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Court awards over £107 million in damages in tunnel case

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Court awards over £107 million in damages in tunnel case

12 April 2018

On 10 April 2018 the Inner House issued its Opinion in the case of SSE Generation Limited v Hochtief Solutions AG.  The case involved the partial collapse of a tunnel forming part of a new hydro electric scheme in the Scottish Highlands that was designed and built by the defenders on behalf of pursuer.  Within a matter of months of the scheme being taken over by the pursuer, the main water-carrying tunnel had partially collapsed due to the effects of water on the surrounding rock.  The central issue for the Court was which party was liable for the costs of repair.   

The judge at first instance, Lord Woolman, after hearing evidence over 83 days, came to the view that the tunnel’s collapse was an Employer’s risk.  This was because, under the terms of the NEC2 contract, there had to be a “defect” in existence when the scheme was taken over for the resulting collapse to be a Contractor’s risk.  Having regard to the definition in the contract, Lord Woolman was of the view that there was no such “defect”.  Lord Woolman was also of the view that Hochtief could rely on the “Option M” defence.  This defence excluded Hochtief's liability for defects due to design so long as it could prove that it had used reasonable skill and care. 

On appeal, there was a split decision, with Lords Menzies and Glennie allowing the reclaiming motion, and the Lord President (Lord Carloway) dissenting.  In the majority’s view, there was a “defect" at take over for two reasons: firstly, the tunnel did not have the 75-year design life stipulated in the works information and, secondly, the tunnel was not in accordance with the design that had been accepted by the Project Manager.  The majority were also of the view that the Option M defence did not apply because the defects were not in the design itself but in the implementation of the design.

The outcome of the appeal is that the pursuer has been awarded over £107 million in damages plus interest, together with other awards, taking the total principal awards to over £109 million.

Counsel for the SSE Generation were Gerry Moynihan QC and Jonathan Barne QC (both Axiom Advocates)

Counsel for Hochtief Solutions were Kenny McBrearty QC and Martin Richardson QC (both Axiom Advocates)