This case concerns a contractor’s design liability under a tunnel project. The Contractor undertook to design and build a tunnel as part of a hydro-electric project. The design life of the tunnel was 75 years. However, the tunnel collapsed within a few months after the tunnel was passed to the Employer due to “erosion of erodible rock”. The defect correction period was 2 years. After the collapse, the Employer instructed the Contractor to carry out repair work but the Contractor refused to do so. The Employer engaged another contractor to carry out the repair work and the cost was GBP137 million. The question is who should bear the costs of repair. Also, there was a dispute as to whether the Employer was entitled to claim against the Contractor when there was a joint insurance to cover the same loss.
The case went through Adjudications, the Court of First Instance and the Court of Appeal. At first, the Contractor won the Adjudications and the proceedings at the Court of First Instance. The commercial judge was of the view that the Contractor had carried out the work in accordance with the contract (NEC) and its design was carried out with reasonable skill and care (Option M). The design work involved a holistic joint process of the Contractor and the Employer whereby the parties agreed the condition of the rock and the necessary measures required to ensure adequate support for the tunnel. There was no evidence to show that the Contractor had failed to carry out its design with reasonable skill and care.
However, the Contractor lost the case at the Court of Appeal although the decision was not unanimous. It was decided that: