Keating Chambers Spring 2014

Spring 2014

Running Heavy Litigation and Arbitration

In this issue...News...

Paul Darling QC

The Nuclear OptionDr Robert Gaitskell QC

Knocking at the Door of Radical BreachVéronique Buehrlen

Vincent Moran QC, Paul Buckingham & Alice SimsWind Farms: Legal and Technical ChallengesJustin Mort appointed as Queen’s Counsel

Declan Redmond joins Keating Chambersas CEO and Director of Clerking

KCConstructionUpdate

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Contents

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1 Anthony Lavers & Adam Constable QC

Welcome to the Spring 2014 Edition

Selected Reported Cases

More than just a construction set

Other Areas of Expertise

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KCConstructionUpdate

Anthony Lavers, Director of Research & Professional Development

Adam Constable QC

Paul Darling QC

Vincent Moran QC, Paul Buckingham & Alice Sims

Running Heavy Litigation and ArbitrationA barrister’s view

Selection of reported cases involving Keating Chambers

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Wind FarmsLegal and Technical Challenges

Selected recent and forthcoming presentations13 Seminars & Presentations

A guide to avoiding nuclear meltdown 18

Véronique Buehrlen QC

Knocking at the Door of Radical Breach Will a mutual indemnity hold harmless clause bite?8 Brief Encounter

Declan Redmond

Dr Robert Gaitskell QC10 The Nuclear Option

Spring 2014

Welcome to the Spring 2014 Edition ofKC Construction Update

In the first KC Construction Update of 2014, there is an unmistakeableflavour of the new. The year has started with the excellent news thatJustin Mort becomes the latest addition to Chambers’ cohort of Queen’s

Counsel; his elevation takes place in April.

Welcome, too, has been the arrival of Declan Redmond as CEO and Directorof Clerking, and there will be much interest in his views about future strategyand developing legal markets in the Brief Encounter feature.

All are likely to be heartened by the evidence adduced by Adam Constable QCon this page of the latest construction sector figures, which show levels ofgrowth not seen in years; it may be early days, but the view looking forwardappears much preferable to what has gone before.

The way ahead is also evident in the energy theme of the principal articles inthis Issue.

Dr Robert Gaitskell QC, Chairman of the Dispute Board for the ITER nuclear fusion project in France, brings his engineering acumen to bear on the future of the global energy industry and how its disputes are to beresolved.

Vincent Moran QC, Paul Buckingham and Alice Sims highlight the growth ofwind farms as a source of renewable energy and the technical issues leadingto disputes over their construction and operation.

Also addressing energy issues, Véronique Buehrlen QC considers theeffectiveness of ‘mutual indemnity hold harmless clauses’, used notably in riskallocation in upstream oil and gas projects.

The last issue of 2013 contained a short report of the presentation by Head ofChambers Paul Darling QC at the Middle Temple and, as promised, in thisIssue is an edited transcript of the paper ‘Running Heavy Litigation andArbitration – a barrister’s view’: while drawing on 30 years of experience, hetoo is looking forward at how the advocate’s role in litigation is developing.

A s the first shoots of spring are seen in the flower beds of theTemple’s gardens, we also seem to be seeing the shoots ofeconomic recovery take hold.

The growing number of cranes seen dotted around not just the capitalbut also the UK’s other major cities, stands in contrast to their notableabsence over the last few years.

This intuitive feel is matched by the economic data: the UK'sconstruction sector grew last month at its fastest pace for almost sixand half years.

The Markit/CIPS purchasing manager’s index (PMI) for the sector roseto 64.6 in January. This was up from 62.1 in December and well abovethe 50 level that separates growth from contraction.

This is the strongest reading since August 2007, as well as one of thehighest figures since the survey began in 1997. Volumes of new workhave increased for the ninth consecutive month and, whilst some of thishas been driven by residential housebuilding (expanding at its fastestrate since 2003), a sizeable part of the growth is attributable toincreased commercial building work and civil engineering activity.

As those of us who deal with building disputes well know, the questionis not whether disputes arise during construction projects, but whenthese disputes will arise and how they will be resolved.

All across Chambers, our experience is that clients are increasinglyinstructing Counsel to get involved in dispute avoidance at very earlystages of the project, often asking us to provide focussed advice on keyaspects of contractual interpretation, which can help shape a strategyfrom the outset, and long before litigation is contemplated.

We welcome the opportunity to help, not just after things may haveirretrievably set themselves on a path to formal dispute resolution, butwhilst the project is live and where fast and effective advice can makeall the difference.

We have a contribution to make to ensure that things go well, as well as being on hand to assist when problems arise. Let’s maintain the positive direction.

©Report design & layout property of Bar Marketing Limited. All rights reserved.

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In considering where we are in litigationand international arbitration, I want tostart with litigation and the courts.

Donald Keating, to whom I and the othermembers of Keating Chambers owe ourprofessional lives and raison d’ȇtre, writing27 years ago in 1986, described constructionlitigation in the early 1950s as follows.

