipeline to suit the topography. Thereafter the ends of the sections were bevelled (prepared for welding) and clamped (the ends brought together for welding).
Thereafter, the sections of pipeline were welded. Most of the welding was carried out manually although there was some automatic welding. After welding, the welds were tested and then coated, an important process in which the welded joints were sand-blasted and wrapped.
After those operations, the trench was excavated to the line and level of the permanent pipeline. Then sections of pipeline were then lowered into the trench. Lowering was a major operation and involved not less than six large mobile cranes, known as sidebooms. Once the pipeline had been lowered into the trench, protective bedding for the pipe was provided and the pipe strings inside the trench were tied in. Then the trench could be backfilled and the wayleave could be reinstated.
In early October 2011, immediately at the start of work on the Southern section at RDX2, OSR discovered peat which was deeper than had been shown in some of the pre-Contract site information. That event gives rise to Claim 3, the claim in respect of unforeseen ground conditions, so I deal with the relevant events in detail in Section 6 below.
There was also further correspondence and discussion about the possibility of temporary crossings over the Brent and Ninian pipelines. The first was where the gas export pipeline crossed the existing Brent and Ninian pipelines (PLX1 and PLX2) just north of the road crossing at RDX2, where the pipeline then turned east towards Firths Voe. The second was where the pipeline re-crossed the Brent pipeline close to Firths Voe (PLX3). There were also two other areas where work was potentially affected. The first was west of PLX3, where the pipeline ran close to, but did not cross, the Brent pipeline. The second was in the beach area at Firths Voe.
As previously noted, the issue of crossings and third party consent was not something which had been entirely forgotten in the drive to bring forward the start of the work. Once the proposal for the temporary crossings had been provided by OSR to AUK, it had to be passed up the line. There was a debate about the timing, quality and completeness of the relevant information, and I deal with the relevant exchanges in Section 7 below. Ultimately, BP and TAQA chose not to allow temporary crossings over the top of the existing pipeline, and the focus of all parties moved onto the proximity agreements, the documents containing the owners' permission for the permanent crossing of the gas export pipeline underneath the Brent and Ninian pipelines. Until they were agreed, the trenchless crossings could not be carried out.
It should be noted that OSR's claims for delay and disruption (arising out of both the unforeseen ground conditions and the temporary/permanent crossings) are essentially global claims, because they operate on the basis that the entirety of the delay and disruption on site was caused either by the deeper peat or the problems with the temporary/permanent crossings. There is no acknowledgement or allowance in the pleaded claims for any delay and disruption which might have been due to OSR, nor any obvious way in which a lesser entitlement has been claimed or might be calculated. The formulation of such alternative claims is often the task of the claimant's expert but, as we shall see, there was a complete absence of such material in this case. Moreover, as I explain in greater detail in Sections 6 and 7 below, the works in late 2011 and in early 2012 were delayed and disrupted for reasons which I find were the responsibility of OSR. There were particular difficulties in this respect with the mechanical works being carried out by Sicim.
My detailed findings as to OSR's responsibility for delay and disruption will not come as a surprise to them. When the final claim document was being put together in September 2014, Mr Mulcair of Roadbridge expressly noted in written exchanges with Mr O'Rourke that there had been delays to the gas export pipeline as a result of various problems within Sicim, including a lack of resources, safety issues and lack of management.
These comments, and others like them, were not simply the product of a relationship between Roadbridge and Sicim which was, on any view, challenging. It was rooted in the real difficulties with Sicim's performance on site, witnessed by OSR and AUK witnesses alike. There were numerous delays which were referable to Sicim's default but which, in the claim documents in these proceedings, OSR have sought to label as the consequence of either the deeper peat or the crossings. The evidence of Mr Teal, AUK's principal site representative, and the detailed investigative work done by Mr Kitt, AUK's quantum expert, demonstrated to my satisfaction that, for all or for the vast majority of the relevant periods, the delays and disruption were not due to those matters but were, instead, due to Sicim's own default.
4. GENERAL OBSERVATIONS CONCERNING THE EVIDENCE
As I have already noted, this was a case with a large volume of contemporaneous documents. Amongst the most important were the Daily Progress Reports ("DPR's") which were signed by both parties. There were also regular progress meetings, which were minuted. In addition, there was a good deal of correspondence (filling 27 lever arch files of the court bundle) in which the parties set out their respective positions on a range of issues, including of course the three claims with which I am now concerned.
In my view, these contemporaneous documents are a useful starting point when trying to work out what was happening on site at any given time, and what the relevant individuals thought were the important events on site during the works. I find that the DPR's are generally reliable. Although each side has sought to rely on the contemporaneous documents for different purposes, the truth is that, in the round, they are of much greater assistance to AUK for what they do not say, than they are to OSR for what they do say.
This is because the contemporaneous documents do not emphasise to any degree the matters upon which OSR now seek to rely. In these proceedings OSR were claiming £10 million (now £8 million) by reference to the deeper peat and the alleged difficulties with the crossings of the existing pipelines. And yet there is little indication in the contemporaneous documents that, at the time, OSR put any great emphasis on these matters, or were claiming that they were likely to lead to a doubling of the Contract price. To the extent that the contents of the contemporaneous documents comprise a credibility test to be applied to the OSR claims, then I consider that, particularly in respect of the crossings (which is by far the largest single claim now made), they comprehensively fail that test.
It is plain that OSR's representatives have always been alive to this difficulty. Accordingly, right at the outset of the oral evidence, and at other times thereafter, OSR sought to make much of AUK's request in April 2011 that the DPR's exclude matters of a contractual nature. The suggestion was that OSR complied with this request, and therefore – for example – deliberately did not refer in the DPR's to disruption or the fact that men or machines were standing idle, even though that was in fact the position.
I reject that argument for four reasons. First, as Mr Smit confirmed in his cross-examination, AUK made clear on a number of occasions that they wanted details about progress and about the allocation of resources recorded in the DPR's. That would include references to standing time. Secondly, a report that men or machinery were standing idle on a particular day is not a contractual issue, but a matter of fact, a report linked to progress and resource allocation. The alleged reasons for the standing time might be a contractual issue, but the reporting or recording of the fact that there was such standing time is precisely what needed to be included in the DPR's. That the reports and other contemporaneous documents in this case make so few references to standing time or disruption, and the fact that detailed claims were not made in the large amounts now advanced until months, even years, after the period in question, are plainly factors undermining the credibility of OSR's claims in these proceedings.
Thirdly, in the contemporaneous documents, AUK made it quite clear that they did want the DPR's and other contemporaneous documents to contain information about standing time if that was what was happening. So for example:
(a) On 28 November 2011, Mr de Graaf expressly told Mr O'Rourke that they needed to "spell out" all standing time, because otherwise any such claims, when passed up the contractual chain, would be rejected by TEP;
For completeness, I should say that my view that the contemporaneous documents were not very helpful to OSR was not significantly modified by the contents of the pipebook, a record to which Ms Dallatomasina in particular referred. The contents do not, in my view, support the large Sicim claims now being made, and the manner in which the entries into the pipebook were completed was not always clear. References to the pipebook did not feature heavily in the OSR witness statements.
(b) On 15 February 2012 Mr Smit told OSR in writing that:
"CONTRACTOR should specify particular resources as being on standby for specific activities within its Daily Progress Report…CONTRACTOR is therefore requested to provide irrefutable evidence that such resources were so affected. Furthermore CONTRACTOR should also demonstrate that the purported delays are a direct result of the lock-out and not a result of delay events for which CONTRACTOR was culpable."
Finally, on a perusal of the DPR's, it is quickly apparent that OSR did not comply with the request in any event and did include, at least from time to time, material that was plainly relevant to what OSR saw as a contractual liability.
OSR's Factual Witnesses
OSR called four witnesses: Mr Mulcair, a director and chairman of Roadbridge; Mr Anton O'Rourke, a project manager with Roadbridge, Mr Roberto Caviglia, the deputy director of Sicim; and Ms Tania Dallatomasina, a project coordinator with Sicim. The witness statements of Mr Caviglia and Ms Dallatomasina were very brief. The witness statement of Mr Mulcair was also fairly short and mainly went to the putting together of the tender, which was relevant to the claim in respect of unforeseen ground conditions, and what was said to be the intention/entitlement not to build an embankment in the Southern section.
The witness statement of Mr O'Rourke ran to 210 paragraphs. It was therefore the only detailed statement relied on by OSR. The principal problem with his statement was that it was not focused on the very specific claims now being made. Instead, the bulk of it was a narrative of the project, which (as the cross-examination revealed) contained numerous matters on which Mr O'Rourke purported to be critical of AUK, but which were of no relevance at all to the claims in these proceedings. It was the sort of statement that might have been appropriate for a general extension of time claim but, as Ms O'Farrell QC properly noted in her opening, this was not such a claim. When it was necessary to look for details to support the claims now made by OSR, Mr O'Rourke's statement was usually found wanting.
In addition, I regarded the oral evidence of Mr Mulcair and Mr O'Rourke as very unsatisfactory. Despite the fact that Mr Mulcair was the relevant director, and Mr O'Rourke had signed the relevant Statements of Truth relating to both the amended claim and the amended reply, both men were very reluctant to support or confirm important parts of OSR's pleaded case. Indeed, during their cross-examination, both men – and in particular Mr Mulcair – appeared to go out of their way to disagree completely with the pleaded basis of the OSR claims.
More surprisingly, this reticence also applied to the contemporaneous documents which they themselves had produced. Throughout the cross-examination of both men, they were taken to documents which they had prepared, or letters which they had written. Passages were put to them within those documents which were contrary to the factual basis of the claims now being asserted. Their responses were almost always evasive. On occasion they purported to put a construction on the words which they had used at the time which, although it helped the claims, was entirely implausible.
Examples of Mr Mulcair's failure to provide answers to simple questions meant that he avoided answering issues that went to the heart of Claim 3, including:
(a) When he was asked whether he had ever revisited the OSR prices after being sent the ground information contained in the Mackintosh probe survey;
This last was merely one of a number of examples of Mr Mulcair's refusal to accept the obvious interpretation of a contemporaneous document, in order to give an answer which he knew helped the OSR claim as now advanced. Another was his suggestion that, although his own document talked about the advantages of supporting the pipe with a stone embankment, he was actually referring to the embankment supporting the peat beside it (a completely different thing). That is a point I come back to at paragraphs 113-114 below.
(b) When he was asked about the deeper pockets of peat in the Southern section that were shown in that survey;
(c) When he was asked about the documents in which he stated his clear preference for a stone embankment throughout the length of the gas export pipeline;
(d) When he at one point sought to elide the concept of the stone road and the embankment.
A further example of this unhappy approach to his oral evidence was Mr Mulcair's reaction to the clear statement within OSR's own documents that an embankment 14 metres wide was necessary (paragraphs 118-124 below). He claimed that, contrary to the document, which he saw at the time, he thought the width of the embankment would vary. When it was put to him that no such response was sent to the writer of the email, who obviously envisaged one width throughout, all he could say was that "this email was sent during a period of design development". His evidence about the anticipated peat depth, and the dividing line between the depth of peat for which a stone embankment was necessary and the depth of peat that would justify a stone road was also vague, uncertain and unhelpful (see paragraph 133 below).
Mr O'Rourke's oral evidence was no better. He was the person most involved in the pleadings and had signed their Statements of Truth, so he was therefore the person formally responsible for the numerous errors within those pleadings. He sought to support the OSR claims when he was simply not in a position to do so because, for example, he had not been at the relevant meeting or was not on site at the critical time. He also said that he could not say what the peat depth was that OSR had anticipated, despite the fact that the pleadings he verified had purported to give precisely such figures.
In relation to the crossings claim, his evidence ran counter to the principal thrust of OSR's pleaded claim, which he had verified: he sought to argue that the problems were not due to the failure to obtain temporary crossings, but the delay in the granting of permission for the permanent works. This may have stemmed from his belated recognition of the difficulties faced by the temporary crossings claim, but it showed that, like Mr Mulcair, he was pretty much prepared to say anything in order to advance OSR's claims, regardless of its truth or accuracy.
Ms Dallatomasina sought to avoid questions on Sicim's own default, particularly in relation to welding documentation. On the issue of the intended width of the embankment, she appeared to accept that Sicim always knew that the embankment would be at least 13 metres wide but, because she was aware that OSR's pleaded case was that it would only be 8 metres wide, she sought to hang onto that case, without any conviction at all. She acknowledged a Sicim method statement which showed a width of at least 13 metres but, because of her knowledge of the pleaded case, she had to try and say that it was somehow inaccurate.
Ms Dallatomasina was also obviously aware that the Sicim claims for standing time, which alone ran to millions of pounds, were unsupported by the DPR's. She had to revert to the alleged instruction not to record the standing time, an assertion which I have already rejected (paragraphs 53-56 above). So when she was shown the subsequent letter which specifically asked OSR to make proper contemporaneous notes of standing resources (paragraph 55(b) above), she evaded the question until I had to ask her to answer it. She then said that, in some way, the letter was 'too late'. Eventually she was obliged to say that, by then, she was no longer involved in the project. Again, I was left with a firm impression of almost persistent evasion of any question that went to the underlying validity of Sicim's claims.
Mr Caviglia's evidence was not immune from this approach either: at one point, he was asked about his claim letter of 28 November in which he had identified an intended embankment width of 15 metres, which was of course directly contrary to the case now advanced by OSR. He airily said that he had made a mistake, without explaining how it had come about (see paragraphs 139 and 140 below). On another occasion, having given detailed answers which suggested that he knew what had happened, he realised that his answer would be unhelpful to the claim, so he suddenly said that he did not remember.
It is also important to note the limitations of Mr Caviglia's evidence. Although the Sicim claims form the vast bulk of the claims now advanced by OSR, his witness statement made no mention of the formal Sicim claims that were being made: their basis, structure or their quantification. He did not verify the accuracy of any of those claims. He expressly accepted in his oral evidence that he neither knew nor understood how the Sicim claims had been put together. Ms Dallatomasina had not been involved in the preparation of the claims either. This meant that, if Mr Lester, OSR's expert, was not in a position to verify the mechanical claims advanced on behalf of Sicim, those claims were unsupported by any evidence at all.
In summary, therefore, I regret to say that each of the four factual witnesses called by OSR endeavoured to avoid many of the questions put to them. Despite a number of interventions from the court to try and get them to do so, they stuck to what appears to have been a deliberate strategy of long, rambling answers designed to avoid the question and put their case in the best possible light, regardless of the truth. Although I found each rather engaging on a personal level, they were as unconvincing a group of factual witnesses in a commercial claim as I have ever encountered.
This conclusion obviously has stark consequences for the OSR claim. In essence, it means that, unless a disputed factual element of the claim is unequivocally supported by contemporaneous material and/or the evidence of the AUK witnesses and/or the expert evidence, it will be most unlikely to find favour with the court. What is more, this highly unfavourable impression has been confirmed by the conduct of some of these same witnesses after they gave their oral evidence, a matter to which I refer in greater detail in Section 4.4 below, when dealing with the evidence of OSR's expert, Mr Lester.
AUK's Factual Witnesses
AUK called seven factual witnesses: Messrs Smit, Teal, Bland, Feteris, Foster, Langford and Metcalfe. In addition, they relied on the witness statement of Mr De Graaf, whose evidence I admitted under the Civil Evidence Act.
Mr De Graaf was the most senior of the AUK witnesses. However his witness statement was of no real assistance because, as he fairly made plain in the opening paragraph, it had been prepared whilst he was working on another major project in Kazakhstan, and he had only been given a fraction of the relevant documentation. In addition, of course, his evidence was not the subject of cross examination. I therefore accord very little weight to his witness statement.
As to the seven witnesses who gave oral evidence, they were divided between the four witnesses from AUK (Messrs Smit, Teal, Bland and Feteris), and three witnesses from JR Knowles, the claims consultants advising AUK throughout (Messrs Foster, Langford and Metcalfe). I did not derive much assistance from the evidence of these latter three, because they went to AUK's formal response to the claims being made. On the other hand, I considered that the evidence from the four AUK witnesses was much more important. It dealt with what happened on site. It was generally clear and concise. Although broadly in accordance with the documents they had prepared at the time, I found that the evidence of these four witnesses was unaffected by which side their answers ultimately helped. As a result, a number of these witnesses, particularly Mr Teal, freely gave evidence on which OSR now seek to rely. He was so helpful he even pointed out the relevant reference for the purposes of OSR's cross-examination of him.
That Mr Teal was an obviously credible and helpful witness was recognised by both sides, because the closing submissions of both AUK and OSR sought repeatedly to rely on his evidence. In general terms, of course, that evidence was helpful to AUK and provided further support for my scepticism as to the factual basis for the OSR claims. I make no apology, in the remaining parts of this Judgment, for identifying Mr Teal's evidence as the starting point (and often the finishing point as well) of my analysis.
It therefore follows from this summary that I considered the evidence of AUK's factual witnesses to be much more reliable than that of OSR. On those occasions when there was a direct disagreement of fact between them, I always preferred the AUK evidence.
The Expert Evidence
There was no programming evidence on either side. In my view this was a welcome and entirely sensible decision. All too often in cases like this, each side relies on a programming expert, but the reports that these experts produce are simply vehicles by which the parties reargue the facts, rather than reports focussed on programming differences. In this case, given that there was no extension of time claim as such, a programming expert on either side would have simply added to the costs and would have been of little or no assistance.
Neither did the parties seek to call expert engineering or geological evidence in respect of the deeper peat claim, going to what an experienced contractor could reasonably have been expected to foresee. Expert evidence to support such claims is not uncommon, although I accept Ms O'Farrell QC's submission that here, whilst the claim under Article 12.2.3 was always disputed by AUK, there was a general consensus that, at least at the start of the Southern section, deeper peat was found than had been identified in the Mackintosh probe survey (some of the pre-Contract information supplied to OSR). Thus OSR might have been forgiven for thinking that the scope of the debate about ground conditions was narrower than is sometimes the case.
I certainly do not dismiss the ground conditions claim merely because it is unsupported by expert evidence. But it must follow that the credibility difficulties faced by OSR's witnesses, to which I have referred in Section 4.1 above, will adversely affect this aspect of their case. If the principal witnesses claiming that they could not have foreseen something are witnesses whose credibility the Court doubts, then even though this is ultimately an objective rather than a subjective test, that important element of the ground conditions claim is inevitably weakened.
Each side called a quantum expert: OSR called Mr Lester, and AUK called Mr Kitt. Given that there was a myriad of options as to the valuation of some of the relevant Line Items, I accept that both men had an unenviable task. But, unhappily, I found that the difference in approach between the OSR and the AUK factual witnesses was even more marked when it came to the expert evidence. I endeavoured to give Mr Lester the benefit of the doubt, particularly given his frank admission that he had not previously prepared a written expert's report or given evidence in the High Court, and because I was aware that he was dealing with a serious illness in his family. His abrupt departure from the witness box at a short break for the transcribers, never to return, was an indication of the undoubted stress he was under. But I regret to say that I came to the conclusions that his evidence was entirely worthless. There were a total of twelve different reasons for that conclusion.
First, I find that Mr Lester repeatedly took OSR's pleaded claims at face value and did not check the underlying documents that supported or undermined them. He uniformly utilised the rates which had been claimed by OSR, not on the basis of any quantity surveying or expert opinion he might have had as to their applicability, but because he had been told that those rates had been agreed by the parties in other contexts, in respect of different Change Order Requests ("COR's"). On analysis, for many of the disputed Line Items, there was often no quantity surveying input from him at all.
Secondly, as he made plain in his cross-examination, he prepared his report by only looking at the witness statements prepared on behalf of OSR. He did not look at the witness statements prepared on behalf of AUK. In some instances, this process culminated in Mr Lester cutting and pasting controversial parts of the OSR statements into his report as if they were in some way a contemporaneous record of events. His report and his evidence were therefore inevitably biased in favour of OSR.
Thirdly, in contrast to Mr Kitt, Mr Lester refused to value these claims on any basis, or on any assumption, other than the full basis of the OSR claim (which had been prepared by Dal Sterling, claims consultants who did not give evidence). This was despite my exhortations to the experts, noted in the transcripts of the early days of the trial, that they were to agree figures based on both their own and the other side's case. Thus Mr Lester's figures were all skewed in favour of OSR, and there was nothing the other way. This was, of course, a very dangerous stance: if one of the disputed assumptions on which OSR's claim was based was found to be wrong (and, as we shall see, Mr Lester repeatedly accepted that many of them were), there were no alternative figures, save for those put forward by Mr Kitt.
Fourthly, not only did Mr Lester base his promotion of the OSR claims on made-up or calculated rates, but he never once considered, let alone formulated, claims based upon the actual costs incurred by OSR. On that basis alone, of course, the alternative claim for damages for breach of contract could never get off the ground. But it also created the overwhelming impression that the OSR claim (as supported by Mr Lester, at least until he came to be cross-examined) was potentially a 'try-on', relying as it did on calculated rates and all manner of assumptions said to have been made in the tender, but not credibly evidenced. Mr Lester resolutely refused to address the issue as to whether or not OSR had suffered any actual loss at all as a result of the events now complained of.
Fifthly, throughout his cross-examination, Mr Lester was caught out on numerous matters, most of which were (with respect to Mr Lofthouse QC) relatively obvious, because so many of them had been pointed out months earlier by Mr Kitt in his first report. Mr Lester originally said that these were typing errors or examples of poor presentation, but, as his cross-examination wore on, he could not escape from the truth that many were much more fundamental than that, and went to the heart of his wholly uncritical approach to the OSR/Dal Sterling claim. By the end of his cross-examination, he was accepting every criticism or error being put to him by Mr Lofthouse QC; on occasions, he even conceded points before they had even been suggested. The admitted errors fatally undermined both his credibility and the credibility of the OSR/Dal Sterling claim as a whole.
Sixthly, the widespread and important elements of the claim, which he admitted he could no longer support, drove him to say in cross-examination that he was not happy with any of his reports, not even with the one provided during the last week of the trial, just before he gave his oral evidence. If an expert disowns his own reports in this way, the court cannot sensibly have any regard to them.
Seventhly, he repeatedly accepted that parts of his reports were confusing and accepted on more than one occasion that they were positively misleading. For example, he calculated various rates in his report because he said that it was necessary to do so, but then he did not use the rates that he had calculated, and used instead rates which OSR said that they had been paid for other work, and which he did not calculate at all.
Eighthly, he appended documents to his original report which he had either not looked at all, or had certainly not checked in any detail. There was a clear inference that many of them had been put together by OSR themselves, or by Dal Sterling. On occasion, Mr Lester admitted in cross-examination that certain schedules had indeed prepared by either OSR or Dal Sterling, despite the fact that the reports themselves did not attribute authorship to anyone other than himself. He also accepted that, at least for some of these documents, he had appended them but had not checked the accuracy or reliability of their contents.
Ninthly, he made repeated assertions in his reports that appeared to be expressions of his own views. They were certainly not attributed to anybody else. But in cross-examination it was revealed that these assertions came straight from discussions he had had with OSR witnesses, Mr Mulcair and Mr O'Rourke. Even more alarmingly, some of these assertions, in particular those in Mr Lester's report provided at the start of the last week of the trial, related to matters on which both men had already been cross-examined and (in many instances) on which they had had no credible answer to the points being put to them. In this way, Mr Lester was used to try and plug the gaps in OSR's evidence which had been exposed by Mr Lofthouse QC's cross-examination of OSR's witnesses of fact, without any input from Mr Lester himself. That is the complete opposite of what a responsible, independent expert is obliged to do. This subterfuge (for that is what it was) only became apparent during Mr Lester's cross-examination. It reflected very badly on him, as well as on Mr Mulcair and Mr O'Rourke.
Tenthly, this process reached its logical conclusion when a schedule was identified by Mr Lester in the third joint statement (produced just before Day 9 of the trial), following 'Without Prejudice' meetings with Mr Kitt. The statement said that he had prepared the schedule. In fact, it turned out that the schedule had been produced by Mr O'Rourke and Mr Mulcair. Mr Lester, having accepted in cross-examination that he had not prepared it, continued to maintain that he had checked and approved it. However, further cross-examination revealed that what he meant by that was that he had discussed the schedule with Mr Mulcair, and had accepted what Mr Mulcair had said about it. In fact the cross-examination revealed that the schedule contained important errors and must be discounted in its entirety.
