The recent case of Van Oord UK Limited v Allseas UK Limited [2015] EWHC 3074 is a timely reminder of the risks associated with the ground conditions found in building and engineering projects.

This case concerned a subcontract for works to a gas pipeline in the Shetland Islands. The subcontractor made three disruption and prolongation claims which they said arose out of unforeseen ground conditions encountered during the laying of an onshore gas pipe line.

The subcontractor argued that peat had been found at a greater depth than that identified in the pre-contract information supplied to it. The subcontractor also argued that the peat encountered could not have been reasonably foreseen and the ground conditions experienced resulted in the subcontractor having to change its methodology, which caused delay and additional cost.

The Court rejected the subcontractor's claim _ and found that it was not sufficient for the subcontractor to show that there were pockets of peat deeper than those shown in the surveys provided at tender stage. "Ground investigations can only be 100% accurate in the precise locations in which they are carried out. It is for an experienced contractor to fill in the gaps and make an informed decision on the results overall."

To succeed, the Court held that the subcontractor was required to prove that an experienced contractor could not have reasonably expected to have foreseen and provided for areas of deeper peat. In this case, the subcontractor failed on the evidence provided to persuade the Court that this was the case.

The subcontractor's case also failed because the Court found that their notices of claim did not meet the relevant provisions of the subcontract conditions. The subcontract conditions provided for notification no later than five days after the occurrence of a relevant event. There was then an additional seven day period for the provision of full substantiation of the claim. Compliance was expressly noted as a condition precedent to entitlement.

In this case, the subcontractor's notice was both out of time (two days late) and, in the Court's strict interpretation of the subcontract, inadequate. The notice failed to make reference to the Article 12 ground conditions or Article 22 change order provisions in the subcontract _ instead it referred to an entirely different Article. The Court required that the notice referred "to the appropriate clauses".

Lessons to be learned for Contractors/Subcontractors

Contractors/subcontractors should closely examine their contracts prior to signature to identify which party bears the risk of ground conditions.

Don't assume that errors in the ground condition information provided will necessarily entitle you to an extension of time.

An experienced contractor/subcontractor should make allowance for the possibility of more difficult and widespread conditions in parts of the site which haven't been tested and fill in the gaps to enable them to make an informed decision on the overall results.

Records should be maintained _ they are key to evidencing the difference in position between the assumptions regarding ground conditions made at tender stage and the conditions actually experienced.

Furthermore, the failure to strictly comply with notice provisions, both in terms of their timing and content, can result in loss of entitlement.

For more information please get in touch with your usual Brodies contact, or one of the individuals listed below.


Louise Shiels

Head of Dispute Resolution and Risk & Partner

Manus Quigg