Early days in the ORsA typical Official Referee (ORs) case of 35years ago would begin by young counseltelling the court whether the case concerneda schedule of defects under a lease or undera building contract.

He would usually be interrupted to be askedwhether there were surveyors on each side.Upon being told that there were, the ORwould say ‘Let’s hear the evidence’.

The surveyors would be sworn, and sat facingone another in court. The OR would then askone about an item and turn to the other forhis comments, invite a reply from the first

surveyor, make a note in his schedule andmove on to the next item until the schedulewas finished.

Counsel’s function was to take a note and, atthe end of the schedule, when the surveyorshad answered the OR’s questions, he wouldbe asked whether he wished to ask anyfurther questions regarding the very full andhelpful evidence.

For the sake of his client, Counsel would ask oneor two questions and then sit down – andremain seated.

The OR would then go through the schedule,giving his decision on each item in pounds,shillings and pence. Everyone kept a runningtotal including set-offs, costs were dealt with onthe basis of the amount paid in.

Reference to law was severely discouraged andonly rarely and briefly argued. Many presentmay reflect that what they have heard describedwas an early version of ‘hot-tubbing’ – perhaps

‘Turkish bathing’. Cases were decided speedily,cleanly and simply.

Growth of constructionlitigationDonald contrasted this with the late 1970s andearly 1980s, where the reality was entirelydifferent. Six ORs, assisted by Recorders, weresitting in construction cases involving very largesums. Leaders proliferated and points of lawarose often, frequently many in one case.

Reference could rarely be made to High Courtdecisions, since there were so few, so the ORswere on their own, deciding the law, often incases of great importance, which they did boldlyand in large quantities.

The late Judge John Newey, looking back to the70s and 80s, also reflected on the sametransformation.

There had been a time, he noted, when the ORscourt was very leisurely; the court did not sit

until 10.15am and summonses were taken firstand then trials. There were not manyconstruction cases for a time and ORs wereavailable to sit in the Queen’s Bench Division oras Commissioners of Assize.

But gradually the volume of cases expanded, andso did their scale. The mega-case arrived, withmultiple parties and hearings of inordinate length.

One case ended up being heard in the basementof the National Liberal Club because of thenumber of participants who had to beaccommodated, and there is a picture in the

‘Short History of Keating Chambers’ that includesPatrick Garland, Anthony May, John Dyson,Richard Fernyhough, John Marrin, Vivian Ramsey,Rosemary Jackson – and Rupert Jackson.

The role of counsel had changed very significantlyby this time and the Construction Bar washandling some of the heaviest cases, both in factand in law.

It is no accident that many of the biggest cases ofthe 1980s and 1990s were in construction:Peabody v Sir Lindsay Parkinson, D&F Estates vChurch of England, Murphy v Brentwood.

I was lucky enough to appear in Temloc v Errill,where the Court of Appeal was persuaded thatthe word ‘nil’ for liquidated damages meant thatthere were no damages for delay. I was alsofortunate in appearing in Holbeck Hall vScarborough about the hotel that fell off the cliffinto the North Sea.

But although this was a wonderful period for theConstruction Bar, when all these big cases wereargued, not everything was entirely rosy in theORs’ court.

When I appeared as Richard Fernyhough’sjunior in Balfour Beatty v ChestermountProperties in 1993, the case was taken to theCommercial Court because it was perceived thatassessment of a concurrent delay and theworkings of the delay mechanisms in the JCTcontracts would benefit from the scrutiny of aCommercial Court judge.

Transformation: the TCCThe transformation began with Mr JusticeDyson, as he then was, sitting half-time aspresiding judge like Mr Justice Forbes.

The then Mr Justice Jackson argued successfullythat the Technology and Construction Courtneeded a full-time High Court judge, and thetransformation has been completed, during mytime, from six circuit judges to a powerfulcombination of full-time and part-time HighCourt judges.

This has been a remarkable development.Although adjudication has affected the volumeand nature of work, the Technology andConstruction Court has gone from strength tostrength, especially in expanding its range, forexample, into EU procurement work.

The TCC is now located with its sibling courts,including the Chancery Division and theCommercial Courts, and there is much cross-over of skills and of subject matter.

The position now is not just that we have aworld-class court, which is the best specialistcourt of its kind, but we have, in the TCC, acourt that has no hard and fast boundaries.

It could no longer be said today, as Mr JusticeColman said in Balfour Beatty v Chestermount20 years ago, that it was appropriate for aconstruction case to be tried in the CommercialCourt if it “raised matters of contract law whichare of general importance in the widercommercial context”.

It has been very instructive to appear in casesin other courts too. Starting from doing casesaround this country (Temloc v Errill, for example,began in Nottingham), I have been able to learna good deal by going overseas.

This has included appearing in the ‘Pyrite’ case,James Elliott Construction v Irish Asphalt inIreland’s High Court and Blair v AWG Residentialin Northern Ireland, as well as many furtherafield.

Experience in the Irish High Court offered a newperspective, for example, on witness statementpractice, of which more anon. But influence is atwo-way process.

The TCC has itself been very influential inadvancing procedural changes in other courts,which are now taken for granted.