Eleventhly, following on from Mr Lester's uncritical passing on of the OSR claims and the Dal Sterling claim documents, he accepted, as he was bound to do, that instead of checking the claims himself, he had preferred to recite what others had told him, even though what he had been told could be shown to be obviously wrong.
Finally, Mr Lester confirmed to me that he had never considered valuing these Line Items by reference to fair and reasonable rates. Remarkably, he seemed almost proud that he had not embarked on that exercise. In my view, this omission made the entirety of the valuation exercise he had carried out of no value, because he had not, even as a cross-check, investigated whether the figures he was so carelessly promoting were actually fair or reasonable, or instead represented some kind of windfall for OSR. It became apparent in his cross-examination that many of the rates he had adopted were far from fair or reasonable.
For these reasons, therefore, I consider that Mr Lester allowed himself to be used, whether wittingly or otherwise, by OSR and Dal Sterling (those with the most to gain in this litigation) to act as their mouthpiece. It was almost as if they were trying to see how much of their claim they could get past Mr Lester, and then Mr Kitt, and ultimately the Court. It made a mockery of the oath which Mr Lester had taken at the outset of his evidence, even though, as I have said, there were some extenuating circumstances.
For all these reasons, I am bound to find that Mr Lester was not independent and his evaluations (to the extent that he did any independent valuations which were relevant) were neither appropriate nor reliable. I am obliged to disregard his evidence in full.
My adverse views about Mr Lester's performance will come as no surprise to OSR's legal team. As I would have expected from leading counsel of Ms O'Farrell QC's integrity and acumen, at paragraph 26 of her closing submissions, she expressly accepted that Mr Lester "…did not meet the standards that are expected for an independent expert giving evidence in court. He did not appear to have checked the claims adequately or carried out a comprehensive analysis of the documentary records so as to provide an independent valuation against each claim."
Although Ms O'Farrell QC went on to submit that, despite this, his opinions as to the basis of valuation were "sound" and that his views and the agreements he had reached as to the basis of valuation should be followed by the court, I regret that, for the reasons I have given, I am unable to accept that submission.
I should also note that, in an attempt to hang on to the bulk of their claims, despite the fundamental difficulties with Mr Lester's evidence, OSR's closing submissions included numerous amended schedules which sought to reduce the overall claim from about £10 million to about £8 million. It was said that these amendments made full allowance for the concessions made by Mr Lester.
Of course, on one view, concessions by a claimant which reduce its claim by £2 million, or 20%, might be welcome news to a defendant. But I recognise that these late changes caused AUK particular difficulties, since they were accompanied by a whole lever arch file of amended schedules which AUK had simply had no time to check. Moreover, in the very limited time that AUK had had possession of the documents, they were able to demonstrate that it was far from clear that all of the matters expressly conceded by Mr Lester had in fact been taken into account. In some instances, it was shown that they had not been. Since they had never been tested in evidence, their status and validity was at best uncertain. In addition, and more fundamentally, the fact that the entirety of Mr Lester's evidence was so flawed means that the tweaking of the OSR claims, although a welcome sign of realism from OSR, did not begin to address the difficulties caused by his answers. The changes did not address the difficulties faced by OSR's factual evidence either.
Mr Lester was not the only expert who gave evidence. The AUK expert, Mr Kitt, had done much more work on the valuations originally, and his criticisms of the OSR claims have repeatedly been proved right. He was an independent and clear expert witness.
Mr Kitt said that, for reasons which he set out in full in his reports, numerous Line Items should be valued at nil. I accept of course that claims like these are easier to knock down than they are to advance, and I think that Mr Kitt sometimes took his desire to seek alternative figures too far. But, when considering the (very different) evidence of the two experts, I make plain that I can only reasonably rely on the evidence of Mr Kitt. Thus the starting point of my evaluation of many of the Line Items is, indeed, nil. That conclusion is wholly unaffected by the belated attempt to bring some realism to the OSR claims after the conclusion of the trial.
5. THE CLAIMS IN RESPECT OF DEEPER PEAT WHICH ARE NO LONGER PURSUED AND/OR ARE HOPELESS (CLAIM 1)
OSR accept that, in relation to the Northern section of the gas export pipeline, the information that they had about the ground conditions was such that they always intended to build a stone embankment there, and lay the pipe within that embankment. There is a separate claim about the width of the embankment on the Northern section (Line Items 7 and 8), which is now claimed (perhaps surprisingly) under Claim 2, the claim in respect of permissions and crossings. It is therefore dealt with in Section 7 below.
However, in respect of the Southern section, OSR say that they intended doing the work in a less elaborate way, building a roadway (referred to in the documents as "the stone road") which would have been 8 metres wide, and then digging a trench immediately to the side of that roadway in which to lay the gas export pipeline. In this way, OSR claim the additional costs of building a stone embankment that was 13/14 metres wide on the Southern section, as opposed to an 8 metre stone road, which is what they said they were obliged/entitled to build under the contract.
This claim is now put only as a claim (Claim 3) in respect of unforeseen ground conditions, pursuant to Article 12.2.3 (paragraph 11 above). But before coming on to consider that claim (which I do in Section 6 below), it is instructive to identify all of the various ways in which the claims in respect of the embankment have been put, which have either been expressly abandoned or which are no longer pursued. On my analysis, both in principle and in fact, this analysis of the other ways in which this claim has been formulated demonstrates that the ground conditions claim is itself a difficult claim for OSR to establish.
The claim in respect of the embankment on the Southern section was originally called Claim 1. It was put forward by reference to an alleged design change required by AUK. The principal difficulty faced by Claim 1 was that OSR were unable to identify any provisions of the Contract on which they could rely to say that they had an entitlement to build a stone road on the Southern section that was 8 metres in width, and that the change to an embankment was a design change with which they were obliged to comply.
This fundamental difficulty can be seen in the original Particulars of Claim where, at paragraphs 6-8, it is alleged that the entitlement to build an 8 metre wide stone road on the Southern section arose as a result of oral or written representations made in March/April 2010, when the original provisional sum for this work was converted (without alteration) into a fixed price lump sum. This was seven months before the Contract was agreed and signed. The claim was therefore based on an alleged term which formed no part of the written Conditions of Contract. This was a basis of claim that was always hopeless in law, particularly given that Article 3 made clear that it was the Contract that alone provided the entire agreement between the parties, and nullified and superseded all related oral and written understandings and representations.
Possibly because OSR themselves were aware that a claim based on a term that arose due to alleged pre-Contract representations would be defeated by Article 3, they sought to suggest, in the alternative, that the written Contract should be rectified. The basis for rectification was obscure. That claim too has now been abandoned, but it again demonstrates that, even on OSR's case, they were unable to identify any express term of the Contract that gave them what they needed to found this claim.
As a further alternative, it was suggested there was an implied term to the same effect (namely that they were entitled to build a stone road 8m wide in the Southern section so that any design change brought about an entitlement to additional monies). That claim too has now been abandoned. Applying the well-known test for an implied term, set out in Liverpool City Council v Irwin  AC 239, it is plain that the Contract could work perfectly successfully without such a term.
The Claim for a Change
Despite these difficulties, prior to the trial, OSR had not abandoned Claim 1, the claim that the 13/14 metre wide stone embankment in the Southern section was a design change instructed by AUK. During the course of the trial, however, Ms O'Farrell QC made it clear that she no longer pursued Claim 1, and instead sought to claim the Line Items that fell within Claim 1 either by way of the claim for unforeseen ground conditions (Claim 3, dealt with in Section 6 below), or by way of the claim in respect of the temporary crossings and late proximity agreements (Claim 2, dealt with in Section 7 below). Thus Claim 1, as a claim arising out of an alleged Change Order, was not identified or advanced in any part of OSR's closing submissions.
This was unsurprising; given not only the difficulties with the necessary express or implied term, but also because OSR had struggled even to identify what they had said was the relevant Change Order. In fact they had pleaded three alternatives (one in May 2011, one in late September 2011, and one on 18 October 2011) which were mutually inconsistent. On analysis, none of these three suggested documents could possibly be said to be Change Orders emanating from AUK. Accordingly, in my view, Ms O'Farrell QC was right to abandon the last way in which Claim 1 could be put, namely by reference to an alleged Change Order.
However, as I have already said, before going on to analyse the claim for allegedly unforeseen ground conditions, it is important to set out how and why, as a matter of fact, the claim for a design change in respect of the Southern section (Claim 1) was always hopeless. As will become apparent, that has a significant impact on my analysis of Claim 3.
The reason for this is straightforward. The way in which the excavations were carried out, and the nature of those excavations, was covered in the Contract by a lump sum. The methodology adopted was a matter for OSR and nobody else, a point expressly accepted by Mr Mulcair in his cross-examination. There was no relevant term of the Contract restricting the choice of methodology available to OSR. Moreover, both the pre-Contract documents, the Contract documents themselves, and the post-Contract documents, all envisaged that at least one way in which these works could be carried out on both the Northern and the Southern sections was by the construction of an embankment at least 13 metres wide, into which a trench would be excavated and into which the gas export pipeline would be laid. On that basis, it was always impossible for OSR to claim extra monies for a design change, when the parties and the documents always envisaged that the work might well be carried out in the way in which it was in fact carried out.
At paragraph 144 of their closing submissions, when dealing with one of the Line Items claimed as a consequence of the alleged unforeseen ground conditions, OSR say this:
" The contract was placed on a fixed priced basis, fixed for the duration of the contract. Within the lump sums in the contract was the work for excavating peat. Accordingly, any allowance OSR might or might not have allowed in its tender was irrelevant. OSR took the risk that it might cost more to carry out the work, and AUK effectively took the risk that the works might in fact be easier, quicker and cheaper to perform."
In my view that encapsulates the point I have already made about the hopelessness of Claim 1, albeit in a slightly different way. It is the reason why Claim 1 was always going to fail and, jumping ahead, it also neatly encapsulates one of the many reasons why Claim 3 was always going to be very difficult to sustain.
OSR's original quotation, dated 16 November 2009, made plain that they envisaged using the embankment technique throughout. They said:
"Due to our concerns about pipeline stability in peat from previous experience, we have taken for an 8.00 metre wide engineered rock embankment to provide support for the pipeline in peat areas. Additionally we have taken for trench support in the Southern Voe terminal area as this area was previously filled and could be extremely unstable for pipe laying."
The price for this work was expressed as a provisional sum.
Thus, from the outset, OSR envisaged at least the possibility that the embankment technique would be used throughout the 5.7 kilometres of the pipeline. It was therefore unfortunate that Mr Mulcair, the person who wrote the letter, and had the keenest understanding of how unhelpful it was to the claim OSR now sought to make, endeavoured to argue that this paragraph did not mean what it said and that actually he was intending to refer to the rock embankment providing support for the peat, rather than the pipeline, and that this was therefore a reference to a floating road, not a rock embankment. That was not what he said in the letter and, I find, it was not what he meant. I have already made the point that his credibility suffered significantly as a result of his attempt to rewrite what he had said in this letter in order to sustain OSR's claim now.
In March/April 2010 OSR were asked to convert the provisional sums which they had quoted into lump sums. They did so, without alteration. I should also note that Mr Mulcair's email of 30 March 2010 referred to a 'haul road' of 8 metres. If that was intended to be a reference to the stone road as opposed to the stone embankment, then on OSR's own case it was a mistake because, although it did not differentiate between the different sections, OSR now say they always intended to build a stone embankment for the entirety of the Northern section.
More widely, of course, the make-up of the lump sum was a matter exclusively for OSR. It was of no relevance to AUK (for the reasons adopted by OSR and cited in paragraph 112 above). It does not appear that Mr Mulcair, or anyone else at OSR, appreciated in full the significant change to the risk being borne by OSR as a result of the change from a provisional sum (which would have entitled OSR to recover what the works cost to build), to a lump sum (which would be payable whatever happened, however the works were carried out, and whatever it cost).
In his cross-examination, there were these exchanges with Mr Mulcair:
"Q: And so far as work package 10 is concerned, you understood, didn't you, on entering into the contract that the contractor was responsible for installation engineering procedure?
A: My Lord, if by that you mean the temporary works to install the pipeline, I would agree, Yes.
Q: How to get the pipe into the ground?
Q: You also understood it was your responsibility to evaluate the optimal method of excavation?
A: …that's correct."
This last phrase was a reference to Exhibit A (Scope of Work) where paragraph 2.10.8 expressly obliged OSR to "evaluate and select the optimal trench excavation method(s) with respect to the soil conditions…this includes construction requirements for an embankment type design, if applicable." In my view, this was a clear and unambiguous provision that made OSR responsible under the Contract for the construction, if 'optimal', of an embankment for the whole length of the gas export pipeline. On its own, it comprised a complete answer to Claim 1.
On 15 September 2010, before the Contract was signed and as part of the refining of the work scope and the contract negotiations, Mr McDermott of OSR sent an email to AUK commenting on various drawings which he had been sent. Both the drawings on which he commented, and his comments themselves, are of importance.
The drawings were prepared by JP Kenny, the designers acting for AUK. They were general indicative drawings. They did not form part of the concluded Contract. The first drawing was entitled "Typical right of way cross-section (peat to 1.5 metre in depth)". This showed excavation down to "non-peat hard-ground / rock." The excavation was shown to be typically 9 metres wide. The pipeline was laid in a trench within that 9 metre width, the trench occupying about a third of it. There was no indication of any stone road at all.
The second drawing was entitled "Typical right of way cross-section using stone road method of construction (peat greater than 1.5 metres in depth)". This showed the embankment method (although it is confusingly called a stone road) with the pipeline laid within that embankment. That showed again the embankment being 9 metres wide with the pipeline taking up a third of it. The drawing clarified that "pipeline shall be installed entirely within the stone road fill".
On one interpretation, therefore, these drawings showed that one possible way of determining which method of construction might be used was by reference to the depth of the peat, and that the cut-off was 1.5 metres. If the peat was deeper than 1.5 metres then an embankment would be used; if less than 1.5 metres, no stone road would be used and there would simply be an excavation down to hard ground. Of course, this was not the basis on which OSR either planned to or did carry out the works.
More importantly for present purposes, Mr McDermott took issue with the 9 metre width, saying that it was too narrow. He said:
"We will require nine metre width running track from the edge of the trench, therefore, the typical dimension at nine metres including the trench width is too narrow. This needs to be 14 metres. 5.6 metres for the trench and 8.4 metres for the running track."
Mr McDermott's comments show that OSR envisaged that the embankment or stone road, whichever they used, had to be 14 metres wide. Again, it seems to me that that analysis is self evident from Mr McDermott's comment. It is also plain as a matter of commonsense: 6 metres (having allowed 3 metres for the width of the trench) was not wide enough to allow the necessary machines to pass along the excavation.
Unfortunately, Mr Mulcair sought to distance himself from this comment. Initially he said that the width of the embankment would depend on the depth of the peat, which is not what Mr McDermott said. Mr Mulcair appeared to be arguing that it would be rare for the 14 metres to be utilised, the complete opposite of what Mr McDermott was saying. So it was asked why, having seen the email at the time, he did not point out to Mr McDermott that he was wrong. Initially Mr Mulcair sought to argue that this did not happen because it was during a period of design development, but in the end he accepted that no one noted that Mr McDermott's comment about 14 metres was, in some way, not a typical detail. I find that it obviously was.
In addition, Mr McDermott's comments were consistent with what OSR had been indicating as to the width of the embankment since the start of the year. It is unnecessary to identify all the relevant documents in which they referred to a width of 12 or 13 metres. By way of example, in their response of 29 January 2010, recorded in the AUK 'clarifications' document of April, OSR said:
"With the regard to the use of traditional equipment it would be our intention to remove a 12 metre wide strip of peat along the line of the pipeline and place a stone pipeline protection embankment in the excavation to provide permanent stability for the pipe and a solid running track for pipe laying equipment such as excavators and side boom."
In my view that document also made clear that OSR always envisaged at least the possibility of a full embankment, 12 metres wide, throughout the length of the pipeline, with the pipeline being laid within it.
On 8 November 2010, Mr Mulcair prepared a report for AUK which he described as a "comprehensive comparison of both pipeline techniques". It was again produced shortly before the Contract was signed. It considered the relative advantages of the embankment technique on the one hand, and the floating road (which Mr Mulcair said in evidence was a reference to the stone road method) on the other. Mr Mulcair concluded his covering letter by saying that he hoped the document "clearly shows the advantage of the embankment technique".
This report, which went through a number of later iterations, was important. It referred to option A as "the floating road", and option B as "the embankment". The embankment technique is described as the technique that "we have proposed…in our base scope". The embankment technique is then described fully and there are photographs to demonstrate how it would be carried out. The document also indicates that it is, at least in part, dictated by peat depth. It said:
"The peat depth from the site investigation indicates depths varying from 0.5 metres to 4.5 metres along the pipeline route. It is difficult to tell from the existing above ground topography and flora the peat depth. It would be our intention with the agreement of the relevant authority to reinstate the peat with a minimum depth of at least 0.5 metres of peat to ensure re-vegetation to the original state."
The report then went on to compare both techniques. It said this:
"Both techniques are technically possible. Our preference is for the solid embankment from a safety and permanent stability viewpoint but if the relevant authorities would prefer a work-off a floating platform, this is entirely possible if the peat depths are less than 2.5 metres. This approach is less stable than digging a temporary running track to solid and induces loads on the peat layer which tends to compress the peat and causes permanent damage to the peat strata."
The report indicated that this preference for the stone embankment required the procurement of rock. The two methods are then scored and the floating road score was 42 and the embankment score was 61. The document makes plain in my view that the embankment method was, in the words of paragraph 2.10.8 of Exhibit A (paragraph 117 above), "the optimal method of excavation".
Mr Mulcair was obviously asked about this document in cross-examination. He accepted that his preference was for the solid embankment with the pipeline being installed "in the body of the rock embankment". In passing I should also say that, although Mr Mulcair suggested that the embankment method to which he was referring envisaged an embankment that was 8 metres wide, it eventually emerged from his cross-examination that the 8 metres did not include the area into which the trench would be excavated and the pipeline installed. He confirmed that these were two separate things, constructed at the same time. This therefore meant that the entirety of the stone embankment, including the area of the trench, would be roughly 12 or 13 metres wide.
After the Contract was signed, this report went through some further changes. In the amended version, it was stressed that "the pipeline would be strung, bent, welded and then installed in the body of this rock embankment thereby providing great permanent stability for the operating pipeline. The pipeline would be bedded and surrounded and we would then propose to remove the top portion of the embankment (above the crown level of the pipe) so that the vegetative layer can be returned." Mr Mulcair confirmed in cross-examination that the intention was to lay the pipeline in the body of the embankment.
The Contract Documents
5.1 Specification and Method Statements
It was agreed that, apart possibly from the drawings, there were no Contract documents which provided any information as to the width of the excavation, or the nature of the road or embankment. However, I do note that in the Method Statement for pipe stringing outside the trench, the width of the embankment was expressly shown as 13 metres. This was the width, shown in a drawing, necessary to accommodate the equipment. Ms Dallatomasina confirmed that this was for the whole pipeline, north and south. She also confirmed that this width did not change in accordance with the depth of peat.
There were no Contract drawings showing the width of the excavation or the nature of the stone road or the embankment to be built. There were a series of Contract drawings which provided some (limited) information as to ground conditions, and I deal with those in Section 6 below.
5.3 Rates/Depth of Peat
OSR's evidence as to what they allowed for in their tender in respect of the depth of peat was completely confused and contradictory. At different times, they suggested that the rates changed (or may have changed) when the peat was in excess of 1 metre in depth; in excess of 1.5 metres in depth; in excess of 2 metres in depth; and even in excess of 2.5 metres in depth. Thus, by way of example only:
(a) By reference to the minutes of the meeting of 20 July 2010, OSR referred to deep peat as being peat greater than one metre. By reference to this minute, Mr Mulcair said in evidence that the reference to "a stone road method" was actually a reference to the embankment method, a further example of his elastic use of definitions.
(b) OSR plead that the distinction for the purposes of their tender rates was peat that was less or more than 1.5 metres in depth. That was a figure referred to in the general (non-Contract) drawings to which I have referred (at paragraphs 119 and 120 above). However, Mr Mulcair said that he did not support that figure. At one point in his cross-examination he said that the relevant cut-off was somewhere between 1 and 1.5 metres. In another passage he said that the relevant figure was 2 metres.
(c) This uncertainty about where, on OSR's case, the relevant cut-off came was the subject of further cross-examination of Mr Mulcair on Day 3. He was asked, when he was talking about "deep peat", whether he was talking about more than 1 metre, more than 1.5 metres, or more than 2.5 metres. On this occasion, Mr Mulcair answered clearly that he was talking about "more than 2.5 metres" (Transcript 3/21/16). That was an important answer for the purposes of the unforeseen ground conditions claim because, on any view, the average peat depth actually encountered in the Southern section was much less than that. It was also consistent with Mr Mulcair's report, at paragraph 127 above.
In truth, there was no credible evidence that the OSR rates actually varied at all by reference to estimated peat depth. They had quoted a lump sum for the work. The lump sum did not differentiate between the Northern and Southern sections, nor did it differentiate between the work necessary or the rates applicable for working in peat above or below any specific depth. Neither were OSR's internal documents (which were in any event irrelevant) supportive of any consistent differentiation.
After the Contract was signed there was a kick-off meeting on 9 December 2010. One of the issues discussed was the possibility of using bog mats (an inferior version of the stone road method) and the advantages of the embankment method. The discussion indicated that both could be used, depending on the actual depth of the peat.
By this stage, there was a Method Statement for the pipeline construction in peat. This was a fuller version of the report already discussed at paragraphs 125-130 above. The statement that it was OSR's "strong belief that the embankment provides a safer, more stable, useable more permanent solution for the onshore pipeline" was repeated. The scoring system, and the result in favour of the embankment method, remained the same. In the conclusion OSR "strongly recommend, based on their extensive experience of pipelines in peat, to construct the pipeline using the embankment technique." The document went on to indicate that the floating road technique was possible in those locations where peat was up to 2 metres / 2.5 metres deep but that, in the Northern section, where peat layers were well beyond 2.5 metres thick, that would require the embankment-type technique. That was consistent with Mr Mulcair's evidence at paragraph 133 c) above. It is also noteworthy that in the conclusion of that report, the floating road technique is described as possible and that it could be used "if it is preferred". The report does not say by whom: in the event, neither OSR nor AUK 'preferred' to use it.
Another post-Contract document was a Method Statement for the right-of-way preparation, including peat handling. This too went through a number of iterations. This suggested that a relevant distinction may be between peat of up to 1.5 metres and peat above 1.5 metres. It was yet another expression of the possible cut-off to add to those summarised in paragraph 133 above.
A further post-Contract document that went through a number of iterations was the Project Execution Plan. This was prepared by OSR and eventually approved by AUK. It was principally concerned with timeline and the efforts to move the mainline work from 2012 to 2011, noted above. This indicated that the ground conditions in the Southern section were thought to be better than in the Northern section. There was a good deal about the removal of peat and the like. The document does not provide any assistance on the differentiation (if any) between the embankment or stone road method, or the width of any proposed embankment or stone road.
However, some post-Contract documents are of assistance in relation to those issues. On 28 November 2011, OSR provided a document to AUK which was a COR (No 66) in respect of unforeseen ground conditions. The document was prepared by Mr Caviglia. In it, he said in respect of the Southern section:
"…A different RoW confirmation was designed considering that the supposed peat depth was less than 2 metres. In this last case, the RoW was designed to be about 15 metres and flat. Instead the access road at present has two levels and a total width of 13 metres (average). The second level was introduced to counter the forces at the bottom of the peat embankment in order to avoid any peat slippage."
This was a clear statement by OSR that they expected the width of the access road (whether embankment or stone road) to be 15 metres wide: indeed it could be read as a complaint that a 13 metre width was inadequate. It was therefore consistent with other evidence I have summarised above, but clearly contrary to the case that they now advance. Mr Caviglia was pressed on that on cross-examination. He simply shrugged his shoulders and said he must have made a mistake. That was despite the fact that, when I asked him whether it was customary for him to make such mistakes in letters of this kind, he answered '"certainly not". I do not accept that he made any kind of mistake, for the reasons previously noted.
In my view, this analysis of some of the relevant documentation makes it only too clear how and why it is that OSR have had to abandon Claim 1. In particular:
(a) They could not demonstrate, pursuant to the Contract, they had any entitlement only to construct a stone road, as opposed to an embankment, in the Southern section. Neither could they prove any entitlement to limit the width of any such stone road to 8 metres.
(b) Instead, all the contemporaneous material makes clear that the nature of the excavation (whether it was an embankment or a stone road) were matters entirely for OSR. Which method was used might ultimately depend on the particular ground conditions which OSR encountered.
(c) There was nothing in the Contract that entitled OSR to additional monies depending on how they chose to carry out the excavations. The risk that a stone embankment might prove to be necessary throughout both Northern and Southern sections always remained with them.
(d) As a matter of fact, it appears that OSR strongly preferred the embankment technique, and made that preference clear to AUK. They also envisaged that that embankment would be 12/13/14 metres wide. That is precisely what they went on to build.
Accordingly (with the possible exception of a claim for unforeseen ground conditions under Article 12.2.3, which I address in Section 6 below), there was no contractual basis for a claim for additional monies arising out of the construction of a 13m embankment in the Southern section. Neither was there any basis in fact: on the contrary, I find that what happened on site was one of the options which OSR expressly envisaged at the time of tender; which was their stated preference; and which it was their obligation to carry out pursuant to the lump sum Contract.
Accordingly I formally record that Claim 1 must fail. The next question is where, if anywhere, does that leave Claim 3?
6. CLAIM 3: UNFORESEEN GROUND CONDITIONS
I have set out the relevant Contract provisions at paragraphs 10-13 above.
I have been referred to a handful of authorities dealing with unforeseen ground conditions. However, this area of the law has recently been considered by the Court of Appeal in Obrascon Huarte Laine SA v Her Majesty's Attorney General for Gibraltar  EWCA Civ 712. In that case the Court of Appeal upheld the decision of Akenhead J, in which he 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, they had a claim for unforeseen ground conditions. Akenhead J rejected that approach. At paragraph 215 of his judgment he said:
"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."
This approach was upheld by the Court of Appeal.
The documents noted in Section 5 above are relevant to the claim for unforeseen ground conditions. I note below some additional documents which are also relevant to this claim.
3.1 Pre-Contract Communications
The most comprehensive pre-Contract information in respect of the ground conditions along the proposed line of the gas export pipeline was provided by way of the results of a Mackintosh Probe Survey. This information was provided by AUK to OSR in tender bulletin number 26 in early 2010. This showed the results of the probes at various stages along the pipeline length. The document was colour-coded. If the result was peat less than one metre in depth, the location was marked with a grey dot; if between one and two metres, the dot was light blue; if between two and three metres, the dot was dark blue; if it was between three to four metres in depth, the dot was shown in orange; and depths of four to five metres or five metres and deeper were shown in two shades of red.
Most of the individual results for both the Northern and the Southern section were shown either in grey or light blue. There were a few dark blue results in both sections. The only real difference was that, although there were orange and red dots shown on both sections, there was one particular part of the Northern section (just north of the road crossing at RDX2), that was all orange and red. That part was about a third to half of one kilometre. That more extensive area of deeper peat aside, I find that there was little difference in the results of the Mackintosh probe survey as between the two sections. There were varying layers of peat in both. Overall, the Northern had more areas of deeper peat than the Southern but, on an analysis of the survey, this was not a significant difference.
It appears from an email from Mr Guite of JP Kenny dated 3 November 2010 that these results were then used, presumably having been averaged in some way, so as to calculate the amount of peat to be removed along the pipeline route.
The results of the Mackintosh probe survey are central to OSR's claim for unforeseen ground conditions because, when it is stripped down, OSR are saying that, where the actual conditions were different to those in the survey, they have a claim under Article 12. An integral part of that approach was OSR's case, supported by Mr Mulcair's witness statement, that their prices for the excavation and related works were based on the Mackintosh probe survey.
Unhappily, this statement, although confirmed by Mr Mulcair in his examination in chief, was untrue. As already noted, the relevant lump sums in the contract came direct from OSR's original quotation, which was provided long before the Mackintosh probe survey had been provided to OSR. In other words, there was, as a matter of fact, no link at all between the survey results and OSR's rates, prices and lump sum quotation. Eventually, in his cross-examination, Mr Mulcair accepted that. This undermined the entire basis of the claim and was a further blow to Mr Mulcair's credibility.
Also prior to the Contract being signed, further investigations were carried out into the ground conditions. Some preliminary survey data was supplied by AUK to OSR on 29 October 2010. Although this made plain that some data was incomplete because the data processing was still ongoing, trial pit logs were provided. The trial pit logs showed peat at various depths in various locations. Some showed peat at greater depths than the Mackintosh probe survey: for example, TP O8E, which was on the Southern section and in an area where the relevant Mackintosh probe survey estimated peat below 2 metres, showed peat at 2.6 metres.
3.2 Contract Drawings
As recorded in paragraph 132 above, the only Contract documents that had any relevance to the issues between the parties on Claim 3 were the Contract drawings. It was a curious feature of this case that only one of these drawings was referred to in the evidence (and that was on the last day of the trial) and a full set was not provided until the closing submissions. Even then the content of those drawings was not particularly illuminating.
There was a certain amount of heated debate about how this situation had arisen. In the end, it seemed to me appropriate to allow the Contract drawings to be referred to, although they had not been the subject of oral evidence beyond one brief exchange with Mr Kitt. I am left to make of them what I will. I set out briefly below my conclusions.
The nine relevant Contract drawings are referred to as alignment sheets. Their principal purpose was to identify the path of the gas export pipeline and the angle at which it would lie in the ground. This was called the "pipe profile". These drawings also referred to the "approximate depth of peat strata". This is shown in red cross-hatch on the drawings. These approximate depths are not stated so, if they were of any importance, they would have had to have been scaled off from the drawings. There was no suggestion that anyone at any time did scale them off in that way.
The drawings show that there were many areas of peat in excess of 1 or 1.5 metres on both the Northern and the Southern sections. The only drawing that was the subject of oral evidence, in the bundles at H1/7A, identified the Southern section and identified a large area of peat that was, when scaled off from the drawing, between 3 and 3.5 metres deep. That was in an area 140 metres long, which was, therefore, rather more than a pocket.
To the extent that it was in issue, therefore, I have concluded that these alignment drawings were not principally designed to provide information as to the peat depth. That explains why no such information is given on the face of the drawings; and why any depths that were indicated were expressly said to be "approximate". These approximate depths showed areas of deeper peat in both the Northern and the Southern section, with more areas in the Northern than the Southern. It is inappropriate to read anything more into these drawings than that, and there was no evidence from OSR that they could or did rely on these drawings at all.
One final comment about the Contract drawings. During his cross-examination on Day 2, Mr Mulcair made the rather cryptic comment that "we knew that what was going to be built was different to what was on the Contract drawings". It may be that, in saying something which seemed to be contrary to basic contracting principle, he had in mind these drawings (the only relevant Contract drawings to which I was referred during the trial) and was aware that they provided little support for OSR's case.
3.3 Other Drawings
Three other types of drawings were referred to during the evidence. In general terms, I have concluded that they do not take the matter any further forward. They were:
(a) An earlier revision of the Contract drawings, referred to above. These contained different information to that shown in the Contract drawings and included indications of "depth of peat strata from ground level" and "extent of trench cut into rock strata". However, no figures were given for these measurements and scaling off these drawings was even more difficult than from the Contract drawings. There is also no suggestion of any real variation of peat depth in these drawings, which was plainly contrary to everyone's expectations. The drawings were superseded, in part because the route of the pipeline changed.
(b) There were the drawings prepared by JP Kenny, AUK's designers, and referred to at paragraphs 119 and 120 above. In her closing submissions Ms O'Farrell QC made the point (for the first time) that these drawings somehow represented a consensus as to how the work would be done depending on whether or not the peat was more or less than 1.5 metres in depth. In my view, that submission is incorrect. First, I heard no evidence about the production of these drawings. In particular I did not hear where the information that was shown in them came from. Secondly, the suggestion that they were somehow a culmination in anyone's thinking was not put to, or made by, any witness. Thirdly, these drawings were early (produced in 2010) and were superseded by the later information, including the Contract documents. They did not represent any concluded view as to how the works would be performed. Fourthly, the drawings do not show the two alternatives with which this trial has been concerned: it shows the embankment method (albeit confusingly referred to as the stone road), but it does not show what OSR call the stone road method: namely the building of a stone road and the excavation of a trench beside it. It shows excavation without any stone road at all. Fifthly, the drawings suggest a difference of methodology at the 1.5 metre level. For the reasons set out in paragraphs 133-134 above, that was not the basis on which OSR operated.
(c) Other drawings, also called alignment sheets, which did give peat depths expressed in figures. The figures on these drawings also showed varying depths of peat, including sections of peat between 1.5 metres and 2 metres and deeper, in both the Northern and Southern sections. They therefore added nothing to the Contract drawings.
3.4 Post-Contract Events
On 13 December 2010, after the Contract between AUK and OSR had been concluded, AUK provided the full topographic and geophysical survey (in other words, including the information they had said in October was still outstanding: paragraph 153 above). This included a resistivity survey. This showed that the rock head was between 1 and 4 metres deep, and getting deeper along the Southern section. In general terms, I find that this further information was consistent with the trial pit information sent in October, and made clear that, in various locations in the Southern section, the peat depth was likely to be greater than had been revealed by the Mackintosh probes, and could be as much as 4 metres deep.
What is more, I find that, subsequently, after the problems arose, both parties accepted that this was indeed what the resistivity survey showed. AUK said so expressly in their letter of 1 November 2011. In their reply, OSR did not challenge that statement, but merely said that, because the resistivity information was provided after the Contract was agreed, the information was irrelevant. In addition, in a much later claim document, prepared by Mr O'Rourke of OSR on 29 August 2013, he compared the Mackintosh probe survey with the later resistivity information and said in terms that "the two methods provided contradictory results, in that the resistivity investigation showed the peat being deeper than had been originally presumed…".
Mr O'Rourke's analysis was obviously correct. It was therefore unfortunate that, in his oral evidence, he sought to avoid the difficulties it created for the OSR claim by arguing that the resistivity information was not after all inconsistent with the information provided by the Mackintosh probes. Again, his evidence in cross-examination was unsatisfactory because he appeared to be trying to cling on to the OSR claim, regardless of the truth. Of course, the question of the relevance of the resistivity information, because it was provided post-Contract, is an entirely separate question, although I note that Mr Mulcair accepted in cross-examination that it was relevant.
OSR started work on the Southern section on about 10 or 11 October 2011. I find that they immediately began to construct an embankment that was about 13.5 metres wide. Mr Teal's witness statement made clear that OSR began building the embankment at this width in the Southern section, without reference to the particular ground conditions. Although, at one point in his cross-examination, Mr Teal appeared to accept a link between this methodology and the ground conditions, he did not suggest that OSR would not have built the embankment in this way in any event. There was certainly no evidence that, for example, the men, plant and materials necessary to build the stone road attended first and then, having looked at the ground conditions, different and/or more men/plant/materials were immediately called up to construct the embankment.
On 12 October there was a meeting onsite "to clarify the method of construction for the right-of-way preparation". The conclusion was that OSR "was to proceed as we were" i.e. with a stone embankment 13.5 metres wide. That is what happened for the rest of the Southern section. At no time after this did anyone ever consider a re-evaluation of the methodology by reference to the ground conditions actually being encountered in the Southern section. I find that that was because this was always the likely way in which OSR were going to carry out this work (for the reasons noted in detail in Section 5 above).
Mr O'Rourke, who was not present at the meeting on 12 October, indicated in both his witness statement and his oral evidence that, in some way, it was accepted at that meeting that OSR had a claim for unforeseen ground conditions in the Southern section and that they had permission, at AUK's cost, to build the embankment 13.5 metres wide for the whole length of the Southern section. In my view, such a suggestion fails on the facts. First, Mr O'Rourke was not party to the discussions and did not attend the meeting. Secondly, as Mr Teal confirmed, all that was agreed was that OSR would continue as they were, namely building an embankment that was 13.5 metres wide. The agreement at the meeting simply did not go beyond that.
On 18 October 2011 there was a video conference to discuss the works, principally because the use of the embankment road throughout the Southern section was going to have an effect on peat and peat storage. This was the subject of emails of the same date. Therefore, on 25 October 2011 there was a progress meeting. Ground conditions were not even discussed, although there was reference to a temporary access point at RDX2A.
On 19 October 2011, OSR wrote to AUK in these terms:
"We wish to notify you that there will be additional costs and time impacts on our programme, due to the substantial difference in the volume of peat and unsuitable material found during the construction of the export pipeline from the initial interrupted report issued by COMPANY during tender stage.
All the volumes of excavation material and imported stone will be agreed on site with a company representative as work progresses.
Therefore we consider this letter to be notification in accordance with Article 15.4 of the Sub-contract Agreement, where we are to notify you of events effecting progress of the works. Also we wish to advise you that any additional costs incurred, which are your responsibility under the Agreement, we will be seeking reimbursement under the appropriate Articles."
Mr O'Rourke, who wrote the letter, confirmed in his oral evidence that the reference to "the initial interrupted report" was a reference to the Mackintosh probe survey.
In their reply of 1 November, AUK referred to and relied on the geophysical survey provided on 13 December 2010, which included the resistivity information. The letter went on:
"CONTRACTOR, was an experienced contractor, could have reasonably foreseen on the basis of other data available, as detailed above, the current sub-surface conditions would have been encountered. COMPANY requests CONTRACTOR to explain to COMPANY why CONTRACTOR, on receipt of the above geophysical survey did not notify COMPANY that such sub-surface conditions would be encountered."
OSR replied on 14 November. They did not answer the particular request made by AUK, saying instead that, because the information provided in December 2010 was provided after the contract, it was "therefore completely irrelevant to our commercial claim for payment for this unforeseen ground condition."
The detailed claim for unforeseen ground conditions, made as two COR's, 58 and 61, was formally made on 22 November 2011. The back-up to the claims was provided the following day. The claim was put at over £5 million, almost half the entire contract sum.
Basis of Claim: Request for Change Order
(a) Article 12.2.3
Article 12.2.3 is set out at paragraph 11 above. That provides the contractual mechanism pursuant to which this claim needs to be analysed. In so doing I have had regard to the authorities, particularly Obrascon.
A claim pursuant to Article 12.2.3 gave rise to an entitlement to request a Change Order pursuant to Article 22. Clause 22.2.5 (set out at paragraph 13 above) provides a maximum of five days for the request to be issued following the occurrence of the relevant event. There is an additional seven days (making twelve days in all) for the production of full substantiation. Article 22.2.5 makes plain that a failure to comply with these provisions would disentitle OSR to any claim. No point is raised as to the inapplicability of this clause to Claim 3; on the contrary, both sides have made their submissions on the assumption that it applies.
It is AUK's case that OSR failed to comply with these notice provisions. OSR maintain that they did comply. I consider that, on the basis of the material set out in Section 6.3 above, AUK are right, and that OSR failed to give timely or adequate notice. My reasons are set out below.
OSR's case is that they discovered unforeseeable ground conditions on 11/12 October 2011. Moreover, on Mr O'Rourke's evidence, it was on that day that OSR decided (he said it was instructed, but I have rejected that case) to build a 13.5 or 14 metre wide stone embankment for the whole length of the Southern section. On the basis of their own case, therefore, a notice should have been provided by OSR no later than 17 October. On any view, no such notice was provided by that date.
Mr O'Rourke's evidence about the importance of what was discussed on the 12 October, and OSR's reaction to it, is fatal to Ms O'Farrell QC's submission, made for the first time in closing, that the notice period did not start to run on 11 or 12 October because it was believed that the deep peat excavated at the start of the Southern section was merely an isolated pocket. No witness said that, nor was there any evidence that it was a pocket. The fact that, thereafter, the methodology was never reviewed again suggests otherwise. Moreover, this was plainly not Mr O'Rourke's understanding: he believed that, from that day, OSR had permission to build a 13 metre stone embankment on the whole of the Southern section, which again suggests it was not thought to be just an isolated pocket. In addition, even if it was an isolated pocket, on the logic of OSR's case, the fact that they were building an embankment there, as opposed to a stone road, would have justified a claim under Article 12 in any event. So that did not relieve OSR from the need to provide a notice in any event.
The first notice relied on by OSR is the letter of 19 October (paragraphs 168-169 above). That notice was therefore not within five days of the relevant event, and so was out of time.
In addition, I cannot accept that the letter of 19 October was a notice under Article 22 in any event. The last paragraph of the letter makes 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. I consider that Mr Lofthouse QC was right to say in closing that this was a very different kind of notice, dealing with Article 15 and 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. I reject the suggestion that that was a technical point: indeed, Mr O'Rourke himself agreed in cross-examination that the letter of 19 October could not be an Article 22 notice.
Although it was not relied on in their closing submissions, OSR pleaded reliance on the notice of 22 November 2011, where they set out their request for Change Orders 58 and 61 (paragraph 172 above). This was out of time, and the document incorrectly presupposed that contractual notice had already been provided. It was also far outside the seven days for the provision of all relevant financial information. In their closing submissions, OSR also sought to rely on an alleged notice of 28 November. That notice was again out of time. Furthermore, it was expressly limited to the mechanical works, and was again a detailed financial claim that incorrectly presupposed that contractual notice under Article 22 had already been provided.
It is, however, worth noting that it was in their letter of 28 November that OSR said, amongst other things, that "the RoW was designed to be about 15 metres [wide]". The point has already been made that this was entirely consistent with all the other contemporaneous documents about the width of the embankment, and wholly contrary to their case now (see paragraphs 139 and 140 above). It was also typical of another OSR trait: the reliance on a contemporaneous document for one purpose, whilst disavowing another part of the same document because it undermined the way in which the claim was now put.
Accordingly, for these reasons, I consider that OSR's claim must fail at the outset because they failed to comply with the relevant notice provisions. However I go on to deal with the merits of the Article 12 claim in case I am wrong on the Notice point. I do that by reference to the steps set out in Article 12.2.3, namely:
(a) Were the sub-surface conditions different from those described in the Contract documents?
(b) Were those different sub-surface conditions those which an experienced contractor could not reasonably be expected to foresee?
(c) Did those different sub-surface conditions substantially modify the Scope of Work and Contract Price?
For the reasons set out below, I consider that OSR's case fails to clear all or any of these hurdles.
(c) Were the subsurface conditions different from those described in the Contract documents?
For the reasons set out below, the answer to this question is that, not only were the sub-surface conditions not different from those described in the Contract documents, but any suggestion by OSR that they were different emerged very late and somewhat half-heartedly.
OSR had no pleaded case that the sub-surface conditions were different from those described in the Contract documents. Their pleaded case was almost entirely based on the results of the Mackintosh probe survey, but that document was irrelevant to the Article 12 claim because it was not a Contract document.
An analysis of the Contract documents offers OSR no assistance. The Contract Scope of the Work, which was Exhibit A to the Contract, made no reference at all to the depth of peat or suggested that the depth of peat was relevant either to the methodology to be adopted by (let alone the remuneration due to) OSR. The only Contract drawing referred to in the evidence was shown by Mr Kitt to include peat up to a depth of 3.5 metres deep in one part of the Southern section. I have set out my summary of the Contract drawings and their contents at paragraphs 154-159 above. In short, the drawings show varying depths of peat in both the Northern and Southern sections, which was exactly what was found.
Moreover, even if the Mackintosh probe survey had been a Contract document, it would have made no difference. The coloured chart showing the different layers of peat revealed by the Mackintosh probes did not show a significant difference between the Northern and the Southern sections (see paragraphs 148-149 above). There is one short stretch of consistently deeper peat on the Northern section which does not have an equivalent on the Southern section but, to all intents and purposes, that is the extent of the difference between the two sections. Beyond that, the conditions in each section were broadly similar. Such a modest difference would not (and did not) justify one method of construction on the Northern section, and an entirely different method for the Southern section. Neither does the chart support an assertion that the conditions that were actually found in the Southern section were different to those in the Contract documents.
Moreover, there is an issue as to what (beyond the fact that there were varying levels of peat) the conditions actually were, and how they compared to the probe survey. It seems clear that AUK were content to let OSR build the embankment 13/14 metres wide on the Southern section because, initially, OSR were not making a claim for additional monies for doing so. When they did, in late November, AUK apparently concluded that, although they had sympathy with OSR, the claim did not work under the terms of the Contract. Thus an embankment 14 metres wide was built throughout the Southern section, without any evidence that the ground conditions that were encountered after mid-October 2011 were significantly different to that set out in the Mackintosh probe survey. There were not always reliable records of the ground conditions actually encountered, metre by metre, after 12 October, and no attempt to compare the actual with the coloured-up chart of Mackintosh probe results provided before the Contract was agreed. So the most that could be said, even by OSR, was that the conditions that were encountered in the first few metres of the Southern section were worse than they had thought. Beyond that, there is no compelling evidence either way.
For all these reasons, therefore, the (unpleaded) suggestion that the subsurface conditions actually discovered were different from those described in the Contract documents has not been made out. On the contrary, the conditions actually encountered were broadly those shown in the relevant batch of Contract drawings. No other Contract documents were of any relevance.
(d) Were the different subsurface conditions such that they could not reasonably have been expected to have been foreseen by an experienced contractor?
(i) By Reference to the Ground Information
This is only relevant if my conclusion in the preceding section is wrong and the conditions were different to those set out in the Contract documents.
I have already dealt with the point that no expert evidence was called to address this topic, and that this was not itself fatal to the claim (see paragraphs 77 and 78 above). I have also made the point that, in October 2011, there was a consensus that the early part of the Southern section had peat deeper than those on site thought they might encounter in that location (presumably because it was deeper than shown in the relevant part of the Mackintosh probe survey). But I have to look at the issue more widely, and decide objectively whether or not an experienced contractor could not reasonably have been expected to have foreseen areas of deeper peat in the Southern section.
I find on the evidence that an experienced contractor would reasonably have been expected to foresee many pockets of deep peat along the Southern section. Indeed Mr Mulcair confirmed in his cross-examination on Day 2 that that was precisely his expectation. In the light of that admission, it is impossible to see how OSR can argue that the fact that they experienced many pockets of deep peat on the Southern section can give rise to a claim for reasonably unforeseeable ground conditions.
On analysis, and leaving aside the difficulty that OSR never actually reviewed the ground conditions and the method of working on the Southern section as they went along, OSR's claim is based on the fundamental misassumption that they were entitled to treat the Mackintosh probe results as some sort of guarantee, such that any deviation whatsoever from those results gave rise to a claim under Article 12.2.3. That is not so. 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. In my view, it is wrong in principle for a contractor to argue that, merely because, in some particular locations, the conditions were different to those set out in the pre-Contract information, those different conditions must somehow have been unforeseeable.
Although that view is confirmed in the Obrascon judgments, I do consider it to be commonsense. 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. Here, OSR quite properly assumed that there would be variable layers of peat, and some deep pockets of peat. They were right to do so. In my judgment, they cannot now make a claim because, putting their case at its highest, there were some more deep pockets of peat in the Southern section than were shown in the Mackintosh probe results. They could reasonably have been expected to assume that there could well be more, or different, such pockets of peat in the ground.
In addition, I consider that it is on this topic that the further ground investigations, provided in tranches either side of the agreement of the Contract itself, are of some relevance (paragraphs 153 and 161-163 above). I accept of course that the resistivity results were not provided until after the Contract had been agreed. They cannot therefore be used in the assessment of whether or not the conditions were different from those described in the Contract documents. But they, and their subsequent treatment, are of some relevance on the issue of what an experienced contractor could be expected reasonably to foresee in the ground between SGP and Firth's Voe.
The resistivity results showed some areas of peat deeper than shown the Mackintosh probe survey. They were provided a month after the Contract was signed and some nine months before the work was started. They were consistent with the results of the trial pits which had been provided pre-Contract. Yet at no time did OSR point out to AUK that the conditions were worse than they had expected or that, more importantly, this would or could have some effect on the excavation works. I find that they did not do so because they knew, as experienced contractors, that the peat layers were likely to be variable and that they could not expect to find peat in precisely the configuration indicated by the Mackintosh probes.
Accordingly, by reference to the ground information available to OSR, I conclude that, if there were different conditions from those described in the Contract documents (which I do not accept), they were conditions which could reasonably have been expected to have been foreseen by an experienced contractor.
(ii) By Reference to Depths Actually Found
Mr Kitt has calculated that the average depth of peat in the Southern section that was actually encountered by OSR was 1.71 metres deep. The details of his calculations were set out in Appendix 9 of his original report. It was not suggested to him that, even though there was a point about the peat depth after turving, his calculation was wrong; indeed, as Mr Lofthouse QC points out in paragraph 76 of Appendix 4 to his closing submissions, it was noted that it was similar to the tables produced by OSR.
