Who Carries The Ground Risk? – The contractor? Not in this case…

Clancy Docwra Ltd (“CDL”) v E.ON Energy Solutions Ltd (“EON”) [2018] EWHC 3124

As some of our followers may be aware, a chapter of my contracting career was spent as the Managing Director of a nationwide trenchless contractor. I have therefore led many disputes concerning unforeseen ground conditions and as such am an avid follower in the ever-changing legal landscape (forgive the pun) of ground risk allocation.

It is the default position at common law that the risk of unforeseen ground conditions is carried by the contractor. The risk can, of course, be redistributed using amendments to; or with additions of express provisions within the contract.

That said, amendments and the interpretation thereof, can bring their own problems. That is why the case of Clancy Docwra Ltd. v E.On Energy Solutions [2018] EWHC 3124 immediately caught our attention.

So what happened?

Under an amended form of the JCT sub-contract, CDL was appointed by Eon to install pipework for an underground district heating network at the Barts Square development in central London.

The works scope included the excavation of trenches and the installation of pipework to accommodate the new asset.

During the works, CDL encountered unforeseen ground conditions which delayed the project substantially.

EON took the position that the ground risk was carried by CDL, a position which CDL rejected.

A dispute arose and was taken to adjudication and further presented to the courts.

CDL stated that when interpreted properly, the sub-contract set out that ground risk was not carried by them.

The court proceeded to interpret the sub-contract reviewing the terms in detail.

It was found that the issue of ground had been subject to lengthy tender discussions and pre-contract correspondence, some of which had been incorporated into the sub-contract under the numbered documents.

Interestingly these numbered documents were described as “a diffuse collection of documents elating of a wide range of matters”.

EON presented there had been bespoke amendments to the JCT form of sub-contract which set out:

– CBL was deemed to have inspected and examined the site and to have satisfied itself before the date of the sub-contract as to the nature of the ground, the sub-surface and subsoil.

– CBL was not entitled to any extension of time or any additional payment on the grounds of any misunderstanding or misinterpretation of any matter falling with (a) or CDL failing to discover or foresee any risk, contingency or other circumstances (including, without limitation, the existence of any adverse physical conditions or artificial obstructions) influencing or affecting the sub-contract works;

– CBL would not be released from any of the risks accepted or obligations undertaken by it under the sub-contract on the ground that it did not or could not have foreseen any matter which might affect the execution of the subcontract works.

Further:

– Eon did not warrant that any information provided to CDL was accurate, reliable or complete.

By reliance upon the bespoke amendments within the JCT sub-contract, EON maintained the ground risk remained with CDL and this was not amended by the inclusion of or the reference to the numbered documents forming part of the sub-contract.

So, what did the court conclude?

The court did not agree with EON.

The court took the approach that it was necessary to first ascertain what the parties had contracted.

It was established that CDL had contracted to undertake the sub-contract works as defined by reference to the numbered documents.

Within the numbered documents were tender clarifications issued by CDL in which they set out what the scope included (and the scope excluded).

Examples of scope exclusions were “breaking out rock”.

The court decided that it would be nonsensical for the bespoke amendments to be applicable to matters which were not part of the sub-contract works scope.

The position was therefore, that the parties had agreed to the scope of works (within the numbered documents) and the amendments then applied to the scope.

What lessons can we take?

This ruling surprised many as, at first glance, it looked like ‘just another’ ground dispute. However following a detailed review of the ruling, it becomes clear the courts have applied logic based on how the contract has been compiled, and there lies the lesson…

Parties need to take care when compiling contracts and especially when incorporating numbered documents and amendments.

The key element in this case which really stood out was the fact that the amendments to the JCT subcontract, which are fairly standard in terms of transferring all risk to the subcontractor, were not effective as the numbered documents were given effect so as to define the scope and transfer the risk to the employer.

For more information regarding ground risk and disputes, contact our team info@kjtaylorconsulting.com or 0115 9336131.

Please note. The information provided on this website is NOT LEGAL ADVICE and is for information purposes only. No action or inaction should be taken due to this information or any reliance placed upon this information. Please note where legal advice is required this should be obtained by an appropriate qualified legal practice and no information provided within this website should form the basis of any legal, contract or commercial decision. K J Taylor Consulting Ltd. are commercial quantity surveyors and not construction legal advisors.

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