Lord Woolf’s reports acknowledged his debt tothe ORs generally and specifically in relation towritten witness statements.

The rule of the advocateTurning now to the trial process, I believe thatwe have to ask ourselves every day of ourprofessional careers: “What is the role of anadvocate orally or on paper?”.

In my opinion, the answer is simple; it’s abouthelping the court or other tribunal to make adecision in your client’s favour.

What the advocate has to do is to makecomprehensible the incomprehensible.

The key skill is in simplifying cases rather thancomplicating them.

Being an advocate involves working out howbest the case you have will play with thetribunal, rather than working out how youwould like to do it yourself, as if you werealone in the room.

It involves concentration, focussing anddistilling – not allowing the material to sortitself out or reading papers without workingout the overall purpose and plan.

It also involves understanding the pressures onthe judge or tribunal.

Sir Anthony May, when newly appointed to thebench, would point out that no matter howable or even distinguished a tribunal might be,it had a finite capacity to take on board,analyse and process information.

We should remember that, however difficultwe think the advocate’s job, judges andarbitrators have a difficult job too, quitedifferent though it may be.

If the advocate can think of ways of making thetribunal’s job easier, even the job after theclosing submissions as well, the chances ofgetting the right result are better.

Opening submissionsThere is never a place where it is moreimportant to help the tribunal than in theopening submissions.

The tribunal should know what your case isbefore the evidence is called. In the past, theplaintiff’s opening was often a somewhatneutral event, setting out both positions fairly.

Sir Christopher Clarke said at a Malaysianjudicial seminar recently that it was thensometimes almost impossible after theopening submissions to identify any disputebetween the parties.

Openings today are much more partisan andindicative of what the respective parties willsay. Some balance must be maintained,obviously; if the case is put too high inopening, the tribunal will focus on whetherthe evidence can support the case soassertively.

But it is crucial that the tribunal understandfrom the start the case being put. It must readthe opening submissions and understandthem.

One of my preferred options is for a short oralopening, with the rest of the day spent by thetribunal reading/re-reading it and at leastsome of the critical documents mentioned init and to be referred to.

So when the witnesses start to give evidence,the tribunal has also been directed to thereally key documents.

Running Heavy Litigation and Arbitration

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...the transformation has been completed, during my time,from a handful of part-time circuit judges to a powerfulcombination of full-time and part-time High Court judges.

Paul Darling QC

Running Heavy Litigation and ArbitrationA barrister’s view

...gradually the volume of cases expanded, and so didtheir scale. The mega-case arrived, with multiple partiesand hearings of inordinate length.

This is an edited version of the presentation given by PaulDarling QC at the Middle Temple Hall to mark his 30 yearsin practice at the Bar. He was joined on the platform by the Rt. Hon. Sir Rupert Jackson and Gary Born, Chair of theInternational Arbitration Practice Group of Wilmer Hale.

KCConstructionUpdate Spring 2014

So far as experts themselves are concerned, theyare, of course, governed by a strong set of rules,originally formulated by Sir Peter Cresswell inThe Ikarian Reefer.

Nevertheless, experts do not always behave asthe tribunal would wish. In Kingspan v Borealis,Mr Justice Christopher Clark, as he then was,observed about the expert evidence that:

“leaving aside the tank design expert and leavingaside the legal experts and leaving aside thefinance experts, runs to 1137 pages. That is morethan my copy of the Old Testament, the NewTestament and the Apocrypha”, complaining thathis court had been “swamped with a vastamount of material … The inordinate size of thematerial and the scattergun approach adopted isan enemy to understanding”.

This dovetails in with the capacity of the tribunalto absorb the material already referred to. It isvery important that the evidence be produced ina way that the tribunal can understand, either by

‘tutorials’ as to the subject matter, if unknown orcomplicated, or by a short presentation by theexpert. Expecting a tribunal, however skilled,simply to look at the expert’s report on their ownand then to go straight into hearing cross-examination is at best very difficult.

There are a large number of cases in which cross-examination has been the defining factor andmany where the expert cross-examination hasbeen absolutely determinative.

Different techniques and tactics can be used toexpose the inadequacy, or indeed the brilliance,of the expert evidence. One idea stands out fromAdrian Whitfield QC’s marvellous lecture on howto cross-examine, when he reminds us that veryoften the task is to avoid making a situation anyworse than it already is.

Single Joint Experts (SJE) and hot-tubbing arevery much in vogue. The Jackson Report says thatthe SJE is not a ‘one-size-fits-all’ technique; hot-tubbing is beginning to work very well. Myperception is that we are seeing cross-examination retained in hot-tubbing cases, butnevertheless the benefit of experts beingexamined at the same time is becoming apparent.

Cross-examination, in my view, remains the mostimportant and most fun thing that advocates do.

ArbitrationFinally, a few words about arbitration. Thereality is that in England, and soon inIreland if and when adjudication takes offthere, domestic arbitration in theconstruction industry is becoming of muchless importance, which in one sense is a sadthing, as the procedures and personnel hadbeen sorted out at the time that this startedto happen.