I accept Mr Kitt's calculation. That is not only because I generally accept Mr Kitt's evidence (see paragraphs 99-100 above) but also because I consider it to be a figure which is entirely consistent with the careful evidence of Mr Teal about the events on site, and the fact that it was only some time after the works were carried out that OSR began to suggest that the ground conditions had been a multi-million pound problem.
How can the figure of 1.71 metres be compared with what OSR say they anticipated? Taking OSR's pleaded case at its highest (and ignoring for this purpose the smorgasbord of conflicting possibilities advanced by Mr Mulcair, and referred to at paragraph 133 above), they say that they anticipated peat in the Southern section that was not greater than 1.5 metres in depth. I do not accept that the difference between 1.5 metres and 1.71 metres gives rise to a claim under Article 12. I reject the proposition that peat at an average depth of 1.71 metres could not reasonably have been foreseen, whilst peat at 1.5 metres depth could reasonably have been foreseen. The margin is just too small, a finding confirmed by Mr Mulcair's evidence in cross-examination that there was no need for the embankment method at all for peat depths of up to 2 (and/or 2.5) metres.
Furthermore, that analysis presupposes that OSR's pleaded case is accurate. I do not consider that it is. As I have already noted, Mr Mulcair said that it was only when peat was at a depth of 2 metres or more that there was a difference in the relevant methodology and thus rates. On another occasion, he said the relevant cut-off was 2.5 metres. The average depth of peat found in the Southern section was well within these ranges. Again therefore, it cannot be said that such a depth of peat was not reasonably foreseeable.
(iii) Link Between the Probe Survey and OSR's Price
I have already noted (paragraphs 151-152 above) that it was an essential part of OSR's case, both on the pleadings and in the oral evidence, that they based their lump sum on the Mackintosh probe survey. This was then the foundation stone of Claim 3, because of course it was said that the rates and prices within the lump sum were calculated on the basis that it was the Mackintosh probe survey that demonstrated what was reasonably foreseeable, and thus dictated OSR's price. It was said that, because the ground conditions were different to the probe survey, they were not reasonably foreseeable and OSR's price was inadequate.
However, as Mr Lofthouse QC demonstrated in his cross-examination of Mr Mulcair, this link was simply untrue; something which Mr Mulcair ultimately accepted. In my view, the removal of this critical element of Claim 3 was also fatal to the ground conditions claim, going as it did to both reasonable expectation and the final topic, Scope of Work and Contract Price.
(e) Did the different conditions substantially modify the Scope of Work and the Contract Price?
In my view, for the reasons already set out in Section 5 and the preceding paragraphs of Section 6.4 above, the ground conditions (even if, which I do not accept, they were both different for the Contract documents and not reasonably foreseeable) did not substantially modify the contractual Scope of Work or the Contract Price.
In order to have had any prospect of successfully overcoming this final hurdle, OSR would have needed to demonstrate on the contemporaneous documents that they intended to build a stone road on the Southern section that was only 8 metres wide, and that their lump sum quotation, and the other documents, made this intention clear to AUK. They simply cannot begin to demonstrate such a case on the facts. That is why they cannot maintain Claim 1, namely the claim for a design change. But for precisely the same reason, because they cannot identify a contractual entitlement to build a stone road 8 metres wide on the Southern section, they cannot demonstrate a substantial modification to the contractual Scope of the Work as a result of the deeper peat.
For the reasons already given, I consider the lump sum price envisaged (or must be taken to have envisaged) the possibility of either an embankment or a stone road, depending on the layers of peat, in both Northern and Southern sections of the pipeline excavation. The documents and evidence to which I have referred above admit of no other interpretation. Moreover, OSR's own representations repeatedly made it clear that they preferred – for very good reason – the embankment method.
In addition, the lump sum plainly envisaged (or must be taken to cover) an embankment width of anything between 12 and 15 metres. That is because of the documents and the evidence summarised above and in particular:
(a) OSR's January 2010 statement referring to the need for a 12 metre width (paragraph 124 above);
(b) Mr McDermott's detailed comments on 15 September 2010 (prior to the Contract) that a 14 metre width was required as a typical detail (paragraphs 122-123 above);
(c) Mr Mulcair's November 2010 report and the necessary extrapolation from it that gave rise to a 12/13 metre width (paragraph 129 above);
(d) The Method Statement for pipe-stringing and its reference to a 13 metre width (paragraph 131 above);
(e) Mr Caviglia's repeated statements in claim letters that the embankment had to be 15 metres wide (paragraphs 139 and 181 above);
(f) Mr Mulcair's evidence at paragraph 29 of his witness statement which, as explained in paragraphs 207 and 208 below, was a clear admission that the embankment he priced for was 13 metres wide.
I am satisfied that the tender itself shows that OSR priced for an embankment that was 13 metres wide for the length of the pipeline. At paragraph 29 of Mr Mulcair's witness statement, he said that he had estimated 40,000 cubic metres of stone being "0.5 metres [depth] for the entire length of the pipeline". The length of the pipeline was approximately 5.6 kilometres. 5.6 kilometres x 0.5 x 13 metres wide = 40,000 cubic metres.
Mr Mulcair did not seek to amend his paragraph 29. It was (for obvious reasons) not challenged in cross-examination. I accept AUK's submission that, on Mr Mulcair's own figures, a 13 metre wide embankment was envisaged at the outset, and allowed for in the Contract price.
The Scope of Work remained entirely unaltered: the pipeline had to be laid on or within a hard layer of material. The work remained unaltered, with OSR obliged always to choose the "optimal" method of excavation (paragraph 117 above). I accept Mr Lofthouse QC's closing submission that it was doubtless because of this contractual constraint that OSR originally made a claim (Claim 1) predicated on the erroneous assumption that a particular method of construction had been required of them (stone road, 8 metres wide) and that it was change to that particular method of construction that gave rise to an entitlement to additional monies.
In addition, as I have noted, OSR's price was identified before they had even seen the Mackintosh probe survey, and not changed thereafter. I accept Mr Lofthouse QC's submission that Mr Mulcair's belated attempt in cross-examination to repair the damage of this admission, by suggesting that in some way the probe survey confirmed his earlier prices, was totally implausible. I find he simply had no regard to the survey at any time when pricing in 2009 or converting the lump sums in 2010.
In addition, for the reasons that I have already given, the rates and prices were not dependant on the depth of peat. Neither were they dependant on whether the works were being carried out in the Northern or Southern sections: Mr Mulcair accepted in cross-examination that "nothing in the tender distinguished between North and South sections".
I acknowledge that, despite the fact that OSR had said clearly that they preferred the embankment method, by the summer of 2011, they may have been hoping to get away with the cheaper stone road method for parts, even the majority, of the route. There is at one point a reference to a 31/69 percentage split of the 5.7 kilometres in favour of the stone road method. But whether or not that was feasible depended on a variety of factors, including of course the nature of the ground conditions actually encountered, and did not alter their contractual obligations.
In the event, OSR chose to lay the whole length of the gas export pipeline by using a 13 or 14 metre wide embankment either because that was their preferred option all along, or because it suited the ground conditions, or because that was the optimal method, or some combination of the three. They were entitled to do the work that way under the Contract. But for the reasons I have noted, they had no entitlement to further monies for so doing.
(f) Conclusion on Claim 3/Liability
For the reasons set out above, I consider that OSR's remaining claim in respect of the deep peat, namely the claim for unforeseen ground conditions pursuant to Article 12.2.3, fails at each and every hurdle.
5 Alternative Basis of Claim: Breach of Contract
In the alternative to the claim for unforeseen ground conditions, OSR put the same claim by way of a claim for damages for breach of implied terms as to cooperation, hindrance and prevention and the like. Prior to the trial, AUK sought to see whether this claim was maintained. To their surprise, OSR confirmed that it was. Although the claim for breach was not the subject of any sort of detailed opening or closing submissions, it is appropriate to deal with it briefly.
Implied terms, to the effect that the employer would not hinder or prevent the contractor from carrying out its obligations, and would take all steps reasonably necessary to enable the contractor to discharge its obligations, and would provide full and correct and coordinated information, stem in the modern era from the decision of Vinelott J in London Borough of Merton v Stanley Hugh Leach Ltd (1985) 32 BLR 51. Although the decision is now 30 years old, it still remains controversial. Many commentators have wondered what the point is of having a detailed contract, with a clear series of terms apportioning risk and responsibility, if the contractor can try to side-step them all by putting its case by reference to these allegedly implied terms?
This is not the place to embark upon a detailed analysis of the decision in Merton v Leach and those that follow it. I still remain to be convinced that, in the ordinary construction or civil engineering contract, these terms are necessary in order for the contract to operate successfully. However, I am quite 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.
However, I simply do not understand how such terms can be of any relevance to a claim for unforeseen ground conditions. For the reasons which I have given, Claim 3 falls to be analysed under the express terms of the contract, and I have concluded that it fails. Claim 3 cannot 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. Even on OSR's case, the events relevant to Claim 3 stemmed from what was in the ground, not anything that AUK did or failed to do.
Moreover, a claim for breach of contract would require evidence of damages, which could only be properly measured by actual losses suffered by OSR. OSR's contractual claim is based on what is said to be an entitlement to contractual or time rates and their solicitors have said (in peremptory terms) that evidence of actual loss is irrelevant to that claim. On that basis, they have deliberately put forward no evidence that they have suffered any actual loss at all. That is despite the fact that Mr Lester agreed that such evidence would be required for a damages claim and agreed that it had not been provided here. That is a separate reason why any alternative claim for breach of contract/damages must fail.
Since I have rejected Claim 3 on liability, it is unnecessary for me to spend too long on the issues of causation arising out of the claim for unforeseen ground conditions. However, there were a number of arguments about causation and it is appropriate for me to deal with those briefly.
The inherent difficulty with OSR's claims arising out of the allegedly unforeseen ground conditions was that they assumed that any delay or disruption to the works during the latter part of 2011 was, in one way or another, linked to those conditions. It is, to that extent, a global claim, which makes no allowance for, or even acknowledgement of, any delay and disruption due to OSR's own default.
Such an assumption was not supported by the evidence. I have already identified the difficulties with OSR's factual witnesses, and the fact that Mr Lester's evidence provided no independent support for the claims as formulated. On the other hand, AUK's case, that the delays were of OSR's own making, was supported not only by the evidence gleaned from OSR's witnesses in cross-examination, but also by Mr Teal and Mr Bland (in particular), as well as Mr Kitt's painstaking analysis of the relevant components of each disputed Line Item.
In those circumstances, OSR's claims were extremely problematic, even if they had been established as a matter of liability. Those difficulties were then compounded by the fact that the DPR's bear very little resemblance to the claims now being made by OSR. In short, I consider that, even if Claim 3 had been made out as a matter of liability, it was not made out as a matter of causation. In order to save time and space, the specific causation issues which arise are identified under the relevant Line Items addressed below.
Again, it follows that, since I have rejected Claim 3 in principle and on the facts, it is unnecessary for me to consider the quantification of the Line Items said to flow from Claim 3 in any detail. However I have formed clear views on a number of the issues between the parties arising out of the disputed Line Items, and it therefore seems sensible to set them out below. The parties will, I hope, forgive me if I do this in relatively short order.
The Changing Claim
One of AUK's complaints throughout the trial has been the ever-changing nature of the OSR claim. There is some force in this criticism. At the opening of the trial, Line Items 1, 2, 7 and 8, which amounted to about £3 million in total, were pursued under Claim 1, the alleged design change. At that point, Claim 1 was abandoned, and Line Items 1 and 2 were then said to be caused by unforeseen ground conditions, whilst Line Items 7 and 8 were now said to arise out of the temporary crossings/proximity agreement delays. This last-minute change of case did perhaps suggest a somewhat relaxed approach to cause and effect.
This impression was further confirmed by the oral evidence of the OSR witness, to which I have previously referred. One feature of that evidence was their refusal to accept or agree with many aspects of their pleaded case. Despite Ms O'Farrell QC's heroic efforts to keep the various elements of the case in line, an underlying impression of uncertainty and muddle was unavoidably created.
Line Items 1 and 2: Extra Peat and Stone Quantities
This is the extra peat and stone said to be necessary for the embankment on the Southern section. Of course, because of my conclusion that the claim for unforeseeable ground conditions had not been established, these Line Items automatically failed. As to quantum, Mr Lester's calculation of the sums due under these two Line Items was said to be by reference to Limb 2 (extrapolated rates). It was put in the total sum of £2,305,131.65. For various reasons, explored below, Mr Kitt valued the claim at nil. If he was wrong about that, he valued the claim in the sum of £776,975.
I have concluded that, even if I was wrong and Claim 3 had been made out, Line Items 1 and 2 should be valued at nil. I consider that the difficulties with the valuation of the claim identified by Mr Kitt justify his conclusion that a nil valuation is appropriate. These difficulties are set out in the only detailed analysis of Line Items 1 and 2 in the evidence, at pages 61-89 of his first report. I therefore adopt that analysis, including his approach to quantities. Although there was a major argument between the respective claims consultants about the quantities of peat and stone, and although I think that AUK were unnecessarily difficult on this topic, I am still driven to conclude that Mr Kitt's analysis is the only one that properly stands up to scrutiny.
One underlying problem here is that the excavation was part of OSR's lump sum. For the reasons explained at paragraph 144 of OSR's own closing submissions (albeit on a different but related point), it is impossible now to interrogate or break down that lump sum so as to justify the calculation of any sort of claim for additional monies.
Further, there is a whole series of contradictory evidence as to what the appropriate cut-off was or might have been (whether it was 1 metre depth of peat, 1.5 metres, 2 metres and so on). Unless that figure can be fixed, it is simply not possible to calculate any additional entitlement. Moreover, because the average depth of peat actually encountered was less than 2 metres in the Southern section, the claim for additional sums is again not made out.
Finally, there is also the question of width. For the reasons set out at paragraphs 206-208 above, whatever the ground conditions, OSR must be taken always to have intended to build an embankment 12/13/14/15 metres wide. Anything less would simply would not have been wide enough. Again it is impossible to see, on the material provided by OSR, what remains to found any claim for additional sums. Line Item 2 would not give rise to any additional sums in any event for the reasons explained at page 89 of Mr Kitt's first report.
If I am wrong to accept a nil valuation for Line Items 1 and 2, and OSR's claim had somehow been made out in principle and on the facts, I consider that Mr Lester's valuation is incorrect in any event. He has calculated his figures on the basis of rates that were apparently used to value other Change Orders (Limb 2). But there was no evidence that those Change Orders were similar to these Line Items or gave rise to the same or a similar valuation exercise. I agree with Mr Kitt that "the rates he [Mr Lester] has used are not Unit Rates falling within the definition of Article 22.3 or derived therefrom by analogy or interpolation." There was no evidential basis for any rates interpolated from other Change Orders. On the contrary, the large quantities of peat and stone claimed here would suggest that any such interpolation was inappropriate.
In addition, because the claim has not been made referable to actual costs, and arrives at a figure far in excess of the sums in the Contract for the original works, I do not accept the reality of the figures claimed. No cross-check has been done by OSR or Mr Lester to see how such huge figures might be justified, by reference to what the work actually cost. The relevant spreadsheets prepared to show depths cannot be correlated or checked. I find that the results are inflated.
If the Line Items were required to have a positive value, I would base any valuation on Limb 1. That was Mr Kitt's primary argument, because these were claims which were capable of being valued by reference to an adjustment of the Lump Sum, which was the first option under Article 22.3. I did not understand Mr Lester ultimately to disagree with that as a matter of principle but, to the extent that he did, I prefer Mr Kitt's evidence for the general reasons noted above. Mr Kitt's Limb 1 valuation was in the sum of £776,975, as set out in paragraph 8 of the Joint Statement No 3, dated 28 July 2015 ("the third JS").
Line Item 3: Unsuitable Material
This is the double-handling of peat which became slurry. If (which I do not accept) liability has been established for Claim 3, then the relevant figure was agreed at £130,895.60. That was on the assumption that the base figure of 11,332 tonnes was correct. The tonnage was converted directly from the figure of 11,332 cubic metres. Mr Kitt said that there was no precise equivalence between the tonnage figure and the cubic metre figure because of the unsuitable nature of the material and the lack of cohesion. However I find that, if this Line Item had been made out, the equivalence was a reasonable assumption for valuation purposes.
Accordingly, line Item 3 would have been valued in the agreed sum of £130,895.60.
Line Item 4: Siltbuster
This is a ground-treating machine. It fails because liability for Claim 3 has not been established. Had liability been established, I consider that there are further insurmountable difficulties of both causation and valuation. Mr Lester claimed £140,607.33 in respect of this item by reference to Limb 3 (time rates). Mr Kitt said that, even if the causation difficulties were overcome, time rates had not been previously approved or agreed by AUK, so that the right figure was £118,334.
I deal first with causation, an issue which also affects the claim at Line Item 9 (Claim 2) for two further siltbusters, which are claimed in consequence of the absence of permission for temporary crossings. I have concluded that all three siltbusters were always required; that any liability for delay on the part of AUK has not been made out; and that, if there was delay, it was OSR's responsibility.
The Onshore Environmental Statement dated September 2009, referred to in Exhibit E to the Contract, identified the need for siltbusters for the onshore pipeline, to deal with suspended solids or sediment. There was an explanation as to why they were required. Subsequently, OSR's own documentation made plain that they would use siltbusters. Indeed, they accepted a quote and were ordering the relevant equipment from Siltbuster Limited. The need for siltbusters was therefore foreseeable and actually foreseen.
This matters because, originally, the claim for all three siltbusters was made as a stand-alone claim, on the basis that, in some way, this was additional equipment which OSR were required to hire. The entire basis of that claim was misconceived for the reasons noted above: the siltbusters were both foreseeable and foreseen. Once OSR appreciated this difficulty, they continued to pursue the same claim for siltbusters, but purported to divide it up between the alleged unforeseen ground conditions and the temporary crossings claims. AUK's legitimate concerns about this Line Item was, as has been so often the case with the OSR claims, treated as a simple matter of re-labelling rather than a more substantial issue of cause and effect.
At no time during the carrying out of the works, and in the request for the relevant Change Orders, did OSR suggest that the areas of deeper peat in the Southern section required siltbusters when they would not otherwise have been required. The claim fails on this ground alone.
Furthermore, Line Item 4 is a very specific claim for the siltbuster at a location close to RDX 2A. It is now put as a prolongation claim, and it is said that the equipment was required for an additional 15.71 weeks. However, the prolongation claim is not made out on the evidence. Mr Teal made plain at paragraphs 46 and 47 of his witness statement that the siltbuster was always required because there was a significant slope in that area which always made the siltbuster necessary. There was no evidence that the allegedly unforeseen ground conditions caused the alleged or any prolongation in respect of the works generally, or of this siltbuster in particular.
Still further, I have concluded on the evidence that, if there was any delay during this period of the Contract works, those delays were the responsibility of OSR. My reasons for that are set out in Section 6.7.6 below dealing with Line Items 5 and 6. Thus, even if Claim 3 had been established, Line Item 4 would fail.
If that too is wrong, and this Line Item falls to be valued in OSR's favour, the quantum issues turns on an argument about the unit rates which are claimed by OSR under Limb 3. Mr Kitt's approach has been to say that, because unit rates for this item were never agreed or approved by AUK in advance of the work being carried out, Limb 3 cannot be the appropriate method of valuation.
In her closing submissions, Ms O'Farrell QC argued that the unit rates had been approved by AUK because the rates were those set out in Exhibit B, and they were subsequently applied to labour and plant recorded in the DPR's. Mr Lofthouse QC's response was to say that Limb 3 envisaged the specific approval of both the rates payable and the extra work to be performed before that work was carried out. He relied on the words of Article 22.3.1, which referred to the approval of expenses "to be incurred" (see paragraphs 14 and 15 above) He said that that could not be a reference to rates already in the Contract being applied to work that had not, at the time, been identified or agreed as extra work.
As a matter of Contract construction, it seems to me that Mr Lofthouse QC must be right: approval of expenses in Limb 3 is plainly a post-contract but pre-works approval and cannot be provided simply by using rates in the Contract applied to (potentially disputed) records and claimed after the event. Limb 3 envisages the specific approval by AUK of specific expenses notified by OSR, before the works which were the subject of the notification were carried out. The approval goes to both rates and the details of the work to be carried out, because the relevant part of Article 22 refers not only to the days on which the change is to be performed, but also the need for "measurement sheets with all the components involved". Nothing like that happened here; there was no prior approval of any such proposals by AUK. Thus Limb 3 cannot be the right method of valuation for this Line Item. Indeed, because there was never any prior approval by AUK on the detailed basis indicated in the Contract, Limb 3 was never an appropriate or applicable method of valuation in this case.
On that basis, I conclude that Mr Kitt's figure of £118,334 (calculated on the basis of fair and reasonable rates) is to be preferred. That would be the quantum for this Line Item if, contrary to the views noted above, Claim 3 had succeeded; liability on the part of AUK to pay extra sums for this item of plant had been established; and if a proper case on delay causation had been made out.
Line Items 5 and 6: Standing Time (Mechanical)
These Line Items fail because Claim 3 fails. If that is wrong, they fail because i) No link has been established between the deeper peat and the delays; and ii) I have concluded that it was OSR who were responsible for the relevant delays in any event.
These are two claims for standing time in respect of mechanical work. Line Item 5 is valued by Mr Lester at £1,104,747.77 and related to standing time at the start of the project, in October and early November 2011. Line Item 6 was said at the start of the trial to be valued at £98,123.49. Mr Lester appeared to support a valuation of just £31,566.83, and it was reduced still further in OSR's closing submissions to £27,616.40. It relates to four particular days only: 15, 16, 17 and 22 November 2011. In my view, both of these Line Items fail because they were simply not made out on the evidence. Indeed, I consider that they assume a case on delay which was contrary to that evidence.
(ii) Line Item 5
The first point to make is that Line Item 5 is a very significant claim. And yet such a large claim finds no detailed expression in the contemporaneous correspondence. When it was first formally advanced by Sicim, it was not said to be anything to do with allegedly unforeseen ground conditions. That immediately suggests that this claim is an afterthought, and was not one that was seriously contemplated by OSR at the time.
It is also easy to see the reason for that. On the one hand, OSR have adduced no evidence that supports the first two pages of attachment 14 to the Amended Particulars of Claim, which purports to be the factual basis of this claim. On the other, AUK (principally through the evidence of Mr Teal) have demonstrated to my satisfaction that the delays in the commencement of the mechanical works were due to the acts and omissions of OSR (or to be entirely accurate, Sicim). The standing time/delay was not caused by the deeper peat on the Southern section. The work could and should have been commenced earlier than it was, even if the ground conditions were unforeseen. The fact was that OSR were simply unable to commence and progress the work in October and November 2011 due to their own default. And what is more, Roadbridge have always been aware of that: see paragraphs 47-49 above.
There are three elements to Line Item 5: bending, welding and stringing. I address the delays to each briefly below. I base my analysis principally on paragraphs 79-132 of Mr Teal's witness statement, and the lengthy paragraph 42 of Mr Bland's witness statement, both of which I accept as an accurate account of the events on site between October and the end of 2011. These paragraphs were not challenged on any fundamental point.
In relation to bending, OSR were held up as a result of their own errors. The bending machine did not have the correct shoes for the gas export pipeline. New shoes were ordered, but they were delayed and a successful trial could only take place on 9 November 2011. Since the claim for bending standing time was for the period from 19 October to 8 November, that provides a complete answer to that element of the claim. The bending resources were useless because OSR had no appropriate shoes.
As to welding, OSR did not have either an approved bevelling Method Statement or an approved welding Method Statement. The first version of the bevelling Method Statement was not provided until October 2011 which meant that automatic welding could not be commenced when it was required on site. Approval of the final issue of the bevelling Method Statement was given on 7 November 2011. Thus automatic welding could not start until that date, again for reasons which were OSR's responsibility.
In addition, the commencement of welding was also held up as a result of the absence of appropriate welding documentation. Approval of the welding Method Statement was only given on 11 November 2011 so welding could not commence until that date.
There was a suggestion that the Method Statements were held up as a result of AUK's delays but that has not been made out on the evidence. I find that OSR had ample opportunity to complete all necessary testing and documentation and to obtain approval in time for the welding to begin in accordance with the October programme, and they failed so to do.
(a) OSR's allegation that the pipes and test rings were delivered late is irrelevant because, although they were delayed, they were provided in early July, which allowed more than sufficient time to meet the proposed start date in mid-October.
(b) The requirement for post-weld heat treatment was something on which Mr Feteris of AUK helped OSR to obtain a concession, so there were no problems as a result of that. It was not clear how the obtaining of a concession could be a delaying event caused by AUK.
(c) CHARPY testing had to be done as part of the mechanical testing in August 2011. The relevant British Standard, to which the testing had to be performed, was altered in June, but there is nothing to say that that alteration had any effect on the progress of the testing. Indeed, even though the relevant British Standard was identified in June, the test did not take place until August; a delay for which there is no explanation.
Finally in relation to stringing, in respect of which there is a claimed delay from 17 October to 10 November, the DPR's reveal that OSR were not stringing in October due to what Mr Teal correctly noted on the relevant DPR as "an internal OSR issue". OSR belatedly wanted to put in an access to the right of way at Access 2A. They were not entitled to immediate approval of this proposal: in any event, it was approved within a reasonable period. Any delay due to the lack of such access was OSR's responsibility. Moreover, once this access was available at Access 2A, stringing still did not take place because OSR had to go back along the line of the gas export pipeline and deal with those pipes which could not be bent because the bending machine was not ready.
Accordingly, I am satisfied on the evidence that the relevant delays to the mechanical works in the first few weeks of the works were all of OSR's own making. They were nothing to do with the deeper peat and it was not suggested at the time that they were. Further and in any event, OSR could have carried out work on the Northern section at this period because construction of the access road in the Northern section was planned to be carried out simultaneously with the construction of the access road in the Southern section. They could have begun their mechanical works as and when the access road had progressed sufficiently in either section, as Mr Teal explained. Their failure so to do was ultimately a matter for OSR.
Accordingly, Line Item 5 must be valued at nil because the necessary causation has not been made out on the evidence: the relevant delays were not due to the allegedly deeper peat but were instead due to the matters noted above, which were OSR's responsibility under the Contract.
If that too is wrong, and it is necessary to consider a positive valuation of Line Item 5, I note that there were disputes about i) the crew composition and ii) the relevant working hours.
The dispute as to crew composition was as follows. OSR's claim is based on a stringing spread comprising 22 different personnel. There was no reliable evidence to support the proposition that such a large number of people were employed on the stringing activities: although OSR purport to rely on the DPR's, they were of very little assistance because, as Ms O'Farrell QC realistically accepted in closing, "it was not clear from the DPR's who was doing what". On the other hand, Mr Teal gave unchallenged evidence as to the makeup of the stringing spread and the plant and equipment that was used. Mr Kitt's first report was based on Mr Teal's statement (see paragraph 8.4.23 of the report, which relates back to Line Item 10B, which was where Mr Kitt first addressed the issue of crew composition). In my view, the relevant crew composition must therefore be that put forward by Mr Teal in his evidence and utilised by Mr Kitt in his detailed calculations.
As to the working hours, the claims were based on a ten hour working day. Again there was no evidence to support the assertion that this was the actual time lost. Mr Teal, at paragraph 133 of his witness statement, said that the relevant period was seven hours, and Mr Kitt has done his calculations on that basis. I again accept the evidence of Mr Teal and Mr Kitt that seven hours was the productive time available, so was the proper measure of what had been lost.
I should add that, in my view, the alternative argument (based on ten hours) was not open to OSR on the facts. On 16 November 2011, OSR proposed that the working hours could be restricted to 08:00 to 15:30 in order to avoid working in the dark. Subject to certain conditions, AUK expressly accepted that proposal in Mr de Graaf's email of 17 November. It seems to me that that agreement means that the relevant working hours were agreed at seven hours rather than ten hours.
Accordingly, on both crew composition and working hours, AUK's case (based as it is on the evidence of Mr Teal and Mr Kitt) is to be preferred. That would mean that, if I was wrong on both liability and causation, the appropriate sum due for Line Item 5 would be Mr Kitt's figure of £314,868.29, which allows for the correct crew composition and the seven hours productive time. It was recorded at paragraph 3 of the third JS and based on fair and reasonable rates, which I consider to be the appropriate method of valuation for this Line Item. Even leaving aside crew composition and working hours, the right valuation could not be Mr Lester's figure of £1,104,747.66 in any event because that was based on Limb 3, and therefore suffered from the fundamental flaw that I have identified in Section 6.7.5 (paragraphs 245-246 above), in connection with Line Item 4.
(iii) Line Item 6
As to Line Item 6, this claim also fails as a matter of causation. The four days in November that were identified in the claim were not said in any of the contemporaneous records to be days on which there was lost time, let alone lost time due to deeper peat in the Southern section. There was no other evidence to support that assertion. The only relevant evidence came from Mr Teal and he made plain that he did not recognise any such delay. Moreover, at paragraph 350 of his statement, he expressly attributed the relevant delay (not for the first time) to "an internal OSR co-ordination issue".
If (which I do not accept) Line Item 6 falls to be valued, I note that the basis of the calculation of the claim was entirely obscure. As pointed out in paragraph 249 above, it went through three iterations during the trial itself. Mr Lester was unable to explain it in a cogent or clear way. Accordingly the item would fall to be valued at nil.
If I am wrong about the principle behind Claim 3, wrong about causation, and wrong about the nil valuation, such that a positive valuation is required then, having found in favour of AUK in respect of the disputes as to crew composition and working hours, the sum due in respect of Line Item 6 would be £9,622.31, as identified by Mr Kitt at paragraph 52 of the third JS, again on the basis of fair and reasonable rates.
Line Item 13: Stone Removal
This is a very specific claim for the removal of stone to accommodate more peat at the express request of TEP. A figure of £30,000 has been agreed for this Line Item.
In his closing submissions, Mr Lofthouse QC said that, since this was a specific request to OSR with which they complied, no point was taken as to liability. He accepted the £30,000 figure.
Summary and Cross Claim
It follows from all of the above that the only sum due to OSR in respect of these Line Items is the sum of £30,000 in respect of Line Item 13. That has to be set against the sum of £1,925,349.89 which was paid on an interim basis only by AUK to OSR in respect of Claims 1 and 3. Thus the net sum of £1,895,349.89 falls to be repaid by OSR to AUK.
How has this unusual situation come about? How is it that claims which have failed at every level at trial generated such large interim payments along the way? And how is it that OSR may have jeopardised the amounts they received by seeking further sums? The answers to these questions are of some importance, given OSR's attempted reliance upon them at the trial and in their closing submissions.
During the lengthy post-Contract debates, OSR put forward various claims, both of an interim and a final variety, which were passed up the line by AUK to TEP. As is common in the offshore industry, some monies were paid by AUK on account. It appears from the correspondence that, at least at one stage, AUK may have been happy for OSR to keep the sums they had been paid, on the basis that no further sums were sought. But OSR were dissatisfied with the sums that had been paid and sought reimbursement of considerably larger amounts. That is how they have ended up in this position. Unhappily for them, the fundamental difficulties with Claims 1 and 3 as a matter of contractual analysis and factual investigation meant that, certainly with hindsight, they should have accepted the interim payments and not pursued their claims for further monies.
Of course, it was entirely legitimate during the trial for OSR to point to some of the admissions made by AUK in the correspondence when agreeing to the payments on account. It is plain that AUK had some sympathy for OSR (or at least the Roadbridge element of OSR) in relation to the ground conditions on the Southern section, and always endeavoured to obtain further sums from TEP if possible. In particular, it was always agreed that, certainly in the first part of the Southern section, the peat was deeper than shown in the Mackintosh probe survey and a COR was agreed on this basis. But such a concession was a long way away from any binding acceptance of any contractual liability. Moreover, I would not expect the AUK personnel dealing with the claim to be fully aware of all the contractual hurdles (many of them derived from the detailed wording of the Exhibits, like the reference in Exhibit A to 'optimal trench excavation method') which, on my analysis, OSR have failed to clear.
Moreover, for every time that AUK made a concession in these interchanges, they also expressed their concern with the underlying basis of the claim and the way in which the claims were put together. They were expressly concerned that some of the claims lacked credibility and they were troubled about even putting those forward up the contractual chain to TEP. The correspondence is certainly not one-way traffic: many of the points on which AUK have been successful in the trial were points which were first expressed by them in the extensive pre-commencement correspondence.
I note that both parties were at relevant times, acting through claims consultants: Dal Sterling for OSR, and James R. Knowles for AUK. They were writing most of the relevant letters. But those claims consultants were not involved in the day-to-day events on site, were not qualified engineers, and were writing their lengthy letters years after the relevant events. Thus, the relevance of both sides' assertions, counter-assertions, concessions and accusations made in the interim claim documentation and claim correspondence was always going to be of limited value at the trial. So it has proved.
In this way, OSR were paid large sums on account in respect of Claims 1 and 3 due to AUK's entirely understandable sympathy for their overall position. But OSR pursued those claims to a point where the sort of rigorous analysis which AUK had always warned them about became necessary. The result of that analysis has been to justify the stance adopted by AUK throughout.
I should make one final point. It is perhaps salutary to note that, even assuming that I am wrong to dismiss Claim 3, and also wrong in my views as to causation and quantification, the figures which I have identified as being otherwise due in respect of Line Items 1, 2, 3, 4, 5 and 6 amount to a total of £1,350,695.10. That is still about £500,000 less than the amount which OSR have been paid on account. In other words, even making every possible assumption in favour of OSR, on all matters of liability and causation, my preference for Mr Kitt's approach to valuation over that of Mr Lester means that OSR's claim for monies over and above that which they have already been paid on Claims 1 and 3 would still have failed.
8 Answers to Issues
Issue 1: Did the post-contract survey provided by AUK indicate that the earlier survey was not reliable and if so, what effect does it have (if any) on the claim?
For the reasons set out in paragraphs 153 and 161-163 above, the subsequent survey material (particularly the resistivity survey) did suggest that, at least in part, the peat on the Southern section was deeper than shown in the Mackintosh probe survey. To that extent, it showed the survey to be unreliable. The effect of that is set out in paragraphs 194-195 above. This was only one of numerous reasons that led me to conclude that the ground conditions claim must fail.
Issue 2: To what extent were the ground conditions in the Southern section of the pipeline unforeseeable in the meaning of Article 12?
For the reasons set out in paragraphs 189-202 above, they were not unforeseeable within the meaning of Article 12.
Issue 3: Was OSR required to change its method of construction from a simple stone road, with installation of the pipe on firm ground, to a stone embankment through which a trench for the pipe was excavated?
No. For the reasons summarised in paragraphs 203-213 above, the methodology was a matter for OSR. They were never required to change their method of construction. Both a stone road and an embankment were always envisaged as possibilities, with OSR expressly preferring the latter.
Issue 4: Was there a change in the width of the stone embankment from 8 metres to 13 metres?
No. For the reasons set out in paragraphs 206-208 above, OSR always intended to use a stone embankment or stone road that was at least 13 metres wide.
Issue 5: Did OSR provide notification of the claim as required by the Contract?
No. For the reasons set out in paragraphs 174-182 above, proper notification was not provided either timeously or at all.
Issue 6: What were the additional volumes of peat excavated and stone used in the works above the tender allowance as a result of the unexpected quantities of peat?
This question does not arise because there was no valid unforeseen ground conditions claim. The volumes in the claim are unreliable because they suggest a higher ground level at the start than we know was there.
Issue 7: What additional volumes of peat excavated and stone used in the works were caused by reason of an unforeseeable depth of peat, as compared with the depth of peat indicated in the pre-tender information?
This question does not arise because there was no sustainable unforeseen ground conditions claim. I do not consider there was any credible evidence as to the alleged tender allowance either.
Issue 8: To what extent, if at all, were OSR's works delayed and/or disrupted by the unexpected quantities of peat?
I have considered this issue solely in relation to the various Line Items claimed. On the evidence, I do not consider that a claim for delay or disruption has been made out. In particular, the largest single item relevant to delay and disruption, namely Line Item 5, can be demonstrated to be due to matters which were wholly the responsibility of OSR (see paragraphs 250-259 above).
Issue 9: What is the quantum of OSR's claims for standing time, reduced productivity, additional costs in the management of increased quantities of peat and stone and prolongation costs (taking into account sums included in other Change Orders)?
For the reasons set out in Section 6.7 above, the only claim which gives rise to a payment to OSR is Line Item 13 in the sum of £30,000. That has to be set against the sums paid on account.
Accordingly, as explained in paragraphs 271-278 above, a repayment of £1,895,349.89 is due from OSR to AUK in respect of the ground conditions claim.
7. TEMPORARY CROSSINGS AND PROXIMITY AGREEMENTS
The Pleaded Claims
There are two different claims arising under this head, despite the fact that they are both referred to in the documents as Claim 2. It is important to distinguish between them, first because it was Mr Lofthouse QC's submission that only one was pleaded, and secondly because (if OSR's allegations are correct) very different consequences will have been caused by each claim.
The first claim arises from the fact that, although OSR applied for permission to cross and re-cross the Brent and Ninian pipeline during the course of the works, using a form of temporary crossing, such permission was never provided. The second, and entirely distinct claim, arises from the fact that the proximity agreements, which were the documents pursuant to which TAQA and BP agreed that the gas export pipeline would be laid permanently underneath their existing pipelines by the method known as trenchless crossings, were not agreed until May 2012, thus delaying that element of the works until after that date.
Mr Lofthouse QC maintained that only the claim concerning temporary crossings was pleaded and that there was no pleaded claim in respect of the delay in providing the proximity agreements themselves. In my view, for the reasons set out below, Mr Lofthouse QC was wrong to say that these two claims have not been separately pleaded, but right to say that almost all of the relevant Line Items are pleaded and presented as claims arising out of the absence of permission to construct temporary crossings, as opposed to the delays in the formal agreements necessary before the trenchless crossings were carried out.
At paragraph 13.2 of the Amended Particulars of Claim, OSR set out the relevant breaches relating to the TAQA and BP pipelines. The complaints about temporary crossings and/or access during the works are dealt with at paragraphs 13.2.2 and 13.2.3. These are said to have given rise to 'lock-outs', that is to say, small areas of the surface site where work was forbidden. However, paragraph 13.2.1 states in terms that AUK were in breach of contract because they "failed to procure the Proximity Agreements required for the works until May 2012". Accordingly I find that both of the potential claims advanced in OSR's closing submissions have been pleaded.
But where Mr Lofthouse QC was undeniably right was in his contention that at least the majority of the Line Items which are claimed by reference to Claim 2 are based on the absence of permission to carry out temporary crossings (the 'lock-outs' as they are termed), as opposed to the long delay in allowing the permanent works (i.e. the trenchless crossings) to be constructed. This distinction needs to be borne in mind when considering the individual Line Items: where there is a clear dispute between the parties about what the Line Item is intended to cover (such as with Line Items 11A and 11B), it has been necessary to examine the pleadings in some detail.
The Contract Provisions
At paragraph 16 above I have set out Article 23.4, which identifies AUK's responsibility for obtaining all permits and authorisations "from all local, state or national government authorities or public services undertakings as can only be obtained by AUK". These were expressly said to include permits and authorisations necessary for the execution of the work at site. The site was defined as the entirety of the site.
In addition, at paragraph 17, I have set out Article 28 which obliged AUK to give OSR "free and timely access to site". OSR also sought to rely on this provision in the context of the temporary crossings.
I consider that, subject to some very important caveats, dealt with below, Article 23.4 obliged AUK to seek to obtain permission for the temporary crossings on behalf of OSR. Although Mr Lofthouse QC maintained that TAQA and BP were not "public services undertakings", because they were private companies, it seems to me that this construction of the words is far too narrow. A public services undertaking would include the owners and operators of gas supply pipelines to the public, and so would include TAQA and BP.
This obligation however, must be considered in context. Realistically, there would be a number of important limitations on AUK's obligation.
First, the temporary crossings were just that: temporary works which OSR wanted to put in place because it made the carrying out of the Contract works easier or more convenient for them. Such temporary works are principally a matter for the contractor.
Secondly, following on from that, AUK could not guarantee that permission for OSR's proposed temporary works would be forthcoming. In contrast to any relevant permissions for the permanent works, which would have to be provided if the Contract were not to be frustrated, OSR could not take for granted that permission for their desired temporary works, which were simply designed to assist them in carrying out the permanent works, would necessarily be granted by BP and TAQA. AUK had to act reasonably in seeking to obtain permission, but they would not necessarily be in breach of the obligation merely because permission was not forthcoming.
Thirdly, any request from OSR to AUK, that AUK seek the necessary permission for the temporary works, must be made in good time in the light of the existing programme and planned durations. AUK would not be in breach if any relevant delay was ascribable to the delay in OSR making the application in the first place.
Fourthly, the application by OSR would have to be made with proper supporting evidence and, if further material was required, that would have to be provided by OSR to AUK. Again, the mere fact that permission for temporary crossings was not provided does not mean to say that AUK – who were always going to be acting as effectively a conduit – were in breach of the Contract.
I consider that the alternative claim, by reference to Article 28 and access to site, is difficult for other reasons. The permanent works in respect of the gas export pipeline involved the pipeline passing underneath the existing Brent and Ninian pipelines within the trenchless crossings. It did not involve any work above the existing pipelines. So whilst the site included the area beneath the pipelines, where the crossings would be constructed, the whole point of this methodology was that the ground above the Brent and Ninian pipelines was not disturbed at all. Accordingly, it is not easy to say that 'the site' included the area above the pipelines. In the same way, the site did not include the B9076 which was always a public road beneath which the gas export pipeline ran.
In my view, therefore, any permission to cross and re-cross at surface level was essentially a question for OSR's temporary works, and was only tangentially an access issue. OSR were entitled to seek permission for temporary crossings, and had to provide any information that was required in order for such permission to be given. Thereafter, under Article 23.4, the obligation was on AUK to seek to obtain that permission. But there was no guarantee that permission for temporary works would be given. That depended on a variety of factors beyond AUK's control.
On 10 August 2011, OSR submitted TQ No. 21 which sought access over the existing Brent and Ninian pipelines at PLX1 and PLX2, and again at PLX3 (Ninian line only). The gas export pipeline also passed close to the Brent line at RDX4. It does not seem that, initially at any rate, AUK dealt promptly with the request. A chaser was sent by OSR on 30 August 2011, although I note that this included a sketch, which had not been provided before, showing the detail of the proposed temporary crossings. The TQ was passed on to TEP on 14 September and two days later TEP indicated that they had no issue with the request.
One of the issues which I am asked to decide is whether OSR provided AUK with this original request "in good time" (see paragraph 454 below). This is one of a number of issues on which the parties called no direct evidence but which, notwithstanding that, I am asked to decide. In respect of the position prior to August 2011, the only relevant evidence was that OSR itself had made plain to AUK that BP would be difficult to deal with in respect of permissions: see the minutes of the meeting on 30 March 2010, and the reference to BP being "very uncooperative to Total".
In addition, the question of whether or not the requests of 10 and 30 August were made in good time is complicated by the fact that, by then, both AUK and OSR were taking steps to bring forward the gas export pipeline works to 2011. When that proposal was formalised at the beginning of October, it was agreed that there would be no claims or cross-claims arising out of that agreement (see paragraph 31 above). Thus a request in August for temporary crossings might well have been in good time if the works were due to start in early 2012, but it seems to me that it was not in good time if in fact the works were due to start in early October 2011.
In all those circumstances, it seems to me that the parties' rights and obligations in respect of temporary crossings have to be looked at in the light of the agreed change to the programme which was formalised in early October 2011, but which had been in preparation for months. Because, by August/early September, both parties were working towards the bringing forward of the excavation works to an imminent start date, and had been planning that for some time, I consider that TQ 21 could and should have been issued earlier.
On 20 September 2011, AUK informed OSR that the request for third party pipeline owner approval of the temporary works would be processed but that it might take two months to arrange. Moreover, in Mr de Graaf's email, he forwarded TEP's comments, which not only made the point about the 2 month delay, but also said expressly that "no work shall start until such time as this agreement is executed." That, therefore was the position when, on 5 October 2011 the parties agreed that the works would be brought forward, with OSR agreeing that there would be no claims in consequence (paragraph 31 above).
Of course, as part of the agreement to bring the works forward, OSR produced the October programme. That showed that they knew that the proximity agreements to be entered into by BP and TAQA would not be available until early January 2012. That explains why the programme shows the trenchless crossing work being carried out separately, after the bulk of the gas export pipeline works, between January and May 2012.
The subsequent exchanges in respect of temporary crossings seem to me to reflect the fact that neither AUK nor OSR believed that the absence of permission in respect of temporary crossings was, of itself, a particular problem. Thus, on 5 October, when Mr de Graaf emailed TEP on the subject of temporary crossings, he said:
"It is appreciated that agreement with pipeline owner takes time but if there is no permission to use these crossings OSR needs to detour their plant. This applies to civil and to mechanical works.
If it is unlikely we get permission for this anytime soon, OSR will plan other measures to get the heavy plant to the required locations."
This does not suggest that the temporary crossings were a particular difficulty and that other measures (which were in fact subsequently taken) were available to OSR.
TEP responded on the same day to say that proximity agreements were going to be necessary to deal with any over-crossing of the existing pipelines. Mr Crawford of TEP went on to say:
"TEP are in negotiation but can't be clear at this stage. It would be strongly recommended that alternative plans to be discussed.
In the interim period in order to gain the authorisation for the proximity agreement TEP require drawing of crossing (we have for PLX1 and 2) and calculation proving the heaviest load and its effect to the existing pipeline.
It would be a 6 to 8 weeks period from submission of the project information."
On 8 October, this email too was forwarded by Mr de Graaf to OSR, and he expressly noted that further drawings and calculations were required.
Accordingly, as at 8 October 2011, following the commencement of the mainline gas export pipeline works, OSR knew:
(a) That there was no guarantee that permission for temporary crossings would ever be provided;
(b) That it was therefore 'strongly recommended' that alternative plans were put into operation (ie that OSR found another way of doing the work that did not require temporary crossings);
(c) That any permission for temporary crossings would be part of the final proximity agreements;
(d) That further information was required to be provided by OSR before the requests could be formalised; and
(e) That the proximity agreements would not be available for at least a period of six to eight weeks after the submission of that information.
Since the October programme indicated that the bulk of the mainline gas export pipeline works would be carried out within that six to eight week period (i.e. by the Christmas break), it follows that, as at 8 October 2011, OSR knew or ought to have known that they were unlikely to get the permission for the temporary crossings in time to make very much difference to the progress of the gas export pipeline works as programmed, and that therefore they would have to make other arrangements.
Although it was said at trial that OSR had already provided all the outstanding information in respect of temporary crossings, it was not said at the time. Moreover, I find that it is not correct. As Mr O'Rourke accepted in cross-examination, full information as to the effect of the temporary crossings on the existing pipelines had not previously been provided by OSR. The information they had provided was limited to the ground-loading details for mechanical plant only. Information as to civil plant remained outstanding. Indeed, on 21 October 2011 Mr de Graaf emailed Mr O'Rourke pointing out that the further information had simply not been provided and went on to say:
"Based on the absence of response or any plans from OSR to mitigate the possible impact we now conclude that OSR does not consider these lock-outs to have an impact to the works but please be reminded to advise how OSR intends to deal with this lock-out situation in order to avoid possible delays and please submit the requested drawing and calculation as per Vaughan [Crawford]'s email of 5 October."
In response to this chaser, some further information was sent on 26 October 2011 although this originated from Sicim and therefore does not, on its face, appear to be the information for the civil plant that had been sought. But even if we assume that this was the provision of the outstanding information, and even if we assume that the eight week period previously referred to had some sort of contractual status, then it meant that permission for temporary crossings would not have been available until after OSR returned to site in the New Year.
The reason why the position on site is so unclear is for the reason identified by Mr de Graaf in his email of 21 October. The issue of temporary crossings just did not seem to be important. Indeed, after October, the question of the further information required for the temporary crossings simply fizzled out, as did the whole question of permission for temporary crossings. It was certainly not said by OSR to be a major concern in their contemporaneous correspondence. Mr O'Rourke's email of 24 November 2011 appeared to accept that if the modest lock-out costs then identified (£100,000) were accepted by AUK, OSR did not otherwise regard the absence of temporary crossings as a major problem.
Accordingly, I find that, at the time that most of the gas export pipeline work was being carried out on site (late 2011/early 2012), the absence of the permission for temporary crossings was not seen by anyone to be a major problem. Both parties seemed resigned to the fact that permission for temporary crossings had not been granted and (to the extent that it was relevant, given that so much of the work had by then been completed) would not be granted. Alternative measures had to be taken. And they were, because permission to construct temporary crossings was never granted, so they were never built, but that did not prevent the Contract works from being completed. Attention then switched to something which would have prevented the completion of the Contract, namely the absence of the proximity agreements relating to the trenchless crossings.
I consider that, once they knew that OSR wanted to construct temporary crossings across the existing pipelines, AUK had an underlying obligation to do all that they reasonably could to obtain permission for that up the contractual chain. Through TEP, they sought to discharge that obligation. Moreover, the delay between 10 August and 14 September (paragraph 304 above) seems to have been AUK's responsibility, although it does not seem to have been causative of any specific loss and has to be considered in the wider context of the agreement at the start of October.
At all times, AUK needed OSR's assistance to obtain that permission, both as to the timing of the request and with the provision of all relevant information. In my view, OSR failed in both respects. The original request should have been made earlier if they had wanted any prospect of the temporary crossings being in place at the time that the works started in early October, and the further information was not provided promptly or at all. Thereafter, on the face of the correspondence, the matter petered out because everyone was waiting for the proximity agreements in relation to the trenchless crossings and the position in respect of the temporary crossings was by then otiose. They were simply never built.
In particular, it seems to me that, when it was agreed that the works would be brought forward in early October 2011, and carried out in accordance with the October programme, and that there would be no claims by OSR in consequence, that agreement encompassed the following:
(a) Permission to construct temporary crossings had not been granted;
(b) Such permission might never be granted, or at the very least would not be granted for six to eight weeks after the provision of the outstanding information (see paragraph 311 above);
(c) Much or all of the mainline work would therefore be performed between October and December without the temporary permissions in place. This was the inevitable consequence of the agreement to bring the works forward;
(d) The October programme allowed for all of this; and
(e) No claim would be made by OSR in consequence of delays in obtaining permission for temporary crossings, at least until the New Year, when they had programmed to finish the mainline works anyway.
In addition, the claim assumes that AUK had an unqualified obligation to obtain permission for the temporary crossings. That is not the Contract obligation and it cannot be right: if, for example, the proposals were hopelessly inadequate, BP and TAQA could not be blamed for refusing permission, and AUK could not then be liable for the consequences of the refusal. And this example is more than hypothetical, because BP and TAQA had gone to some lengths to ensure that their pipelines were not the subject of any permanent works above them, and were instead carried out by way of the trenchless crossings beneath their pipelines. So why was it unreasonable of them to decide that they did not want any temporary works or heavy traffic crossings above their pipelines either? That is an issue on which there was no evidence.
For all those reasons, with the exception of the delay between August and September, which is not said to be the cause of any specific loss, OSR has not made out any liability for the claim against AUK in respect of the absence of permission to carry out temporary crossings.
Even if I am wrong about that, I do not consider that OSR have complied with the notice provisions in the Contract in respect of this element of Claim 2. That finding is, of course, consistent with my view that, during the relevant period (October-December 2011) OSR did not consider the lack of temporary crossings to be a particular problem.
OSR's pleaded case relies on notices of 23 February and 23 March 2012. Given that, by 20 September 2011, AUK knew that permission for temporary crossings would not be granted for at least two months (paragraph 308 above), such notices were plainly and obviously out of time. Perhaps unsurprisingly, they were not relied on in OSR's closing submissions.
In order to get round the notice difficulties, Ms O'Farrell QC first argued that, since AUK themselves had notified OSR about the two month delay in respect of the proximity agreements, this dispensed with the need for notices at all. I disagree. That would amount to a case of waiver, and such a case requires to be pleaded. It has not been.
Moreover, the relevant events to which Ms O'Farrell QC referred arose out of the ultimate agreement between the parties to bring the works forward. OSR produced an October programme which reflected the fact that the proximity agreements were going to be delayed until the New Year. It also reflected (or must be taken to reflect) that, for the reasons noted in paragraph 313 above, they knew that permission for temporary crossings might not be granted in time or at all. In my view, AUK were entitled to assume that the October programme allowed for any delay that might be caused by the absence of permission to construct temporary crossings. So the situation in early October did not dispense with the contractual obligation to provide notices; in reality, it made it even more acute, because otherwise AUK would be entitled to think that the October programme allowed for any problem that might arise from the absence of permission for temporary crossings.
If the waiver argument was unsuccessful, Ms O'Farrell QC both opened and closed OSR's case on the basis that the relevant notice was provided by OSR's letter of 19 October 2011. That letter said:
"We wish to notify you that there will be additional cost and time impact on our programme due to the spread lock-out at the above locations [RDX 4 to Firths Voe/RDX 2/ Ninian pipeline crossing].
We will generate an assessment of the time lost due to these items and forward in due course.
Therefore we consider this letter as notification in accordance with Article 15.4 of the Sub-contract Agreement, where we are to notify you of events affecting progress of the works. Also we wish to advise you that any additional costs incurred, which are your responsibility under the Agreement, we will be seeking reimbursement under the appropriate Article."
That was plainly not a notice under Article 22. It was a notice under Article 15.4. The position is therefore the same as with the other notice on the same day, noted in paragraph 179 above. Mr O'Rourke, the only witness of detail called by OSR to deal with its claim, expressly agreed that the notice of 19 October 2011 was not an Article 22 notice.
Moreover, I accept the submission made by Mr Lofthouse QC that the notice of 19 October 2011 (even if that is what it was) was out of time, because OSR had been informed on 20 September 2011 that the temporary crossings might take two months to agree. So they knew from then that they would not get the relevant permission, and they failed to serve a notice for a month. I should also note that the notice made no reference to the BP pipeline at all.
It is also appropriate to refer to the response to the letter of 19 October 2011. It was dated 28 October. It said:
"COMPANY notified CONTRACTOR on the 8 October 2011…that access to SITE would be restricted. COMPANY stated in such notification that CONTRACTOR was to plan the WORK accordingly. CONTRACTOR should have used all reasonable endeavours to overcome and minimise the anticipated delay."
I agree with that analysis. These were, after all, temporary works designed to assist OSR in carrying out their contractual obligations. OSR had been warned that permission for these temporary works may not be given or would at least be delayed and OSR were told to make other arrangements. That does not, in my judgment, give rise to any sort of claim for additional monies.
Finally, I note that the relevant COR in respect of temporary crossings, was COR 59 and was dated 18 November 2011. This puts the likely value of the claim at £100,000 (a figure which Mr O'Rourke said was a proper estimate based on the information available at the time). That is again consistent with the other evidence that the issue of temporary crossings – or 'lock-outs' as they were often called – were not regarded as a major difficulty by OSR at the time, and with the lack of any urgency on the part of OSR to provide the requested information relating to the detail of the crossings. COR 68, dated 10 December, was also very limited in its alleged scope and effect.
It is startling to contrast the contemporaneous claims and valuations in these CORs with the £8 million plus now being claimed as a consequence of precisely the same events. On any view, there were no notices under Article 22 which ever suggested that this claim was ever worth more than a tiny fraction of what is now claimed in Claim 2. The first time that notice was given of a sizeable claim under this head was 31 July 2012, ten months after the relevant events. A claim for £4.3 million then emerged out of the blue, in a claim prepared by Dal Sterling. It was a long way out of time.
In the circumstances, I conclude that OSR have not established AUK's liability in relation to the alleged problems caused by the absence of permission for temporary crossings and no relevant notices were served in order to trigger any claim. There was never a notice to trigger a claim of the size and scale now being made.
The Proximity Agreements
The Contract Provisions
These are the same provisions as set out in paragraphs 16 and 17 above. For the reasons set out there, I conclude that it was AUK's obligation to procure the proximity agreements under the Contract with OSR. There were significant differences, however, between the nature of this obligation and the nature of the obligation in respect of temporary crossings. For the latter, any discharge of their obligations by AUK was inevitably affected by the nature of the temporary works for which permission was sought and the performance of OSR: if the request was flawed, or if OSR did not request permission timeously, or if they did not provide all the necessary information, AUK could not obtain the permission for the temporary works (either timeously or at all) and could not be criticised for that.
But the position in relation to the proximity agreements for the permanent works was entirely different. That was a matter that rested entirely with AUK. The permanent works were part of the Contract works. It had long been agreed that the crossings would go underneath the existing pipelines and would be trenchless. Once TAQA and BP had agreed to the proposals, the work could be carried out by OSR. But until they agreed, that element of the Contract work could not be carried out. So obtaining agreement did not depend on OSR in any way: it was a matter that, unlike the temporary crossings, was entirely a matter for AUK.
The essential facts are simply stated. The October programme demonstrated that the proximity agreements would be provided by mid-January 2012, allowing the trenchless crossings to be carried out then. But the proximity agreements were not ready by mid-January 2012. By late January/early February, much of the gas export pipeline had been laid, and the progress meeting minutes on 12 January 2012 made clear that one of the key remaining elements of the work was the permanent crossings.
Indeed, both the minutes of this meeting and the minutes of subsequent meetings on 24 January and 7 February 2012 stated that, before BP and TAQA were prepared to enter into the proximity agreements, they required further ground investigation work to be done and further details to be provided of the trenchless crossing methodology. At one point, an alternative design involving micro-tunnelling was mooted. It is clear that BP and TAQA were not easy to deal with and that, on any view, the trenchless crossings element of the Contract works was delayed.
On 23 February 2012, OSR sent a notice to AUK in these terms:
"Re: Proximity Agreement
It cannot be disputed that COMPANY has failed in its obligations under Article 28.1 of the CONTRACT to allow CONTRACTOR free and timely access to the SITE in accordance with the WORK TIME SCHEDULE. As notified in CONTRACTOR letter ref OSr/LPU/0139 CONTRACTOR considers this a change order under Article 22.1 and confirms CONTRACTOR is currently in delay, and has been in delay from 27 January 2012 until CONTRACTOR receives the relevant authorisation to commence works on landfall construction from COMPANY…"
OSR have suggested that this was a notice in respect of the absence of permission for temporary crossings. That is plainly incorrect: it relates solely to the absence of permission to carry out the trenchless crossings. Although it specifically referred to the landfall causeway, I consider that it was sufficient to notify AUK of the problems to the works as a whole caused by the lack of the proximity agreements. Thus I conclude that it was a valid notice in respect of the impact of the delay caused by that failure. It identified a delay from 27 January 2012, which is also consistent with the October programme.
Due to the ongoing delays, OSR took the decision at the end of March 2012 to demobilise. The proximity agreements were eventually signed off in early May and OSR remobilised on site and completed the works thereafter.
Pursuant to the provisions set out above, I consider that the delay in the provision of the proximity agreements was the contractual responsibility of AUK. They had failed timeously to obtain the necessary agreements from TAQA and BP (who for this purpose are public services undertakings); additionally, they had failed until May 2012 to give access to that part of the site which lay beneath the existing pipelines and which was the area where the trenchless crossings would be carried out. No explanation has been provided as to why the proximity agreements were so delayed.
The contemporaneous documents in early 2012 record that everyone was aware that the absence of proximity agreements was of some importance. Unlike so many of the other claims advanced by OSR at trial, this claim (at least in principle) is properly reflected in the contemporaneous correspondence. There was also a clear and detailed notice under Article 22, namely the letter of 23 February 2012 (paragraphs 339-340 above).
Moreover, this notice was provided within about a month of the mid-January date which had been identified in the October programme as the date by which the proximity agreements should have been provided, and some two and a half months before they were actually provided. The notice cannot therefore be said to be out of time: on the contrary, it was provided early on in the period of delay from January to May 2012. If the purpose of this sort of notice is to deliver a 'hurry up' warning, it did so, but it was a warning that AUK/TEP failed to heed. There are points to be made by comparing the size and scope of the claims made now with the sorts of claims intimated in the notice of 23 February 2012, and all sorts of points about causation and the like, but that does not, in my view, prevent the notice from being a valid notice for the claim in respect of the late proximity agreements.
Breach of Contract
As previously noted, although I remain unsure about the validity of what are sometimes called the 'usual' implied terms, it seems to me that an alternative claim for breach of contract is a useful yardstick by which to measure my findings of liability (or otherwise) under the Contract in respect of the temporary crossings and the late proximity agreements.
As for the temporary crossings, I do not find that AUK were in breach of the implied terms. The request was not made timeously by OSR. The information in respect of temporary crossings was passed up the line and then back again, and some information was never provided. No one seemed to consider that the absence of temporary crossings was anything other than a relatively minor nuisance. It was not linked to any significant claims at the time.
The claim in respect of the delay to the final proximity agreements is different. Those had been promised by early January 2012 at the latest and OSR had produced a programme which showed the trenchless crossing works being carried out immediately thereafter. Those proximity agreements were not provided then and although they were repeatedly promised, that promise was not kept. In those circumstances, were it necessary, I would find that the failure to provide the proximity agreements themselves was a breach of the implied terms of the Contract. That would, however, give rise to quantum difficulties for the same reasons noted in paragraph 219 above.
Again it is very important, when considering causation, to differentiate between the claims arising out of temporary crossings, on the one hand, and the permanent works, on the other. Many of the pleaded Line Items are said to flow from the delay and disruption caused by the absence of temporary crossings. Indeed, by reference to the way in which the Line Items were presented, the absence of permission to carry out the temporary crossings was the most important element of Claim 2.
However, not only was that claim not made out under the Contract, and not the subject of a valid notice under Article 22, but the evidence made clear that the absence of temporary crossings had very little (if any) effect on the overall progress of the works. For a start, it did not affect the works in the Northern section in any way whatsoever, because there were no temporary crossings north of PLX1/PLX2/RDX2, the start of the Southern section. In the Southern section, some temporary access points were constructed, but the evidence suggested strongly that these temporary access arrangements would have been provided in any event. They were not the result of the absence of permission for the temporary crossings.
In addition, the factual evidence did not support the suggestion that the absence of temporary crossings had any significant delay or disrupting effect. The evidence of Mr Teal in particular, as well as Mr Bland, repeatedly made clear that this was not a major problem. In those circumstances, I accept the submission made by AUK at paragraph 206 of their closing submissions that the absence of permission to temporarily cross the pipelines "resulted at most in the need to move plant from section to section on a few isolated occasions".
On the other hand, the absence of the proximity agreements in respect of the trenchless crossings delayed the carrying out of that particular work for many months. Prima facie, that would give rise to a claim for prolongation and/or disruption but of course the detail of what, if anything, might be due will depend on the individual Line Items, and the existence (or otherwise) of other events causing delay and disruption over the same period which were OSR's responsibility. It is therefore necessary to consider that topic before turning to the relevant Line Items.
Other Causes of Delay
The allegations of delay are, of course, made by reference to the October programme. That itself creates difficulties because the programme is unreliable, for the reasons stated in paragraphs 32-37 above. Of particular relevance to this aspect of OSR's claims is the fact that, although the programme assumed that stringing, welding, coating, trenching, lowering and tie-ins would be carried out simultaneously in different areas, the cross-examination of Mr Caviglia made clear that OSR did not have the resources with which to carry out work in this way. They only had six sidebooms on site, despite the fact that the sidebooms were an important piece of equipment and necessary for a number of these operations, including stringing, automatic welding, manual welding, as well as lowering. Mr Teal was adamant that there were insufficient sidebooms, and I agree with that conclusion.
The decision to use only six sidebooms for the works meant that, for example, the lowering could not occur at the same time as stringing and welding. The six sidebooms were always required for lowering which meant that, whenever lowering was happening, other elements of the works were automatically delayed (at least by reference to the October programme). Although it took a long time to get there in his cross-examination, Mr Caviglia eventually accepted that, in order to comply with the October programme, he needed more lifting resources on site than he ever had.
Mr Teal's witness statement on this topic, on which he was not challenged, makes this crystal clear. He explained how and why the limited amount of plant, particularly sidebooms, precluded the simultaneous working on which the October programme was based. In his typically fair way, Mr Teal stressed that he was not criticising OSR for failing to do the lowering at the same time as welding and stringing, but merely pointing out the limitations on OSR's progress which had been necessitated by the choices that they had made as to plant. In addition, to the extent that OSR had ever suggested to the contrary, Mr Teal explained that the absence of permission for the temporary or permanent works would not have prevented OSR from bringing more sidebooms to the site so that they could do the welding and tie-ins simultaneously.
Similar difficulties were caused by the number of welding teams which were actually deployed on site. I accept the evidence adduced by AUK, that the number of welding teams on site was less than the number assumed by OSR for the purposes of the October programme. Again, I do not consider that this had anything at all to do with the absence of permission for either the temporary or permanent crossings: it was simply the way in which OSR chose to carry out the works. It was a feature of Sicim's performance of which Mr Mulcair was rightly critical in the subsequent correspondence (see paragraph 48 above).
Because OSR's claims allow for no causes of delay and disruption other than those which they lay at the door of AUK, they are particularly vulnerable to evidence that, throughout the relevant period, delay and disruption was in fact caused by OSR's own default. Paragraphs 18 and 19 of the Amended Defence and Counterclaim plead eleven separate causes of delay which were OSR's own responsibility. These matters were supported by Mr Teal's evidence and repeated at paragraph 138 of AUK's opening submissions and paragraph 266 of their closing submissions. In general terms, I find that these delays have been made out. In particular, there were many delays as a result of the slow progress in the manual welding operations, which was itself due to the lack of manual welding resources, referred to above. The rate of progress of manual welding was much slower than had been anticipated in the October programme for reasons which, on the evidence, were entirely OSR's responsibility.
It is unnecessary to deal in detail with all of these other causes of delay. But it is important to note that significant delays took place after mainline welding had been completed because of problems with the follow-on activities, such as coating, and because manual welding and fabrications were slow. I outline my findings in relation to some of those activities below.
As to coating, the pipe could not be put into the ground unless it was coated. Coating could not happen until the welds had been carried out.
The mainline welding was, to all intents and purposes, finished on 13 December. Although the October programme indicated that coating should have followed on a week or so behind, no coating was done in November and December. This was because the coating personnel were still being qualified, and, as Mr Teal explained, the qualification was something of a fiasco, since essential equipment for the qualification test was missing. Already, therefore, what OSR called their "conveyor belt" sequence could never actually have been put into operation.
Accordingly, whereas mainline stringing and almost all the mainline welding was finished before Christmas 2011, the coating, trenching and tie-in welding, did not start until January 2012. This was a delay that was OSR's responsibility. Mr Caviglia accepted that coating had not started on time. Although he said that coating could catch up quickly, he agreed that the documents did not indicate that this in fact happened.
The contemporaneous documents also revealed that Roadbridge themselves were very anxious about Sicim's delays to the coating works. On 25 November 2011, Mr O'Rourke emailed Mr Caviglia, pointing out that "as a result of the delays on the wrapping activities, Roadbridge's cost for standing time at Firths Voe could be jeopardised…we have a concurring delay due to the wrapping. In other words the plant associated with the digging and backfilling of the trench could be and most likely will be deducted from the claim." Although Mr Caviglia answered this on 1 December, his reply was long on personal abuse (he attributed Mr O'Rourke's email to "a momentary lapse in reason") and short on substantive answers.
Unsurprisingly perhaps, the problems caused by the delay in coating/wrapping did not go away. Mr Mulcair wrote to Sicim on 15 December to complain that "no wrapping has taken place", which meant that the works were "way behind programme". This observation was wrapped up in a separate complaint that Sicim demobbed early before Christmas 2011 with so much of the work outstanding. The documents also show that, when Sicim returned in the New Year, they still failed to progress the mechanical works properly.
Mr Caviglia also agreed that lowering did not catch up, either as programmed or at all. One of the problems here was that the entire lowering element of the operation was stopped because of health and safety concerns which, ironically, were first raised by an OSR employee. Mr Caviglia accepted that, once the complaint had been made, it was reasonable for Total/AUK to stop and investigate the allegation. Again, simultaneous working did not occur, and no coating or lowering took place until the stringing and almost all the mainline welding were complete.
Obviously, these problems also affected the trenching. The trench could not be dug prior to the qualification of the coating team, because otherwise the trench would have been left open too long. Roadbridge were very unhappy about this, and their concerns were raised with Mr Caviglia in writing. Unsurprisingly, those emails were then utilised as part of Mr Caviglia's cross-examination. I find that there was no substantive answer to them.
I have already referred to the problems with welding. It was OSR's case that ten welds a day could have been performed, although this rate of progress did not differentiate between automatic welds and the very different (and much slower) manual welds. To that extent, therefore, the ten welds a day baseline was meaningless. Of particular concern were the manual tie-in welds which could not be done until after coating and lowering, as Mr Caviglia accepted. Although the October programme showed them being carried out immediately after the welding started on the relevant part of the line, in fact all the tie-in welds had to follow the coating. Thus they were not carried out until 2012. This was long after the vast bulk of the automatic mainline welding had been completed. Again, this can be traced back to the coating delays.
In addition, as Mr Teal's witness statement made clear, the manual welding was carried out very slowly. Only repair welding was done before Christmas. After that, OSR proceeded to carry out manual welding at a slow rate, in sequence with the lowering and the tie-ins. The vast bulk of the manual welding was done between January and the end of March 2012 and Mr Caviglia accepted that OSR never achieved more than two or three manual welds a day.
I find that one of the reasons for the slow progress of the tie-in welds was that, because of these other problems, they were carried out at the same time as the lowering. That was the clear case put to Mr Caviglia. The best he could do was to say that this was "not necessarily" the case. I accept paragraph 352 of AUK's final submissions that Mr Teal's witness statement, which made it plain that this was the cause of the delay, is to be preferred.
Finally, the point should be made that the slow progress of the manual welding was universal: in other words, it happened on both the Northern and the Southern sections, right across the site. It was therefore wholly unconnected with the issue of permanent or temporary crossings. Ten welds a day were never achieved, regardless of where or when the welding was carried out.
For all these reasons therefore, I find that the delays and disruption in the first three months of 2012 were the responsibility of OSR. That means that most of the Line Items discussed below fail for reasons of causation in any event.
7.6 The Relevant Line Items
Line Items 7 and 8: Additional Peat Excavated and Stone Placed in North
It was claimed at the trial, although never before, that the absence of permission to carry out temporary crossings over the Brent and Ninian pipelines meant that the stone embankment in the North was widened from 8 metres to 13 metres. In my judgment, such a claim fails at every level.
First, it is instructive to look at the ever-changing basis for these Line Items. Originally, Line Items 7 and 8 were claimed under Claim 1, namely the claim based on the alleged design change which prevented OSR from carrying out the works as they intended (a stone road 8 metres wide), and required them to build an embankment 13 metres wide instead. This element of Claim 1 was pursued on the basis that, even though OSR accepted that in the Northern section they always intended to construct an embankment, they maintained that this would only have been 8 metres wide. Claim 1 has of course been entirely abandoned.
Unlike the other Line Items claimed under Claim 1, Line Items 7 and 8 were not moved to Claim 3, the claim for unforeseen ground conditions. That perhaps reflected the fact (amongst other things) that – whatever the alleged difference in ground conditions – OSR could never demonstrate that a 13 metre wide embankment represented a substantial modification to the Contract work since, on any view, OSR always intended to build an embankment in the Northern section at least 13 metres wide (see paragraphs 206-208 above).
In those circumstances, it is impossible to see how and why Line Items 7 and 8 are now thought to be recoverable under Claim 2, by reference to the absence of temporary crossings and/or the late proximity agreements. OSR were entitled to (and on the documents intended to) build a 13/14/15 metre wide embankment on the Northern section. That they chose to do the work this way had nothing to do with the absence of temporary or permanent crossings: the intention can be seen in the OSR documents months before work even started.
There is a second and separate reason why the claim within Line Items 7 and 8 is misconceived. The Northern section of the gas export pipeline was completely unaffected in fact by the absence of permission to carry out temporary crossings or the late proximity agreements in respect of the permanent works. All of the temporary and permanent crossings were on the Southern section from PLX1/PLX2/RDX2 eastwards. What divided the Northern and the Southern section were the pipeline and road crossings; thereafter, the only locations where the gas export pipeline was to cross the two existing pipelines were on the Southern section. The Northern section was quite unaffected by any of this, so the claim for a wider embankment on the Northern section due to the permission/crossings argument was misconceived.
