The head contractor had also carried out precontract trial pit logs, which showed peat at various depths at various locations, with some of greater depth than the Mackintosh survey. Shortly after the contract was concluded the head contractor provided a full topographic and geophysical survey, including a resistivity survey, the results of which were consistent with the pre-contract trial pit information.
With respect to the requirement that subsurface conditions must be different from those described in the subcontract documents, Justice Coulson found that the only subcontract documents that referred to the subsurface conditions were the contract drawings, the purpose of which was to identify the path of the pipeline. However, the drawings also referred to ‘the approximate depth of peat strata’ and showed many areas of peat greater than 1 m or 1.5 m, and an area of peat 140 m in length of depth between 3 m and 5 m. Coulson concluded the subsurface conditions were not different from those described in the contract documents and therefore, Sicim’s adverse physical conditions claim failed.
Coulson rejected the supposition that Sicim was entitled to treat the Mackintosh report as a type of ‘guarantee’. Further stating that it is a matter for contractors’ judgment as to the extent to which they rely on the information, referring to the decision in Obrascon, and as a matter of common sense that ‘every contractor knows that ground investigations are only 100% accurate in the precise locations in which they are carried out, and that it is for an experienced contractor to fill in the gaps.’ Coulson added that it was reasonable to take an informed decision as to depths greater than 1.5 m in depth.
There is an Australian case that is noteworthy, this being Illawarra Hotel Company Pty Ltd (Illawarra) and Walton Construction Pty Ltd (Walton). Illawarra entered into a contract for Walton to carry out the renovation and refurbishment of its hotel. A number of matters were referred for determination by a referee one of which was on account of variations to the scope of work.
One of Walton’s variations concerned the unexpected discovery of a deep void in the foundation to the floor slab, which required the construction of a suspended floor slab, rather than a slab on ground, as indicated on the drawings. The referee found that the void was an unforeseen condition under the terms of the contract. Illawarra challenged the referee’s finding on this issue.
Justice Einstein set out the terms of the contract that had an adverse physical conditions clause similar to that in the FIDIC contract suite, and was of the view that the provision did not require an investigation of all potential aspects of physical conditions on the site, but is limited to an inspection of the site and its surroundings. He was of the view that what is reasonable in terms of inspection of the site is to be informed by the degree of information otherwise available to the tenderer, which in this case, included the engineering drawings prepared by Illawarra’s structural engineer, depicting a slab on ground. Illawarra’s evidence was that Walton inspected the site, but did not get under the building and inspect the subfloor conditions, since they believed that the architect and the engineer would have done this, resulting in the selection of the slab on ground design.
Einstein found that Walton did precisely what was required, examined the drawings and inspected the site, and that the drawings did not show the void, rather, to the contrary. He concluded that an experienced contractor would not expect to find physical conditions in the nature of the void, having regard to the very drawings that the adverse physical conditions clause requires a contractor to examine.
Einstein, in referring to Walton, was of the view that an experienced contractor’s inspection of the site is to be ‘informed by the degree of information otherwise available to the builder’. Einstein reasoning that he considered an experienced contractor would not have accessed below the building and inspected the subfloor conditions, in light of having examined the employer’s drawings showing a slab on ground.
How such a decision would be interpreted for a marine infrastructure project throws up some interesting points. The author considers that this particular contractor’s failure to fully ‘inspect’ is inconsistent with the terms of most adverse physical conditions clauses such as in FIDIC (1999 Red and Yellow Book) clause 4.10, which specifies as an independent requirement that the experienced contractor shall, to the same extent as the contractor, ‘be deemed to have inspected and examined the site, its surroundings and other available information’, with the term ‘surroundings’ not containing any limitation as to distance. The author submits that the decision in Walton should not therefore be relied upon by contractors as authority for the principle that the experienced contractor test does not involve a complete and thorough inspection of the entire site and its surroundings, and that ‘surroundings’ in a marine environment, whether immediate or in the area, need to be considered when assessing the likelihood of encountering adverse physical conditions.