The experienced contractor in subsurface works
David Kinlan MCInstCES, Contracts Director and Co-founder, Inframara BV
UNFORESEEN adverse physical conditions are a regrettable recurring theme in construction projects and major cause of claims in civil construction and marine engineering works. The CRUX 2022 5th Annual Insight Report titled Battling the Headwinds lists adverse physical conditions claims in the top three factors during construction.
In my career spanning 35 years in civil engineering and marine construction they have been a constant factor and regular source of dispute. At the start of my career there was little to no guidance or any case law as to what was expected of a contractor’s QS when lodging an adverse physical conditions claim.
The term ‘experienced contractor’ was in clause 12 of the ICE Conditions of Contract, 6th edition which I was using on my projects back in the day and later when I started to work internationally I encountered it in clause 12 of the FIDIC 4th edition which had developed from the ICE Conditions of Contract.
However, what experience was to be expected was not in any way defined or a benchmark given.
Just what or who is the experienced contractor?
Quite often when lodging a claim I was informed by the client’s resident engineer that as a contractor with long experience in the industry it would be reasonable to expect that conditions on the project site may not be fully represented.
This is, however, a too simplistic response and poor contract management as you have to look at the available site information and what information the contractor could reasonably be expected to obtain.
Basically, the contractor was expected to suck it up.
The contractor after all has only a short period to tender for a project and a client has many months or years to investigate its chosen project site. The onus is therefore on the client to provide a reasonable amount of site information such that the contractors bidding for the project can make informed decisions as to the nature of the site.
When an adverse physical condition is encountered and notified the parties invariably refer to the contract provisions, it is then that three basic questions often arise:
- What is the test of an experienced contractor?
- What reasonable enquiries could the experienced contractor be expected to have undertaken at the time of tender?
- Would an experienced contractor have at the time of tender reasonably expected and foreseen the condition encountered?
his is, however, a too simplistic response and poor contract management as you have to look at the available site information and what information the contractor could reasonably be expected to obtain.
The test of an experienced contractor has always been subjective and related to the specific project site. However, in virtually all standard contracts there is a clause which provides that the contractor was deemed to have inspected and examined the site, its surroundings, the client provided data and other available information, and to have been satisfied before submitting the tender as to all relevant matters, including the form and nature of the site, including subsurface conditions.
The reference to ‘other available information’ could be seen as rather vague but in the NEC4 contract it refers to publicly available information or other information which the contractor could reasonably be expected to have or obtain. So the bidding contractor as part of its reasonable enquiries should at least carry out a desk study and collate all available information. Other information may refer to specific information which the contractor perhaps has retained from earlier projects which the client themselves may not have.
Also note the wording about an inspection or examination of the site. This is generally meant to refer to a visual inspection of the site and its surroundings to look for salient details, so features in the landscape such as road cuttings, open excavations, trial pits and other features which may give an indication of the Site’s sub-surface conditions. Often contract wording is amended by client lawyers and the wording altered to include ‘investigation’ however it is generally accepted that bidding contractors have no opportunity to carry out site investigation of subsurface conditions.
Disclaimer and non-reliance clauses
Over the years, I have seen the rise of disclaimer and non-reliance clauses whereby the client seeks to place a bar to an adverse physical conditions claim by stating the client-provided site information is for information purposes only and not to be relied on by the contractor.
The courts have in recent years looked closely at such provisions with regard to reasonableness the UK case of First Tower Trustees and other v CDS (Superstores International) (2018) EWCA Civ 1396, the Court of Appeal has clarified that any clause that has the effect of avoiding liability under the Misrepresentation Act 1967 must satisfy the reasonableness test in the Unfair Contract Terms Act 1977 (UCTA). There have been similar cases in Australia too where the non-reliance provision was held to be unreasonable and unenforceable under the Australian Consumer Law.
It is safe to say that in the UK virtually all adverse physical condition disputes are settled between the parties or by reference to adjudication with only 5% of adjudicated cases proceeding to litigation or arbitration.
Yet such non-reliance clauses are still seen repeatedly in construction contracts giving the client a false sense of security as a bar to a contractor’s claim.
When the UK introduced adjudication as a means of resolving construction disputes the onus is on the adjudicator to determine just what could be expected of an experienced contractor.
It is safe to say that in the UK virtually all adverse physical condition disputes are settled between the parties or by reference to adjudication with only 5% of adjudicated cases proceeding to litigation or arbitration (Prof Nazzini/A. Kalis, 2022) only when a notice of dissatisfaction is issued is the dispute escalated to a higher dispute forum such as arbitration or the courts. So adjudicators rely heavily on reported court cases when arriving at their decisions.
The first major adverse physical condition claim in the UK courts was in June 1991, the Court of Appeal decided the case of Humber Oil Terminal Trustees v Harbour and General Works (Stevin) concerning unforeseeable ground conditions and the application of clause 12 of the Institution of Civil Engineers (ICE) conditions of contract.
This was the first case where the notion of the ‘experienced contractor’ was tested in court. Whilst lifting a large concrete soffit, the jack up barge listed, became unstable and collapsed. It was found that although the soil conditions at the base of the leg of the jack up barge were foreseeable, there must have been a very unusual combination of soil strength and applied stresses just before the failure occurred.
The Court of Appeal held that applied stress, namely the loading of the jack up barge, may be a part of a physical condition within the meaning of clause 12, since the nature of the ground cannot be discovered without an actual or notional application of some degree of stress on it.
Obrascon and Van Oord cases
It wasn’t until 2014 and 2015 that the UK courts again turned their attention to adverse physical conditions claims.
The two cases were Obrascon Huarte Lain SA v Her Majesty’s Attorney General for Gibraltar (2014) and Van Oord UK/SICIM Roadbridge v Allseas UK (2015)1. Both cases have been the subject of much discussion in legal circles as they are seen as definitive modern cases on the notion of what is expected of the experienced contractor. Both involved adverse physical conditions claims by the contractors. Obrascon was contaminated ground at the tunnel for Gibraltar airport and Van Oord was variable layers of peat on a site in Shetland.
In the Obrascon case being concerned with the expected volume of contaminated material on a brownfield airfield site the contractor cannot solely rely on the client’s assessment of the amount of contaminated material alone as a sort of guarantee.
The key takeaway in the Van Oord case, Justice Akenhead rejected the idea that the contractor was entitled to treat the client soil report as a type of guarantee. He stated further 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 he stated 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.
In looking back over the years, one can see that development in case law over the decades has had not only an impact on the development in contracts but also has helped in setting benchmarks for effective dispute resolution. The notion of the experienced contractor has developed from a position that the contractor can totally rely on the site investigation prepared by the client to the position now that the contractor has to make a reasonable and informed judgement of what lies between testing and sampling locations.
David Kinlan MCInstCES, Contracts Director and Co-founder of Inframara BV
www.linkedin.com/in/davidkinlan/www.inframara.com
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1 I have written about these cases in detail in Terra et Aqua #162 in the article Adverse Physical Conditions Legal Developments and changes in risk profiles. The reader is invited to download the article from the IADC website to gain a more detailed understanding of both cases.