A rather forlorn attempt was made during the trial to argue that, because of the absence of temporary crossings in the area that divided the Northern and Southern sections, the construction traffic progressing the pipeline down the Northern section had to cross and re-cross over the same section of the embankment, so it had to be wider to allow construction traffic to pass back along the line. The suggestion was that this was because of the blockage at the southern end of the Northern section where the first 'lock-out' was.
But even ignoring the fact that the embankment was always going to be 13 metres wide, the evidence was plain that there would always have been such a blockage. The whole basis of OSR's methodology was that they were going to work in sequence, laying the pipeline section from Sullum Voe down the Northern section, before turning east and constructing the Southern section. Thus, on the Northern section (which was always going to be an embankment, even on OSR's case) when the construction traffic reached the limit of the embankment construction on the Northern section, it would always have had to have turned and travelled back up the existing embankment to leave the site. This would only have ceased on the last day of embankment construction when the embankment was connected to the road.
Thus, even if there had been temporary crossings from the outset at PLX1 and PLX2 (where the pipeline crossed the Brent and Ninian pipelines, just north of RDX2), the construction traffic could not have used that to turn into the Northern section because, until it had been built, there would have been no embankment on which they could have driven. Hence there was always a need for a 13 metre wide embankment.
Mr Teal, who was otherwise a restrained witness, scoffed at the idea that the absence of permission for the temporary crossings at the end of the Northern section somehow meant that the embankment on the Northern section had to be wider than planned. It is clear that he regarded such a claim as misconceived. I agree. Still further, I note that the temporary access road on the Northern section, which was always likely to be built and which came in at RDX1A (half way up the Northern section) would have relieved any alleged traffic congestion.
As for the faint suggestion in OSR's closing submissions that the width of the stone embankment on the Northern section had anything whatsoever to do with the late proximity agreements, I would simply point out that the embankment had been built at 13 metres wide on the Northern section long before the trenchless crossing work was programmed by OSR to be carried out, in January 2012. In other words, even if the proximity agreements had been provided in January 2012, this would not have affected in any way the question of the width of the embankment on the Northern section.
For all those reasons therefore, I conclude that, however it is put, the claim for Line Items 7 and 8 are misconceived. The Northern section was wholly unaffected by the alleged lack of permission for temporary crossings or the delays in 2012 to the proximity agreements.
In those circumstances it is unnecessary to spend very much time on any issues of quantification. But there are, so it seems to me, a series of further problems with the quantification of the OSR claim for these Line Items.
First, Line Item 8 is for the additional stone placed in the Northern section. But I find that, by comparison with the tender, there was less, not more stone, placed in that section. Appendix 9 of Mr Kitt's first report demonstrates that 35,000 cubic metres was anticipated in the tender, whilst only 31,268 cubic metres was actually placed. This evidence was not directly challenged and seems to me to be compelling. There is therefore no claim for Line Item 8 at all.
I note that the original values for both these Line Items amounted to over £1.25 million odd. Although Mr Lester advanced a lower claim in the sum of £814,202.49, that still seems to me to be a figure which, given the Contract sum and the other figures in the case, is obviously exaggerated. Again, that may be because it has been calculated under Limb 2, by reference to rates used on other COR's, without any evidence as to how and why those rates are applicable for Line Items 7 and 8. For this reason, even if liability and causation had been made out, and even if I was wrong to accept Mr Kitt's point about there being less rather than more stone (paragraph 382 above), I would still be obliged to reject the claim as valued by Mr Lester.
Mr Kitt has used Limb 1 of the possible evaluation methods, namely adjustment from the Lump Sum. Mr Lester appeared in cross-examination to agree that Limb 1 could be used, but sought to argue that the quantity of increase in stone and peat was too great to justify it (the type of qualification which Mr Lester never even considered in relation to his promiscuous use of rates derived from other COR's). In my view, Mr Kitt has demonstrated that Limb 1 was applicable because it was the first valuation option under Article 22.3, and because the relevant increase in quantities was less than 30%. Accordingly, I conclude that, if the claim for these Line Items had been made out, Limb 1 would have been the appropriate method of valuation.
Mr Kitt's final figure was £155,839, as set out in paragraph 25 of the third JS. That would therefore have been the appropriate figure if both liability and causation had been made out. Since, on my findings, neither liability nor causation has been established, nothing is due in respect of Line Items 7 and 8.
Line Item 9: Siltbusters
This claim is for the alleged prolonged hire of two siltbusters in the Northern section. It fails because the claim for delayed permission in respect of temporary crossings has failed in principle. On the facts, and on the particulars provided, this Line Item is nothing whatsoever to do with the delay in respect of the proximity agreements/permanent works. Line Item 9 also fails because these siltbusters were on the Northern section, and could not therefore have been affected by the temporary crossings/permanent works in any event. And Line Item 9 also fails because any delay was the responsibility of OSR: see Section 7.5.2 above.
Even if all three of those conclusions were wrong, I consider that, as a matter of fact, this Line Item must fail for the same reasons as those set out in Section 6.7.5 above (in relation to Line Item 4, the siltbuster in the Southern section). On the basis of Mr Teal's evidence, the siltbusters were always required. Moreover, I can see nothing which links the alleged extended hire of these siltbusters to the absence of permission for temporary crossings. There was no evidence that such an absence gave rise to the extended hire. That doubtless explains why no COR issued in 2011 suggested that the siltbusters were in any way linked to the absence of permission for the temporary crossings.
One of the siltbusters was at DX8, in the first 1.5 metre section of the Northern section, between the Shetland Gas Plant and Access 1A. There was free access at both ends. There was no pipeline crossing in any part of that section. The mainline welding in the Northern section was completed by Christmas 2011, and there were no access issues in that first section anyway. There was therefore no basis for a claim for this siltbuster.
DX19 was also in the Northern section. It was between Access 1A and RDX2. Although the hire of that siltbuster could conceivably have been prolonged because of the absence of permission for temporary crossings, there was no credible evidence of that. As I have already said (paragraphs 376-378 above), that was an area where the construction traffic always had to turn round and retrace their steps, at least until the final day when the embankment on the Northern section was completed.
In addition, there are other difficulties with Line Item 9 relating to quantum. Mr Lester was claiming £387,274.28 in respect of both siltbusters on the basis of Limb 3. For reasons which were unexplained, in OSR's closing submissions, and notwithstanding the disastrous evidence of Mr Lester, this Line Item claim had actually increased to £460,484.85. Mr Kitt's calculation for both siltbusters was £73,210.57, assuming that Limb 3 was the right basis. His alternative figures, based on Limb 5 (fair and reasonable rates), was £323,893.20 for the extended hire and £62,568.26 for the enhanced specification, as set out in paragraphs 12 and 13 of the third JS. This was itself based on his detailed calculation in his first report, culminating at paragraphs 7.2.38 and 7.2.39.
For the reasons set out in relation to Line Item 4 (paragraphs 244-246 above) I do not accept that the applicability of Limb 3 has been established in respect of any of these Line Items. There were no relevant approvals of rates, days or measurement sheets prior to the incurring of these expenses. Accordingly, if Limb 3 is not applicable, Limb 5 (fair and reasonable rates) is the proper basis for the valuation of this Line Item.
As to the detailed make-up of the claim, Mr Kitt's figures are to be preferred. They correct the numerous errors made by Mr Lester, such as to the failure to give credit for the period shown in the October programme; the correct allowance to be made by reference to the tender; and the fact that the enhancements claimed for were nothing to do with the absence of temporary crossings but were required in any event.
If the Line Item is recoverable at all, then the claim would be limited to the siltbuster at DX19. That is because this claim could only conceivably be for the siltbuster at DX19. For that reason, the maximum value of this claim would be around £193,230, being half of the figures calculated by Mr Kitt and referred to in paragraph 390 above. Of course, because I have rejected the temporary crossings claim as a matter of principle, because this Line Item was not the result of the absence of permission to carry out temporary crossings, and because any delay was due to OSR, nothing falls to be recovered in respect of Line Item 9.
Line Item 10A: Civil Standing Time
As I have already noted, one of the features of this claim is that the Line Items in respect of the civil engineering work, which related to the works performed by Roadbridge, are relatively modest. This is one such claim, said now to be worth a maximum of £49,483.82 (although if, as I conclude, the right basis of evaluation is at fair and reasonable rates, the maximum figure would fall to £30,642.05). However, for the reasons noted in paragraphs 395-399 below, the claim for Line Item 10A fails in its entirety.
This is a claim for plant standing time. It relates principally to periods in November and December 2011, with certain further days in January, February and March 2012. Line Item 10A can therefore only relate to the absence of permission for the temporary crossings, rather than the absence of the proximity agreements in respect of the permanent works (because those were not programmed even to start until mid-January 2012, and are nowhere identified as the cause of the alleged standing time claimed in Line Item 10A). Accordingly, nothing is due in respect of this Line Item because I have rejected that claim as a matter of liability.
There is a second reason why this Line Item fails. For the reasons set out in Section 7.5.2 above, I have found that the relevant delays during the periods claimed in this Line Item were the responsibility of OSR. This claim therefore fails for causation reasons too.
Further and in any event, this Line Item suffers from other insurmountable evidential difficulties. Mr Teal reiterated on a number of occasions in his witness statement that he did not see Roadbridge's plant standing idle (save for one isolated incident, for which they have already been paid). He was not challenged on that evidence. Mr Kitt, who undertook a detailed assessment of the material said to support this claim at pages 103-127 of his first report, concluded that the claim was "devoid of a cohesive explanation" and was not made out on the evidence. He was not cross-examined on that analysis and I accept it.
It is unnecessary to identify all the difficulties with this claim summarised in those pages of Mr Kitt's report. But amongst them is the fact that the claim was said by OSR to relate to COR 45 (which is about 'unapproved enabling documentation' and unconnected with the temporary crossings); the fact that the relevant DPR's did not contain any references of civil plant standing idle, despite the fact that this was exactly what one would expect to see in the DPR's if that was the case; and the fact that the records show that there were no resources available to Roadbridge to operate any additional plant that might otherwise have been standing idle.
Accordingly, even if AUK's liability for the absence of temporary crossings had been established, and even if delay causation had also been established, the valuation of this Line Item would have been nil because there was no evidence to support it.
As for quantification, I note that the claim for this Line Item at the outset of the trial was £157,802.99. Following the problems with Mr Lester's evidence, OSR have reduced the claim to £49,483.82. But in my view this does not make full allowance for all that he failed to address, and is in any event a valuation based on the inappropriate Limb 3. If I am wrong on the principle and wrong on the facts and causation, this item would have a maximum value of £30,642.05, the figure calculated by Mr Kitt on the basis of fair and reasonable rates and recorded at paragraph 16 of the third JS.
Line Item 10B: Mechanical Standing Time
Just as the claim at Line Item 10A in respect of the civil engineering works is relatively modest, the claim at Line Item 10B in respect of the mechanical element of the works is, on any view, exaggerated. Mr Lester purported to pursue this item in the original sum sought by OSR of £2,827,332.40. The claim at the start of the trial was slightly less, at £2,724,592.47. By the end of the trial, notwithstanding all the problems with the claimants' witnesses of fact and the evidence of Mr Lester, the claim for this Line Item had actually increased to £2,780,730.89. Mr Kitt's alternative figure (on the basis of Limb 3) was £533,122.07. But if the right method of valuation was to use fair and reasonable rates (and in my view it was, for the reasons previously noted), Mr Kitt calculated the figure at £206,295.11 (see paragraphs 58 and 59 of the third JS).
In principle, this claim mirrors Line Item 10A and therefore suffers from all the problems noted in Section 7.6.3 above. It is again presented in the particulars provided by OSR as being due to the problems caused by the absence of permission for temporary crossings, which is a claim that I have rejected as a matter of liability. Although the periods claimed could theoretically be said to relate to the late proximity agreements in respect of the permanent works (because they are mainly for the early months of 2012), that is not how OSR have chosen to plead and present them in the claim documents.
In addition, as with Line Item 10A, I have concluded that the delays which are covered by this Line Item were the responsibility of OSR, for the reasons noted in Section 7.5.2 above. Thus the Line Item also fails for causation reasons.
However, even if I was wrong about both of these findings, the evidential difficulties identified by both Mr Teal and Mr Kitt would mean that no positive value can be given to this Line Item in any event. Those difficulties are summarised below.
First, there was no evidence from any of the OSR witnesses that corroborated or supported this claim, a point that Mr Kitt made expressly in his first report at paragraph 7.4.9. Mr O'Rourke did not deal with it, presumably because he was a Roadbridge employee and did not have the requisite detailed knowledge. But, although this was a Sicim claim relating to the mechanical resources, neither Mr Caviglia nor Ms Dallatomasina had been involved in the preparation of the claim at Line Item 10B and neither could affirm or even speculate as to its validity or otherwise. In my view, no aspect of this claim can be said to speak for itself: for example, it might be asked how, as a matter of commonsense, plant could be standing idle (ie not being used at all) as a result of the absence of permission to construct temporary crossings, which was never given, and for which alternative solutions had to be, and were, found?
Secondly, Mr Teal gave detailed evidence in respect of the alleged standing times of the stringing crew and the welding team, the two relevant components of this claim. He said that "none of the crew or plant used for the mainline stringing was standing between January and the beginning of April"; and that "the mechanical work, apart from the move around time, were not impacted by the lock-outs", before going on to refer to what the stringing resources and the welding resources were actually doing at the relevant times. His evidence was supported by Mr Bland, who not only said that the OSR employees were not standing around but also that, in reference to the vast size of the subsequent OSR claim, "it would be astonishing to see this amount of crew and plant standing idle at site. I do not recall any crew or plant standing around at all."
It is in this context that the absence of any reference in the contemporaneous documentation to the large amount of standing time now claimed is so significant. This is not some technicality on which OSR's claim has foundered; it is further corroborative evidence that the claim which is now made on their behalf is devoid of reality, and fails to engage with what was actually happening on site at the relevant time. In my view, the evidence of Mr Teal and Mr Bland is supported by the contemporaneous documentation, and the fact that the DPR's are all but silent in relation to the standing time.
It is perhaps worth examining the two components of this Line Item in a little more detail. As for stringing, Line Item 10B assumes that there was a dedicated stringing team standing around, waiting for work to do. That is not what happened. The stringing was largely complete by the end of 2011. There was no dedicated stringing team on site in the New Year. One aspect of the evidence considered a period between 10 January and 4 February. By then, stringing was being carried out by one sideboom and two sideboom operators, who were principally there to carry out lowering, which was still required. Other labourers were described as "external" and they are not shown on the DPR's. Many of the other operatives were not stringing specialists at all, and were instead "helpers, supervisors, operators, crane operators, banksmen and a translator."
So there was no evidence of any stringing crew standing idle; as might have been expected, they were all usefully employed on other tasks. Neither is the stringing plant claimed in any way specialist equipment. It was general, and it was being used (albeit for other tasks) in the relevant period.
In those circumstances, it is perhaps unsurprising to see that some of those individuals claimed in relation to the stringing spread are also in the claim for welding spread. Not only is that illegitimate double counting, but I accept AUK's submission that it shows that the work was not being carried out by specialists. The only conclusion from all the documents is that, when there was no stringing to do, the relevant people and plant were redeployed to carry out other tasks. That is, of course, what Mr Teal has always said, and constitutes a complete answer to the claim that the stringing team were standing idle.
Welding, which was the other component of Line Item 10B, was treated in the same way. After the completion of the mainline automatic welding in January, the automatic welding team was reduced to a single automatic welding spread. I have already dealt with the slow progress of this work thereafter (paragraphs 365-368 above). This was because, due to OSR's default, the welding was being carried out in tandem with other operations, such as lowering. In addition, manual welds were not started until after Christmas and tie-in welds could only be done after lowering which did not commence until after Christmas as a result of the problems in coating (Section 7.5.2 above).
In all those circumstances, therefore, I consider that, even if liability for the absence of permission for the temporary crossings had been made out, and even if liability for delay on the part of AUK had been established, the claim under Line Item 10B was simply not proved on the facts. The plant said to be standing either was not standing, or was standing because of OSR's default. I therefore consider that Mr Kitt was right to value this Line Item at nil.
It is only if that approach is wrong as well, that it becomes necessary to look at the detailed figures. The claim is valued on the basis of Limb 3, which is inapplicable, for the reasons noted in paragraphs 245-246 above. The correct basis for valuation is therefore Limb 5, fair and reasonable rates. Although the claim has been modified for the purposes of the closing submissions, the basis of the valuation has not changed. Moreover, the modifications are themselves incomplete: some items of plant have been deleted, but the operators of that plant have not been.
In addition, the arguments about crew composition and working hours are the same as those dealt with in Section 6.7.6 above, in relation to Line Items 5 and 6. I have resolved both of these arguments in favour of AUK. On that basis therefore, if this claim was established as a matter of liability, and if I am wrong to value the claim at nil because the link between the temporary crossings and the delay claimed in Line Item 10B was entirely unproved, and/or no evidence of standing time has been established, and/or any delays were the responsibility of OSR, then the right valuation for Line Item 10B is Mr Kitt's figure of £206,295.11 (paragraph 401 above).
Line Item 11A: Civil Piecemeal Working and Line Item 11B: Mechanical Working
I had thought that these Line Items were again presented as being due to the absence of permission for temporary crossings, a claim which I have rejected in principle. They did not, on their face, appear to have any connection to the delay in the proximity agreements. However, perhaps because she was only too aware that the latter claim was a better bet in principle than the former, Ms O'Farrell QC's oral closing submissions sought to depict them as OSR "hanging on for the trenchless crossings". In those circumstances, it is unfortunately necessary to detour into the pleadings to see just what these claims were based on.
The two types of claim to which all the Line Items under Claim 2 relate are conceptually very different. The alleged problems as a result of the absence of permission to cross the existing pipelines on a temporary basis would, if right on the facts, have had an ongoing disruptive effect. Putting it at its highest, it would have slowed down and made more difficult the carrying out of the permanent works. The absence of permission for temporary crossings would not have stopped the permanent works altogether; we know that because no such permission was ever granted, and yet the works were completed. On the other hand, the principal effect of being unable to build the trenchless crossings for months would have been different: it may well have caused a delay when OSR had done all the other work they could do, but were prevented from then completing the work because they could not undertake the trenchless crossings. That this element of the work was quite capable of being done separately, and after everything else, is apparent from OSR's October programme. It is necessary to keep these basic differences in mind when considering the pleadings.
Attachment 7 to the amended particulars of claim deals with Line Items 11A and 11B. It is headed "Lockouts", the name given by both parties to the areas above the existing pipelines where there was no permission to put in temporary crossings. Furthermore, the details focus on various activities during 2012 where "it is apparent that the disruption caused by the lock-outs has prevented efficient continuity of optimised crews. Where crews are working on two fronts in the same sub section, they are treated as one crew." That again suggests disruption caused by the absence of temporary crossings, a point confirmed by the following extract:
"The absence of measured distances excavated for trenching or backfilling operations prevents an alternative method of establishing loss of productivity as provided in Line Item 11B. It is evident that most of the lost time arises from returning to the lock-out locations and temporary accesses consequential to the lock-out."
On the basis of the extract from Attachment 7 set out above, these Line Items are clearly presented as relating to the absence of temporary crossings, and nothing to do with the delays caused at the end of the works because everything but the trenchless crossings had been completed. But if there was any doubt about that, the replies to request for particulars 6.1 to 6.3, included in the trial bundle at A2/18-29, make that crystal clear. The alleged delay and disruption is all about the alleged lock-outs and the need to work round those areas of the site where permission for temporary crossings had not been granted. There is not a hint in any of those particulars that the problem was a much more simple one, namely that everything had been done except for the trenchless crossings. Of course, that was because, at this time, there was still plenty for OSR to do. In those circumstances, I conclude that these Line Items are put forward on the basis on which both Mr Lester and Mr Kitt have addressed them, namely as the consequences of the absence of permission to construct temporary crossings over the existing pipelines. They are not presented, and I do not deal with them, as claims arising out of the delays to one of the last elements of the permanent works, namely the trenchless crossings.
Line Items 11A and 11B are claims for delay and disruption. Like Line Items 10A and 10B, addressed in Sections 7.6.3 and 7.6.4 above, they assume that the relevant delays and disruption was the responsibility of AUK. They therefore fall to be rejected for the same reasons as those Line Items: the evidence shows that the relevant delay and disruption was the responsibility of OSR (see Section 7.5.2 above).
The evidence in support of these particular Line Items was also non-existent. The same absence of evidence from the OSR witnesses, noted in connection with Line Items 10A and 10B at paragraph 405 above, applies again. The basis of the claim for Line Item 11B, originally put at £1,556,202.95 and based on a comparison of 'as planned' and 'as built' durations, was abandoned by Mr Lester in his first report and a new claim, based on the (unrealistic and unsupported) suggestion that OSR were capable of 10 welds a day, was offered instead. Mr Lester appeared to abandon Line Item 11A during his evidence when he admitted that he had not checked Mr Kitt's evidence that the sums claimed had already been paid under COR 51. The details of the myriad valuation difficulties are set out below.
(ii) Line Item 11A
This is a claim in respect of allegedly piecemeal working in respect of the civil engineering works. The underlying difficulty with it was that it was wholly unsupported by the evidence, and contrary to the evidence of Mr Teal. Mr Kitt had undertaken an analysis of the material put forward in support of Line Item 11A and concluded that it has not been established in any respect.
A further difficulty was that the claim overlapped with COR 52, for which OSR has already been reimbursed. Mr Kitt pointed out that many of the individuals for which a claim was being made for particular days of lost time under Line Item 11A, had in fact been the subject of the earlier payments.
Mr Lester had originally said in the joint statement that this was not the case but examples were put to him in cross-examination and he accepted that he was wrong to disagree with Mr Kitt on this point. This exchange was particularly important:
"Q: …Well, that [is] simply wrong.
A: That would appear to be incorrect, I'd have to admit that.
Q: And it's not a difficult matter to check, is it?
A: No it is not. I should have made that check but…I didn't do it.
Q: You simply preferred to recite what was told to you by others without checking?
A: That appears to be the case.
Q: Well that is the case?
A: It is the case, my lord, Yes."
This is of course another example of Mr Lester simply parroting what he had been told by OSR and not undertaking the necessary checks himself. On the basis of over-payment alone, Mr Kitt valued Line Item 11A at nil. Given Mr Lester's complete capitulation on the point, I consider that Mr Kitt's approach must be right.
I note that OSR have sought to allow for Mr Lester's evidence by reducing the claim from £187,038.08 to £172,896.03. In my view, this wholly fails to grapple with the problem that, in essence, Mr Lester abandoned the entire basis of this Line Item. Again, even as modified, the OSR claim is based on the inapplicable Limb 3.
Mr Kitt said that, if (contrary to my findings) liability and causation were proved, the maximum value for this Line Item was just £15,000 (and even that assumed that Limb 3 applied: see paragraph 65 of the third JS). If liability and causation were proved, and Mr Kitt was wrong to value the claim at nil, then I accept that that would be the maximum due.
(iii) Line Item 11B
This claim was originally put at £1,811,378.26. Mr Lester recast the claim and valued it at £1,556,202.95. It appears that OSR have had another attempt to revalue this claim in the smaller sum of £946,036.77 after the conclusion of the evidence. In truth, I consider that the entire claim for this Line Item is riddled with inconsistencies and evidential difficulties.
The claim in respect of Line Item 11B was recast by Mr Lester in his original report and depended on an alleged planned progress of ten welds a day. However, that planned rate of progress was meaningless because it muddled automatic and manual welds. On the evidence, it appeared unrealistic. A rate of ten welds a day was never achieved, even when there were no access difficulties. Mr Caviglia accepted that OSR never achieved more than two or three manual welds a day at any time. Accordingly the entire basis of Line Item 11B, as recast by Mr Lester, was as flawed as the original basis of the claim.
In addition, the new basis of Line Item 11B takes no account of the fact that no tie-in welds could be performed before Christmas because neither coating nor lowering had begun, and there were further problems thereafter, something which was nothing to do with the absence of permission for temporary crossings (paragraphs 359-368 above). As noted there, when this was debated with Mr Caviglia in evidence, his answer was that this was "not necessarily" the reason for the slowness of the welding, but he put forward no other explanation. Mr Teal, on the other hand, ascribed the delay in the welding to precisely this cause, explaining in his statement that OSR lowered the pipe and then went back to do tie-ins before resuming lowering in a new section. In addition, again as demonstrated by Mr Teal's evidence, the welding was slow because OSR had only two manual welding teams, another obvious reason for delay. It was for these reasons that Mr Caviglia was bound to accept that OSR never achieved more than three manual welds a day, a rate of progress which makes a nonsense of the entire basis of the claim encompassed by this Line Item.
Thus the underlying assumptions beneath Line Item 11B are simply not made out. Not only is it based on the ten welds a day, the claim also treats as "lost time" all the days after Christmas. For the reasons set out in detail in respect of Line Item 10B in Section 7.6.4 above, that is a wholly illegitimate basis of claim. It means that in effect, OSR are claiming to be reimbursed for delays and disruption which they themselves have caused.
In contrast to Mr Lester's superficial and incorrect evaluation, Mr Kitt produced a detailed explanation for his approach. It can be found between pages 160 and 168 of his first report. As already noted, his initial view was that Line Item 11B should be valued at nil. I accept that analysis.
If he was wrong about that, and on the basis (which I do not accept) that OSR suffered the lost time claimed, then he has calculated a figure, based on Limb 5 (fair and reasonable rates), of £417,335.51. That is recorded in paragraph 69 of the third JS.
I should say for completeness that Mr Kitt's valuation is based on the same approach as to crew composition and working hours that I have noted and accepted in earlier Line Items.
For all these reasons, Mr Kitt's detailed appraisal of both these Line Items led to a nil evaluation. I agree with that.
Only if that too is wrong is it necessary to quantify these Line Items. Mr Kitt's figures are based on the applicable approach. They are £15,000 for Line Item 11A, and £417,335.51 for Line Item 11B.
Line Item 14: Standing Time (Reinstatement)
This Line Item relates to civil plant which it is said was standing during July and August 2012. This was after OSR had returned to complete the works following the delay in the provision of the proximity agreements. I consider therefore that this Line Item is different to the other Line Items so far discussed in Section 7.6 which, on analysis, were based on the absence of permission for temporary crossings. This is a Line Item which, on its face, flows from the delay in the provision of the proximity agreements, which I have accepted in principle (paragraph 342 above) and for which there was a valid notice (paragraph 343-344 above). Accordingly, it seems to me that something must be due in principle relation to this Line Item.
I accept that OSR have not made it easy for themselves because they have few contemporaneous records for this period, and appear to be basing much of the claim in respect of plant that either could have been off-hired, or which was present on site for other purposes, and when the labour which might have operated that plant was not itself standing. All of those factors lead Mr Kitt to value the claim at nil.
Moreover, that approach could be said to be supported by the evidence of Mr O'Rourke in cross-examination, because he accepted that he knew that elements of plant for which standing time claims had been made under this Line Item were subsequently used for other work packages after the end of July 2012. He also accepted that he (and therefore I) could not make blanket assumptions about how easy or difficult it was to off-hire particular items of plant.
However, there has to be a level of realism in my assessment of this Line Item. I remind myself that OSR should not have been on site as late as July and August 2012 carrying out this reinstatement work. The principal reason that they were there at that late stage was because of the delays in the provision of the proximity agreements, and the fact that the trenchless crossings work was started four months late. Accordingly it does seem to me that, inevitably, OSR would have suffered some delay and disruption in consequence. What is more, unlike the other Line Items assessed above, this is delay and disruption for which AUK was responsible under the Contract.
In all those circumstances, I have concluded that the best course is to have regard to Mr Kitt's alternative calculation, based on fair and reasonable rates, at £111,603. This is not a claim to which Limb 3 (which produces a much higher figure) is applicable for the same reasons given in paragraphs 245-246 above. I consider that fair and reasonable rates are the proper basis for this valuation. In addition, I note that Mr Kitt's figures are based on his own assessment of the crew composition, which is itself based on Mr Teal's evidence. I have already accepted that as the correct basis for valuation.
The figure of £111,603 was calculated by Mr Kitt in advance of his meeting with Mr Lester on 23 July, and set out in a spreadsheet. That spreadsheet then became Appendix 4 to the third JS and was expressly referred to in paragraph 81. It seems to me, taken in the round, that £111,603 is a reasonable figure for this Line Item. Accordingly, I find in OSR's favour in relation to Line Item 14 in the sum of £111,603.
Line Item 15: Demobilisation
At the end of March 2012, OSR demobilised and left site, until such times as they could carry out the trenchless crossing work. That was a reasonable decision. It was a decision necessitated by AUK's failure to procure the proximity agreements any earlier. Accordingly, I consider that the claim for demobilisation is made out as a matter of principle.
Again, however, there are problems with the quantification of the claim itself, put at a maximum of £269,222.24 by Mr Lester. That was calculated on the erroneous Limb 3 basis. In addition, because of OSR's blanket refusal to provide any details of what actually happened when demobilisation occurred, or what that decision actually cost them, the claim seems to me to be inevitably exaggerated. OSR refused to provide particulars of what their personnel were doing during the period of the demobilisation: whether they were deployed elsewhere, or given a holiday. They have not identified any other ways in which these losses could have been mitigated. I agree with AUK that this Line Item does not prove itself and that OSR would have been much better advised to have proved that their staff were not employed elsewhere and that losses were suffered as a matter of fact.
But again I must take a realistic view and endeavour to do justice between the parties. Some additional costs were the inevitable consequence of the decision to demobilise. Thus, because I consider that this Line Item is correct in principle, I have had to identify an alternative method of calculation. I have done that by reference to Mr Kitt's evidence in his first report, his joint statements, and his oral evidence in cross-examination.
Mr Kitt has calculated the demobilisation claim at fair and reasonable rates in the total sum of £221,623.52 (see paragraph 21 of the second JS). Although even this calculation assumes, in OSR's favour, that the relevant employees had to be retained on full pay and no other productive work to do, I think it more likely than not that OSR suffered losses of this order as a result of the decision to demobilise, and the six week demobilisation period. Such a figure is by no means excessive for these events (although it does highlight the exaggerated nature of many of OSR's other claims). I therefore allow this Line Item in the sum of £221,623.52.
Line Item 16A: Prolongation
This Line Item appears to be something of a catch-all in every respect. At the outset of the trial it was put at £2,012,906.49 although this was always unsustainable and was not supported by Mr Lester. However, Mr Lester still purported to support a claim for £1,179,125.85. The overlap between this and some of the other Line Items is very unclear.
This Line Item is a claim for prolongation for five months between the end of March 2012 and the beginning of September 2012. Although Attachment 11 to the Amended Particulars of Claim, and the further and better particulars also provided by OSR, are even more opaque than the pleadings in relation to Line Items 11A and 11B, I have concluded that they were intended to claim the alleged knock-on consequences of the failure to grant permission to construct temporary crossings, which resulted in the lock-outs. That was certainly how AUK understood it in their Amended Defence and Counterclaim where they said in terms, in denying the claim, that "no attempt is made to set out the reasons why the alleged delay of five months was caused by the lock-outs". The OSR Reply joins issue with the detail of the valuation. It does not at any point suggest that AUK were wrong to characterise this as a claim arising out of the lock-outs.
Furthermore, the one place where this Line Item is the subject of a detailed analysis is at Section 7.9 of Mr Kitt's first report. It is plain that Mr Kitt understood that this Line Item was being pursued on the basis that it arose out of the lock-outs. Accordingly, I accept paragraph 369 of the AUK closing submissions that "this claim is for prolongation as a result of the delay caused by the lock-outs." I reject paragraph 325 of OSR's closing submission that this claim arose "as a result of the late proximity agreements." Because I have already dismissed the claim in respect of temporary crossings/lock-outs as a matter of principle, that is the end of this Line Item.
If that were wrong, and this was a claim that arose in respect of the late proximity agreements, then it does not seem to me that the claim has been proved on the facts. This can be demonstrated in three ways.
(a) First, for the reasons set out in paragraph 342 above, I am of the view that any relevant delays were the responsibility of OSR.
(b) Secondly, it is not clear to me what prolongation there could have been as a result of this failure, beyond that which I have allowed in Line Item 14 and Line Item 15. Under those claims, I have already made an allowance in respect of the demobilisation from March to May, and the alleged delay and disruption once OSR returned to site in May. No other delay or disruption has been established between March and the beginning of September, a point made by Mr Kitt in his first report at pages 177-183. As he rightly notes, no OSR witnesses gave any evidence as to the cause or the extent of this delay.
(c) Thirdly, a claim for a 5 month delay, during which time a considerable amount of contract work was done, simply makes no sense. It was unsupported by any cogent evidence. I accept Mr Kitt's analysis, at paragraph 2.5.5 of his supplemental report, that on any view, the maximum periods of delay were 6 weeks (Roadbridge) and 2 weeks (Sicim).
Two further points should be made which also lead me to conclude that nothing is due in principle in respect of this Line Item. First, the WP 10 works were not delayed significantly beyond the date of July 2012. That was the completion date identified in the October programme because the 'pull in' works were always programmed to be carried out from April 2012 onwards. That necessarily meant that the completion of the last section of pipeline would take place then, and not any earlier, despite the agreement that the bulk of the pipeline work would be carried out in 2011/early 2012 rather than later in 2012. Accordingly, this was a claim for additional monies for resources which would always have been required under the Contract.
Secondly, and more importantly for the purposes of quantification, OSR have already recovered significant sums in respect of additional preliminaries as a result of other COR's. Mr Kitt carried out a good deal of work on this aspect of OSR's claim, and his conclusion was that, to the extent that any prolongation could be shown as being a result of events for which AUK are responsible under Line Item 16A, compensation had already been paid under other COR's. Even allowing for the maximum periods of delay in paragraph 449 c) above, he still identified an overpayment of £346,878.23 (see paragraph 2.5.5 of his supplemental report of 20 July). He was cross-examined about that, and stuck to his analysis. His conclusion was that, even if Mr Lester's lower figure for the contributions from other COR's was correct (and of course Mr Kitt had a significantly higher figure), that was still well in excess of any figure that might be due for prolongation under Line Item 16A. In other words, whichever analysis the court adopted, the evidence showed that no further sums were due in respect of this period.
As for all the quantification debates, for the general reasons noted in paragraphs 80-100 above, I preferred the evidence of Mr Kitt. The entirely speculative nature of Line Item 16A leads me to conclude that, on any view, no sum has been shown to be due by reference to it. For all those reasons, therefore, this Line Item fails in its entirety.
7.7 Answers to Issues
Issue 10: Whose obligation was it to obtain proximity agreements?
For the reasons set out in Sections 7.1-7.3 above, it was AUK's obligation to obtain proximity agreements relating to the permanent crossings. As to any temporary crossings, AUK were obliged to pass on any such requests up the contractual chain but their obligation was necessarily tempered by the nature and timing of any requests and the provision of all relevant information by OSR.
Issue 11: Did OSR provide AUK with its requests for temporary crossings permission in good time?
No. The request could and should have been made much earlier than August 2011. OSR signed the Contract in November 2010 and must always have known that they wanted (or might want) permission to cross over the top of the existing pipelines during the carrying out of the works. The reasons why the temporary crossings request did not give rise to a claim on the facts are summarised in paragraphs 304-318 and paragraphs 319-323 above.
Issue 12: Was OSR obliged, and if so did it fail, to provide AUK with information needed to conclude the proximity agreements?
Yes, insofar as it relates to temporary works. Beyond that, it is unclear what this Issue adds to Issue 11. To the extent that this relates to the need for proximity agreements to deal with the permanent crossings, then that was a matter entirely for AUK.
Issue 13: Did OSR provide notification of the claim as required by the Contract?
For the reasons set out in paragraph 324-334 above, OSR did not provide proper notification of the claim in respect of permission for temporary crossings. For the reasons set out in paragraphs 343-344 above, OSR did provide proper notification of the claim in respect of the delay in the conclusion of the proximity agreements in respect of the permanent works.
Issue 14: To what extent, if any, were OSR's works delayed and/or disrupted by the lock-outs imposed by the third parties?
In general terms, for the reasons set out in Sections 7.5 and 7.6 above, I have concluded that OSR have not made out any claims for delay and/or disruption as a result of the absence of permission to perform temporary crossings. That failure is on grounds of liability; on grounds of causation; and on grounds of quantification.
I have however concluded that there was delay and disruption caused by the delay in respect of the provision of the proximity agreements themselves. That triggers a liability under Line Items 14 and 15 only (paragraphs 436-445 above).
To the extent that my analysis is wrong, and other Line Items in addition to 14 and 15 were related to the absence of the proximity agreements for the permanent works, for the reasons set out in Sections 7.6.1-7.6.5 and 7.6.8 above, I consider that those Line Items suffer from the same deficiencies of causation and quantification and must fail in any event.
Issue 15: Is the October 2011 programme a relevant and appropriate base line against which to assess the claim?
For the reasons set out in paragraphs 32-37 above, the October programme is unreliable. Moreover, the issue is redundant since the Line Items which would have been measured by the reference to the October programme are Line Items which fail in any event.
However, I conclude that (despite its flaws) the October programme is relevant in two ways: first, because it shows the trenchless crossings being carried out separately and at the conclusion of the other works in January 2012; and secondly because it shows that WP 10 works were still ongoing in April 2012.
Issue 16: Did the sequence and progress of the works change from that contemplated by the baseline programme because of:
(a) The inability to cross the pipelines with construction plant during the works, thus creating interruptions in the right of way; or
(b) The fact that a proximity agreement permitting the trenchless crossings below PLX1, 2 and 3 was not available until 3 May 2012?
It is not clear what this Issue adds. Claims in respect of delay and disruption have not been made out in relation to sub-paragraph (a). Up to a point, they have been made out in relation to sub-paragraph (b), but only under Line Items 14 and 15. As a result of my analysis of the various Line Items set out in Section 7.6 above, all the others fail in any event.
Issue 17: Is some or all of the time lost as compared with the baseline programme caused by other matters, and in particular:
(a) Late start of coating (apply plastic wrapping over welds also called wrapping);
(b) Slow and late manual welding of tie-ins, fabrications, ditch crossings;
(c) Other matters pleaded by the defendant?
For the reasons set out in Section 7.5.2 above, I have concluded that all of these matters caused delay. I regard the coating and welding delays as of particular significance. As a result, the entire basis of Line Items 9, 10A, 10B, 11A, 11B, and 16A (which assumed the only causes of delay were the absence of the permission for the temporary crossings) was erroneous. No alternative claims were (or were capable of being) put forward by OSR to reflect the delays that were plainly their responsibility.
Issue 18: What is the quantum of OSR's claims for standing time, reduced productivity, additional costs (including the increased width of the access road) and prolongation costs (taking into account sums included in no other Change Orders)?
For the reasons set out in Section 7.6 above, I have identified the relevant figures for quantum in respect of the various Line Items. The only two Line Items where a recovery is appropriate are Line Item 14 and Line Item 15.
8 Sums Due and Cross Claim
For the reasons set out in paragraphs 441 and 445 above, Line Items 14 and 15 having been made out, I value them at £111,603 and £221,623.52 respectively. That makes a total of £333,226.52 due from AUK to OSR.
The position in respect of AUK's cross claim in relation to Claim 2 is complicated. The parties are agreed that at least £922,109.50 has been paid on account. Once the sum noted in the previous paragraph is deducted, that makes a net sum due from OSR to AUK of £588,882.98.
However, there is a separate dispute about COR's 59 and 68. This only came to light when I asked the parties for clarification as to what sums had been paid in respect of Claim 2. I recently received written submissions on the point which are not easy to follow. I am not prepared to delay this judgment by embarking on a yet further analysis of a yet further dispute between these parties. I am content for the sum noted at paragraph 466 above to be provisional, in the sense that it does not allow for any argument about COR 59 and COR 68. I would urge the parties to resolve that matter between them; otherwise a separate hearing will be required.
There is one final point to make. If, contrary to my findings, OSR had established AUK's liability in principle and on the facts for Line Items 7, 8, 9, 10A, 10B, 11A and 11B, and if they had also established causation – none of which they did – then my evaluation of the maximum due in respect of those items was £1,018,342.40. If one adds to that the £333,226.52 in respect of Line Items 14 and 15 which I have accepted, that is still only about £400,000 more than the amount that OSR have been paid on account in respect of Claim 2. Moreover that takes no account of the argument about COR's 59 and 68, and no account of the large overpayment on Claim 3 (paragraph 288 above). Again it means that, even on OSR's case on liability and causation for all these Line Items, my preference for Mr Kitt over Mr Lester means that, on Claim 2, they would have come out ahead by only a modest amount (at least in the context of a High Court trial lasting 3 weeks), which would then have been promptly extinguished by the overpayment on Claim 3.
8. BEACH VALVE CLAIM
On 27 November 2012, AUK changed the design for the beach valve chamber. The changes required OSR to remove the entire slab foundations that had already been cast. By this time, OSR had demobilised their resources because the mainline works, including the trenchless crossings, had been substantially completed two months earlier, in September. Thus the beach valve chamber works were treated as an entirely separate package of works for which OSR was plainly entitled to be reimbursed by way of a Change Order.
In March 2013 a small team from OSR remobilised and worked on the beach valve, which was installed and completed by September 2013. Further works remained outstanding but could not be completed because of a delay in the provision of the beach valve control cabin. Again, OSR were instructed to demobilise. They remobilised their resources in January 2014 and the works in connection with the beach valve were ultimately completed on 12 July 2014.
OSR were paid for this work under a Change Order. It is common ground that the payments were made by reference to the rates in the Contract. There is no issue that, save for the claim in Line Item 16B, OSR have been paid in full for the work carried out in respect of the beach valve.
The Principal Issue
The principal issue between the parties concerns the question of supervision. At the outset of the trial, OSR maintained a claim for supervision in the sum of £230,737.32, but this was not supported by Mr Lester, who agreed the sum of £161,096.44 with Mr Kitt, and only then if Limb 3 was appropriate. It is AUK's case that the (agreed) rates which they have paid to OSR for this Change Order allow for supervision and that therefore no further sum is due.
Article 30 of the Contract is set out at paragraphs 18 and 19 above. Article 30.4 states that the rates, sums and prices in Exhibit B "shall be deemed to be all-inclusive" and are deemed to include, amongst other things, overheads, administrative expenses, preliminaries, and "everything necessary for the complete performance of the WORK".
Paragraph 1.3 of Exhibit B of the Contract repeats that the rates are inclusive of all costs, whether direct and indirect, and paragraph 6.6 of Exhibit B states in unequivocal terms that personnel rates "are fully inclusive of site supervision and clerical support".
As a matter of construction, therefore, it is plain that the rates in Exhibit B which were used to pay for the beach valve Change Order were rates that included a full allowance for supervision. Prima facie, no additional claim for supervision can therefore be made.
One of the many curiosities about Mr Lester's evidence in cross-examination was that he appeared to accept AUK's case on coverage (namely that supervision was covered by the Contract rates already paid). Indeed, in respect of other claims, he expressly allowed for it. Instead, Mr Lester simply said that, in his view, the Contract should have been amended because it was not fair for the same rates to be used after the periods envisaged in the Contract had come to an end. Since the Contract had never in fact been amended, that seemed to be the end of the claim as an arguable source of further entitlement.
In her closing submissions, Ms O'Farrell QC argued for the first time that, because the Contract had been agreed in 2011 then, as a matter of construction, these rates were no longer applicable.
In my view, there are two difficulties with that submission. First, those were the rates that were applied and paid to OSR for carrying out the beach valve work. It was never suggested that these rates were inappropriate at the time that the work was done and the sums paid.
That links to the second difficulty. This claim (which amounts to the carving out of the supervision element from the rates) was not made at the time that the beach valve works were done. It was made some time afterwards. It has, therefore, all the hallmarks of an afterthought.
In my view, the analysis is simple. The beach valve works were originally part of the contract. They were the subject of a Change Order. Payment for Change Orders was dealt with by reference to Exhibit B. That made plain that the rates were inclusive of supervision. As a matter of construction of the Contract, therefore, no additional claim for supervision can now be valid.
The time point is irrelevant, since the works were carried out under this Contract, regardless of whether the rates could be said to be more or less appropriate by the time that payment was actually made. Article 30.3 said expressly that "all rates, sums and prices stated in the CONTRACT shall be fixed and firm and not subject to any revision, nor escalation, nor any adjustment due to currency fluctuations".
No part of the Contract was drawn to my attention that could justify some sort of cut-off, beyond which contractual work could be done at different rates. On the other hand, some parts of the Contract – including Article 20.3.2 – envisaged the carrying out of works years after the completion date. That would also militate against OSR's construction.
In the circumstances, it is unnecessary to deal with this claim further, save to say that I was not persuaded that the base hours/days claimed were accurate or valid. Mr Lester supported the claim in full in his original report, but he said in cross-examination that he knew that the days were not supported by the DPR's. He subsequently said that it was only during his supplemental report that he had first considered the DPR's at all, and agreed that his statement that he had looked at the DPR's was "not…entirely accurate". This was illustrative of Mr Lester's poor performance as an expert, which I have roundly criticised elsewhere. In addition, the claim was based on Limb 3, which was inappropriate, for the reasons set out above.
Line Item 16B
For the reasons set out above, this Line Item is rejected in full.
Answer to Issues
Issue 19: What is the quantum of OSR's claims in respect of the prolongation costs incurred in remobilising its plant and labour to carry out the delayed works (taking into account sums included in other Change Orders)?
For the reasons set out in paragraphs 473-483 above, having taken into account the sums paid under the beach valve Change Orders, the quantum of this Line Item is nil.
Issue 20: Are the sums paid on the terms in the defendant's letter of 11 December 2012 and/or as time rates under Exhibit B, deemed to include for the supervision claim in Claim 4?
For the reasons set out in paragraphs 473-483 above, the answer is Yes.
For the reasons set out in Sections 6.1-6.5 above, Claim 3 (the claim in respect of the alleged unforeseen ground conditions) fails as a matter of liability. If that is wrong, for the reasons set out in Sections 6.6 and 6.7.6 above, Claim 3 fails as a matter of causation. If that too is wrong then, for the reasons set out in Section 6.7 above, Line Items 1, 2, 3, 4, 5 and 6 have not been made out, and must be valued at nil. If, contrary to my views on liability, causation and valuation, a positive value should be ascribed to those Line Items, the maximum value is £1,337,223.60, far less than was paid on account to OSR for the abandoned Claim 1 and Claim 3.
It is agreed that Line Item 13 gives rise to an entitlement on the part of OSR. It is agreed at £30,000. When allowance is made for that sum, it means that the sum of £1,895,349.89 falls to be repaid to AUK by OSR in respect of Claims 1 and 3.
For the reasons set out in Section 7.2 above, the claim in respect of permission in respect of temporary crossings fails in principle. If that is wrong, for the reasons set out in Section 7.5 above, the claim fails as a matter of causation. If that too is wrong then, for the reasons set out in Sections 7.6.1-7.6.5 and 7.6.8 above, Line Items 7, 8, 9, 10A, 10B, 11A, 11B, and 16A have not been made out and must be valued at nil. If contrary to my views on liability, causation and valuation, a positive value should be ascribed to those Line Items, the maximum value is £1,018,342.40, about £80,000 more than the sums paid on account to OSR for Claim 2.
For the reasons set out in Section 7.3 above the claim in respect of the delay in the provision of the proximity agreements for the permanent works succeeds in principle. For the reasons set out in Sections 7.6.6 and 7.6.7, I value the consequential Line Items 14 and 15 in the total sum of £333,226.52.
When allowance is made for that sum, it means that a minimum sum of £588,882.98 falls to be repaid to AUK by OSR in respect of Claim 2.
For the reasons set out in Section 8 above, Claim 4 (in respect of the beach valve) fails in its entirety.
For completeness, I should make clear that this is intended to be the Final Judgment on all matters, save: the remaining argument as to AUK's cross claim in respect of Claim 2 (paragraph 467 above); any issue or dispute as to interest; and any issue or dispute as to costs.
Note 1 Confusingly, this was often referred to in the papers as Limb 4, probably because the actual Limb 4 was regarded as irrelevant by both experts. It is easier to refer to it as valuation using “fair and reasonable rates”. [Back]
Note 2 Ms Dallatomasina was guilty of the same thing, but to a lesser extent: see paragraphs 66 and 67 below. [Back]
Note 3 It was unfortunate that, although the evidence closed on 30 July, the amended schedules were produced only in mid-September, preventing AUK from dealing with them in their written closing submissions. [Back]
Note 4 I find that Limb 1 was also the relevant methodology for the similar claims at Line Items 7 and 8: see paragraph 384 below. [Back]
Note 5 This difference is analysed further in paragraph 416 below. [Back]
Note 6 Paragraph 7.3.5 of his first report [Back]
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