The site investigation report contained a number of borehole log and trial pit results, which indicated ‘made ground’ (i.e. man-made ground) of varying depths between 1.0 m and 5.4 m, and non-uniform soil contamination results.
In their claim for unforeseen adverse physical conditions, Obrascon relied on details in the environmental statement provided in the tender documents, which estimated that the work would require removal of some 10,000 m3 of contaminated material. Obrascon claimed that the removal of much more contaminated material than that described in the environmental statement was not foreseeable. When rejecting Obrascon’s claim, Justice Akenhead stated: ‘The contractor cannot simply accept someone else’s interpretation of the data and say that is all that was foreseeable.’
Akenhead noted that an experienced contractor would not limit itself to the soil investigation report and volume of contaminated material in the environmental statement. Rather a contractor would have referred to the environmental statement containing references to the history and various historical maps (including the contaminated land desk study showing ‘earthwork rifle butts’ present in 1869 along the tunnel alignment), and foreseeably there would have been lead within the made ground.
Similarly, he referred to aircraft fuelling activities on the site for over 70 years and the location of a previous fuel farm and oil pipes close to the works, with such information leading experienced contractors to have appreciated that there ‘could well be’ hydrocarbon or other oil derivatives in the soil.
Akenhead stated that if these factors were coupled with the tender requirement to allow for 10,000 m3 of contaminated material, in his judgment, any experienced contractor tendering for the works would foresee that there would or at least could realistically be substantial quantities of contaminated material, and that the allowance of 10,000 m3 was only a ‘say’ figure. In terms of quantities, Akenhead did not put a precise figure on what should have been foreseen, but commented that it would be ‘very substantially above 10,000 m3’.
Akenhead determined that an experienced contractor would have not just blindly accepted the volume of contaminated material mentioned in the environmental statement but would have also looked at the history of the site. The site had previous been a runway, a fuel farm and a rifle range and the material to be excavated was all made ground. Therefore, an experienced contractor could reasonably expect considerable contamination at the site and therefore made a greater allowance in removal of such material.
With respect to the estimate of 10,000 m3 of contaminated materials contained in the environmental statement, Akenhead stated that this was one person’s interpretation of the data and tenderers were bound to take that assessment into account, but they remained under a duty to make their own independent assessment of the physical conditions likely to be encountered.
This particular case refers to the claimants, a joint venture (JV) formed by Van Oord UK Ltd and Sicim Roadbridge Ltd (together OSR), which made an adverse physical conditions claim against Allseas UK Ltd. The claim was brought in the name of the JV but only concerned the onshore work element in respect of the gas export pipeline, carried out by the civil partner, Sicim Roadbridge Ltd (Sicim). Allseas was the head contractor for construction of gas pipelines for a gas field development that formed part of the Total Laggan-Tormore gas field development at Sullom Voe in the Shetland Islands, Scotland.
The proposed route of the gas export pipeline onshore was from the Shetland Gas Plant on the north-western coast to Firths Voe on the eastern coast. The total length of the gas export pipeline onshore was ~5.7 km.
Sicim contended that it originally intended to construct part of the pipeline by forming an 8-metre-wide stone road and laying the pipe in a trench excavated into the adjacent untreated ground. OSR claimed that because peat was encountered at greater depths than it could reasonably have foreseen, it was obliged to build a 13.5-metre-wide stone embankment and lay the pipe within the embankment.
Sicim relied on a Mackintosh probe survey report. The Mackintosh probe is a test used to measure the depth of soft soils, including peat. The report was not a contract document. It showed similar depths of peat along the pipeline, varying up to 2 m in depth. Sicim claimed that in cases where the actual conditions were different to the survey results, it was entitled to an adverse physical conditions claim under the subcontract.
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.