But international arbitration is a significantproportion of the work for many of thoseattending this event, and interestingquestions arise as to the interplay betweenthis and litigation work.

Obviously there are a number of similaritiesand differences, and some of the similaritiesare becoming more similar and some of thedifferences more different.

One area where the differences are growingis that of party autonomy and control. Oneis seeing party autonomy being given itshead in arbitration and a much moremanaging approach from the courts.Neither is a bad thing, but the difference isclearly increasing.

The appeal systems are becoming bizarrelymore similar. The prospect of appeal from aTechnology and Construction Court decisionis much less than it was; trying to persuadethe Court of Appeal that an extremelyexperienced, competent judge has made anerror on fact is not something to undertakelightly.

This is growing closer and closer to thefinality of arbitration.

What is also interesting is the largenumber of new procedures beingdeveloped in arbitration that are moreflexible and different from those in thecourts.

At the Malaysian seminar, one of thequestions to the panel was whethersome of the devices in arbitration,such as more flexibility in annexingdocuments to the statement ofcase, were a good idea and at least

Nowadays, of course, both sides get the chanceto open. Those who appeared before the ORs inthe 1980s will remember that the defendant’scounsel was given a 15-minute opportunity tosummarise its client’s position. Having to get allkey points across in such a short time is anexcellent discipline and the best of these wereworks of art.

Today, one of the requisite skills is attention toprocedural correctness, so that the opening is ofthe right length and correctly paginated.

The Queen’s Bench guide, for example, requires aconcise summary of submissions on each side,citation of the main authorities relied on, readinglist with time estimate, all set out within amaximum of 20 double-spaced A4 pages innumbered paragraphs.

The need to get the opening right, so that at theend of it the tribunal knows where your case isgoing, is even more acute in internationalarbitration than in court, because with shorter,time-limited hearings, and parties picking somepoints and leaving others, the tribunal may notunderstand what point a question of cross-examination is addressing.

Document management andbundlesWhen it comes to cross-examination, there ismuch to be said in favour of core bundles, thecompilation of which helps in finding your wayaround them.

One of the lessons to be learned from the Irishprocedure is the practice of preparing specificbundles or ‘books’, as we call them in Dublin, forcross-examination of particular witnesses,containing the documents especially relevant tothat person. Core documents are the key torunning an efficient case.

Lord Justice Sedley has summarised amusingly forus in his 11 Laws of Documents how thingsroutinely go wrong in paper management.

When sitting in the Technology and ConstructionCourt, my fellow panellist, Sir Rupert Jackson,would keep the documents exhibited to witnessstatements in the corner of the court as theywere likely to be better copies than those in thetrial bundle, so that when, under Sedley’sSeventh Law, the latter were illegible, truncatedor cropped, he had a ready alternative source ofreference.

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In the future, management of documentsthrough e-bundles, hyperlinks and documentdatabases will be normal practice, as it isalready becoming, but the skill of the advocatein this respect is the same – to be in control ofthose documents and their purpose.

Witness statementsThe opening and the documents beingcompletely controlled, the witness statement isthe next priority.

The starting point was the judge’s ‘inherentjurisdiction’, and they become formally part ofthe Rules of the Supreme Court in 1986 and1995, by which they came to stand as evidencein chief.

Lord Woolf recommended that witnessstatements should as far as possible be in thewitnesses’ own words, should not discuss legalpropositions, should not comment ondocuments, and concluded with a signedstatement by the witness that the evidence is atrue statement and in his own words.

This development has now been continued bythe Jackson Report and to CPR Rule 32.2, givingthe court power to identify and limit the issuesto which factual evidence might be directed, toidentify those witnesses to be called and thosewhose evidence may be read, and limiting thelength or format of witness statements.

The Jackson Report focusses on the difficulty ofwhether or not witness statements shouldstand purely as evidence in chief or whethermatters should be dealt with orally, since theoral evidence will be determinative, so that thewitness statement should not stand, or shouldonly partly stand, as evidence in chief.

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There is no single right answer to this and asyet no universal practice in the courts as toprohibition or encouragement, or somewherebetween the two.

My experience of the Irish High Court wasthat, although there were witness statements,the evidence was given orally. The upside ofthis is that the evidence heard is from thewitnesses themselves rather than what hasbeen thought up in the quiet of solicitors’offices or counsel’s chambers.

However, the downside of oral evidence isthat some time can be wasted.

Cross-examinationThere may be no right answer to this question,but a witness statement does providesomething for counsel to get hold of in cross-examination.

Some may regard cross-examination as lessimportant nowadays than it was, but in myview it remains a fundamentally importantpart of the civil justice system. Cross-examination can change cases, positively ornegatively. The first essential in cross-examination is to know what you are trying toachieve and that your system is planned, withthe techniques to be used.

In cross-examining, the key thing in my viewis to listen to the answer that you get. And it isvital not to give up; witnesses have beenknown to fall apart after initial failures whengood cross-examination perseveres.

Cross-examination, it has been said, does notmean examining crossly. The witness has to betaken to the documents, and inconsistentstatements probed.

It should be seen as a means of eliciting theevidence that the tribunal needs.

Unfairness in cross-examination is a very badidea, because if the tribunal perceives thatyou are not trying to persuade the tribunal ofthe merits and correctness of your case, theeffect is likely to be to damage your case.

The reality is that in England, and soon in Ireland if andwhen adjudication takes off there, domestic arbitrationin the construction industry is becoming of much lessimportance...

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In the future, management of documents through e-bundles, hyperlinks and document databases will benormal practice, as they are already becoming, but theskill of the advocate in this respect is the same – to be incontrol of those documents and their purpose.

one response suggested that the CPR gavepower to do just that.

Another distinguished judge, however,warned of the need to get agreement tothose sorts of procedures, because satelliteappeals about whether the procedure was orwas not permitted under the rules should bediscouraged.

The reality is that there is a tension aboutpure innovation. That is not surprising, giventhe way in which court rules have beenadapted and moulded and made so muchmore flexible over the last 30 years, andparticularly the last ten years, which has beenan astonishing process.

In thinking about what could happen inarbitration, I want to mention some drasticproposals for saving time and cost, mentionedby Prof. Dr. Joerg Risse, Baker & McKenzieDispute Resolution Partner in Frankfurt, somesurprising, some less so.

The first is to limit parties’ submissions to 100pages in all circumstances. Somewhat morerevolutionary is the second idea of allpleadings being done orally, and the tribunalnoting those that it thinks are important.

Following the terms of reference meeting, thetribunal would make recommendations.

Third, which is thought by some asrevolutionary, is the use of Calderbank offersin arbitration; in fact, this is fairly standard.

Fourth, there should be no written witnessstatements; interrogation would be by thearbitrators and by nobody else.

Fifth, there should be absolutely no documentproduction by either side in anycircumstances, the theory being that witnessstatements and disclosure cost too much.

Running Heavy Litigation and Arbitration Running Heavy Litigation and Arbitration

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Sixth, the tribunal should decide the materialissues and then the parties should addressthose in order to answer the questions posed.

Seventh, there should be comprehensive oralopening statements and then a discussionwith the tribunal on the merits; most of thetime in a hearing should be spent on openingsubmissions.

Eighth, which arbitrators will like, the partiesare to assist the tribunal in writing the finalaward.

Ninth, cost sanctions should be applied forinefficiency in the conduct of proceedings.

Tenth, which arbitrators will not like quite somuch, financial incentives or punishments forarbitral tribunals tendering the award quicklyor slowly; some might say that that could alsobe done with other forms of disputeresolution.

This is a very interesting analysis, which seeksto tear up the rules and start again. Itadvocates the use of some very moderntechniques, but goes back to where thispresentation started, to a greater use of oraladvocacy.

Panel sessionInvited to comment on the state of oraladvocacy, Sir Rupert Jackson suggested thatthe balance with written presentation is vitalto save court time, reduce costs and assist thetribunal.

He took as an example the misuse of skeletonarguments in the Court of Appeal. Instead ofbeing used as a brief summary of the pointsto be argued, they are often immensely longand advocates ignore them, instead dictatingpropositions of law that they want the courtto accept.

If asked by the court where they are in theskeleton, they often have no idea. Counselshould take the court to the first submissionon the first page, and then when they haveseen what it is, make supplementary points,reducing dictation/note-taking by the judgesand facilitating an effective dialogue.

The process of advocacy is not one of telling the tribunalsomething, but of explaining it and trying to simplify it and,as part of that, listening to what the decision-maker bothunderstands and doesn’t understand so well.

Gary Born restricted his comments toarbitration, although he thought his remarksmight apply to litigation as well. In oraladvocacy, the most important time spent bythe advocate is in listening to what the tribunalis saying.

The process of advocacy is not one of tellingthe tribunal something, but of explaining it andtrying to simplify it and, as part of that,listening to what the decision-maker bothunderstands and doesn’t understand so well.

Focussing on and addressing those issues iscritical.

This second comment was that advocacy is nolonger simply oral or not. Oral advocacy,especially today, may mean oral accompaniedby hyperlinks and PowerPoint and other audio-visual accompaniments, depending on thecomplexity of the case.

Just as it is essential to master the documentsin cross-examination, so it is essential topresent them, and whatever other evidencethere is, in a digestible way.

Finally, of course, the real question, when youare displaying all this technological prowess,and taking all this time to attend to thetribunal’s concerns, is how to make the clientpay for all that, so a real challenge is balancingall this with demands for efficiency.

The panel also addressed questions on theJackson reforms. Sir Rupert Jacksoncommented that the time to judge them willbe “when they have been in place for ‘a coupleof years’ and people have got used to them”.

Gary Born remarked that arbitration,notwithstanding promises of efficiency andspeed, was often oddly conservative and thattribunals were under pressure to allow partiesto be heard ad nauseam because of the fear ofhaving an award set aside or not recognised.

Instead of hot-tubbing replacing cross-examination and saving time, the tendency isto end up with both, which is still a good thing.One of the few effective mechanisms forcontaining cost and delay is by fixing dates anddividing the time equally.

The evening concluded with furtherquestions and discussion amongst guestsover dinner.

Paul Darling QCCall: 1983 | Silk: 1999 | Email: [email protected]

Running Heavy Litigation and Arbitration SCL Gulf Conference – 24th AprilWestin Hotel, Dubai

Building the Gulf – Legal Challenges and Solutions

For further information, please visit:www.scl-gulf.org/conference-2014

An outstanding line-up of speakers andpanellists, with unrivalled expertise inconstruction disputes in the region, will be looking at common legal problems onconstruction projects in the Gulf, andproposing solutions.

Brief Encounter

Declan Redmond: CEO & Director of Clerking | Email: [email protected]

Declan Redmond joined Keating Chambers asCEO/Director of Clerking in January 2014, bringingwith him over 30 years of experience.

Declan is a former Chair of the Institute of Barristers’ Clerks and joins us from adistinguished career at Wilberforce Chambers

Declan Redmond

Declan began his career as clerk at Wilberforce Chambers in 1982. In 1998, Declan took on the role of senior clerkand by 2002 he had successfully amalgamated the posts of senior clerk and chief executive following amanagement re-structure.

Declan’s appointment as CEO/Director of Clerking at Keating Chambers was acknowledged by Head of Chambers, PaulDarling QC by saying, “I am delighted that Declan is joining Chambers, he has a formidable reputation and considerableexperience in the clerking world”.

Declan’s role will see him oversee both the clerking and administration functions of Chambers. He will take on thetask of ensuring the effective running of Chambers and that clients receive the necessary quality of service, alongwith responsibility for the overall leadership and development of the staff and Barristers' practices.

His key responsibilities will include the development and implementation of Chambers' strategic business plan, businessdevelopment and managing client relationships.

What is your perception of Keating Chambers since your arrival in January?

I was always aware that the Keating “brand” is very strong both domestically and abroad. I knew that Keating areone of the leading construction sets in the UK. However, like others, I was not aware of the diversity of the workundertaken by Members of Chambers, across the areas of Construction, Energy, Engineering, InternationalArbitration, Shipbuilding, Procurement, Utilities and IT disputes.

I have found that the barristers are very approachable, committed and of an incredibly high standard. The staffknow the industry inside out and are always willing to go the extra mile for the clients. It is a very forward-thinking set of Chambers.

What are the key elements of your role?

My role is very varied. It covers the following main responsibilities:

I have overall responsibility for all the clerking, marketing and administration functions in Chambers. I amresponsible for developing with Members of Chambers the overarching Chambers strategy that will enhanceChambers’ brand in the market and its collective identity, and also developing a strategy for businessdevelopment and marketing (with Amy, the Marketing & Business Development Manager).

I also have 31 years of Clerking experience (12 years as CEO/Senior Clerk), so I will continue to be a point ofcontact for clients who would like to discuss the various aspects of the work undertaken by members of Keatingand make the necessary recommendations.

What are your priorities for the next 12 months?

My priorities are to: drive a focussed approach to business development on behalf of Chambers, continue todevelop Chambers’ reputation in the UK, develop client communication and client care mechanisms; add myknowledge and experience of running a set of Chambers to assist the staff and barristers in providing a top-classservice to our clients; continue to promote Chambers in foreign jurisdictions.

What impact are changes in the global legal market having on Chambers and your role?

Nobody foresaw over 31 years ago, that by becoming a Junior Barristers’ Clerk, one day I would be visiting anddeveloping Chambers business in many foreign jurisdictions.

There are now so many different jurisdictions that Chambers can market to: the Middle East, Far East, Africa, USA,Australia, Japan, Korea, Europe and others.

It is important to investigate these markets but it is of even more importance not to spread ourselves too thinly.Keating has a presence in Hong Kong and also in Singapore, so we are able to monitor the legal market at firsthand. Members of Chambers get involved in major disputes in most of the jurisdictions mentioned above and wewill continue to develop our international strategy.

Do you envisage a shift in Keating Chambers?

My view is that the members of Keating Chambers are exceptional at delivering expertise, in the core areas ofChambers work, i.e. Construction, Energy, Engineering, International Arbitration, Procurement, ProfessionalNegligence, Shipbuilding, IT and Utilities.

Arising out of those core areas members undertake work in the commercial property sector, they deal withregulatory matters, PFI/PPP contracts and so on. It is important to concentrate on what you do well and offeringthe client a first rate level of advocacy, advice and client care.


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SOURCES OF ENERGYThe energy industry is in a state of flux.Politicians want to interfere with the utilitiesmarket. Shale gas and oil are giving the US asignificant competitive advantage over otherareas.

Germany has lost confidence in nuclearfission power plants, while the UK is intent onlaunching a new fleet of such energy sources.Oil supplies from Libya and other traditionalproviders are uncertain.

Further, the eco-friendly renewable sourcesare proving problematic. In the UK, a recent

spell of extremely high winds meant that somuch power was generated by the existingwind turbines that the suppliers were paidsubstantial sums to stop feeding theirelectricity into the national grid, which couldnot cope with such levels.

The extreme winds were also responsible forat least one such turbine suffering severefailure.

Solar panels have been widely installed in theUK, with the high take-up encouraged bysignificant government subsidies.

However, national austerity measures arereducing such subsidies, and the growth ofelectricity generation from such sources willnow taper off.

It is in this context that there is now a freshinterest in an enhanced form of nuclear powergeneration, that from ‘fusion’ rather than fromthe conventional fission process.

Most exciting of all is the ground-breakingthermonuclear experimental project nowunderway in France, supported by a wide rangeof nations.

This is the International ThermonuclearExperimental Reactor Project (ITER). Thechosen dispute resolution procedure for thatvast project is the now well-established disputeboard (DB).

NUCLEAR FUSIONNuclear fusion is quite unlike nuclear fission.The fission process has, of course, far morepublic recognition, since that technology liesbehind the atomic bomb and conventionalnuclear power stations.

In the fission process, the nucleus of an atomsplits into smaller parts, usually producing freeneutrons and releasing a very large amount ofenergy.

In a conventional nuclear power station, anuclear reaction is produced deliberately. Thefuel rods are bombarded with neutrons and theresult is that further neutrons are emitted.

This sets up a self-sustaining chain reaction thatreleases energy at a controlled rate in a nuclearreactor (for a power plant), or at a very high,uncontrolled rate (in an atomic bomb).

The fission process is linked with nuclearwaste problems and with well-knownexamples of escaping radioactivity (e.g.Chernobyl).

The fusion process, by contrast, issignificantly different. At the moment, alimited amount is known about the process.Much of what is known is very encouraging.

Stars, including the sun, experience the fusionprocess at their cores. The ITER Project aimsto establish, if it can, that the fusion processmay be used to generate electricity on acommercial basis.

The process that is to be used involves twofuels that are relatively easily obtained.Deuterium may be extracted from seawater,and lithium is in the earth’s crust.

Used together in the fusion process theycreate tritium on a significant scale.

Ultimately, therefore, the supply of tritium ispotentially unlimited. Mass for mass, thelithium/deuterium fusion process envisagedfor the ITER Project is expected to releaseabout three times as much energy as uranium235 fission.

Of course, this will be millions of times moreunits of energy than any chemical reactionsuch as burning fossil fuels like oil, gas or coal.

The ecological credentials of fusion includethe fact that it emits no pollution orgreenhouse gases. Its primary by-product ishelium, an inert, non-toxic gas.

Unlike fission ‘melt-down’ chain reactions,there is no possibility of a fusion ‘run-away’reaction, since any alteration in theconditions of a fusion reaction results in theplasma cooling within seconds, so that thereaction ceases.

There is a low waste output.

The Nuclear Option

The ecological credentials of fusion include the factthat it emits no pollution or greenhouse gases. Itsprimary by-product is helium, an inert, non-toxic gas.

The broad objective of the ITER Project is to establishthat the reactor, using 50 megawatts of input power, isable to produce ten times the energy output...

As Chairman of the Dispute Board for the ITERnuclear fusion project in France, Dr Robert GaitskellQC, brings his engineering acumen to bear on thefuture of the global energy industry and how itsdisputes are to be resolved.

The Nuclear OptionA guide to avoiding dispute meltdown

Dr Robert Gaitskell QCTHE ITER PROJECTITER originally stood for the ‘InternationalThermonuclear Experimental Reactor’. However,nowadays it is generally taken to refer to theLatin word for ‘the way’. If the prototype proveseffective, the overall budget is now expected toapproach €16 billion.

The member states for the project are the EU,which contributes 45% of the cost, and sixindividual nations, each contributing 9%: India,Russia, China, South Korea, the United Statesand Japan.

The project was first seriously mooted in 1985at the Geneva Superpower Summit inNovember of that year.

Broadly, the ITER Project involves about tenyears for the construction of all facilities atCadarache in southern France, followed by 20years of operation.

If this essentially experimental project issuccessful, then a demonstration fusion powerplant (named DEMO) will follow, introducingfusion energy to the commercial market, byconverting the heat generated by the fusionprocess into electricity, in fairly conventionalways familiar to those with an understanding ofcurrent power plants.

The broad objective of the ITER Project is toestablish that the reactor, using 50 megawattsof input power, is able to produce ten times theenergy output, i.e. 500 megawatts.

Provided that can be achieved for a relativelyshort period (a matter of minutes), then theprinciple will have been established and theultimate success of the DEMO power plant isassured.

Another of the key objectives of the ITERProject is to verify that tritium, one of thenecessary ingredients for the process, can be

‘bred’ in the reactor, so that the supply of thatfuel becomes self-supporting.

The technological and scientific challengesinvolved in the ITER Project should not beunder-estimated.

Pierre-Gilles de Gennes, the French Nobelphysics laureate, once said about fusion:

“We say that we will put the sun into a box. Theidea is pretty. The problem is, we don’t knowhow to make the box.”

PlasmaTo be successful, the reactor must contain hightemperature particles, with their enormouskinetic energy, in a sufficiently small volume,and for a sufficiently long time, for fusion totake place, creating the plasma.

Ordinarily, protons in each nucleus of theisotope fuel will strongly repel each other, sincethey each have the same positive charge.

However, when the nuclei are broughtsufficiently close, with sufficient energy, theyare able to fuse.

In the ITER Tokamak machine, the nuclei arebrought close together using high temperaturesand magnetic fields.

The plasma in the ITER Tokamak is a hot,electrically charged gas. It is created, atextreme temperatures, by electrons separatingfrom nuclei.

About 80% of the energy produced in theplasma is carried away from the plasma by theneutrons which, having no electrical charge,are unaffected by the constraining magneticfields.

These neutrons then hit the surrounding wallsof the Tokamak, and are absorbed by theblankets on the walls and so transfer theirenergy to the walls as heat.

In the ITER Project, this heat is simplydispersed through cooling towers.

However, in the forthcoming DEMO fusionplant prototype, the heat generated will beused to produce steam and, through theintermediaries of turbines and alternators,generate electricity.

Magnetic FieldsThe plasma needs to be heated to 150 milliondegrees centigrade in the core of the machine.

Plasma at that temperature, and with itsconstitution, cannot be allowed to touch thewalls of the reactor, since the plasma wouldrapidly destroy any constraining vessel andwould also cool down, ending the process.

Therefore, the plasma is controlled by so-called‘magnetic confinement’. The plasma is shapedby magnetic fields into a ring, or ‘torus’, andthus it is kept away from the relatively coldvessel walls.

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Dr Robert Gaitsell QC | Call: 1978 | Silk: 1994 | email: [email protected]

These surrounding walls have ‘blanket modules’containing lithium. They are termed ‘breedingblankets’ because, as part of the fusion reaction,tritium can be generated.

The magnetic fields are created usingsuperconducting coils which surround thevessel, while an electrical current is also passedthrough the plasma.

On site at Cadarache, the Poloidal Field CoilsWinding Facility house has already beencompleted. It is here that the largest of themagnets will be wound.

The Tokamak ComplexAt the heart of the project is the ITER Tokamakmachine. This machine draws on theexperimental work that broadly stems from amajor breakthrough in 1968, when scientists inthe Soviet Union achieved temperature levelsand plasma confinement times significantlybeyond anything achieved hitherto.

The Soviet scientists termed their device, whichachieved doughnut-shaped magneticconfinement, a ‘tokamak’.

Since then about 200 tokamaks of various kinds,shapes and sizes have been created in researchfacilities all over the world.

One of the most significant tokamaks is theJoint European Torus (JET) at Culham in England,which has been operational since 1983.

JET is a project of the European Atomic EnergyCommunity (EURATOM). The JET tokamakachieved the world’s first controlled release offusion power in 1991.

The ITER tokamak will be twice the size of thelargest current machine. It will be housed in theTokamak Complex at Cadarache. That Complexwill include the tokamak machine itself, as wellas Diagnostic and Tritium Buildings.

Of particular significance in the construction ofthat Complex will be the Seismic Isolation Pit, a17m deep hollow, excavated to house theconcrete basemat and the Seismic pads that willprotect the buildings and equipment fromground motion in the event of a seismicincident.

Construction activity on site is about to peak,with 3,000 workers present. If all goes accordingto plan, fusion power should be feeding into theworld’s electricity grid systems by about 2040.

DISPUTE BOARDSIn common with the contracts forinfrastructure projects around the world, themany ITER contracts contain Dispute Boardprovisions as part of the dispute resolutionprocedures.

Dispute Boards (DBs) involve a procedurewhereby a panel of three engineers/ lawyers(sometimes just one) is appointed, often at theoutset of the project.

Ideally, the DB will visit site a few times a yearand deal with any incipient grievances. Thisoften avoids a complaint crystallising into adispute.

Where the project has an especially diverserange of technologies and constructionprocesses, there may be a large panel ofappropriately qualified specialists, who can beassembled in panels of three suitable for theparticular dispute.

DB BackgroundAfter successful US experience with DBs in the1960s and 70s, in 1995 the World Bank madethe procedure mandatory for all InternationalBank for Reconstruction and Development(IBRD) financed projects in excess of US$50million.

From 1997, the procedure was adopted by theAsian Development Bank and the EuropeanBank for Reconstruction and Development.

The commonly favoured model for DisputeBoards in the US was and is the Dispute ReviewBoard (DRB), under which ‘Recommendations’are issued in respect of the particular disputebeing dealt with. This is a relatively consensualapproach to dispute resolution.

Broadly, if neither party formally expressesdissatisfaction with the Recommendationwithin a stated period of time, the contractprovides that the parties are obliged to complywith the Recommendation.

If either or both parties do expressdissatisfaction within the limited time period,then the dispute may go to arbitration or courtlitigation. Although the parties may choosevoluntarily to comply with a Recommendationwhile awaiting the decision of the arbitrator orcourt, there is no compulsion to do so.

FIDIC DB ClausesThe International Federation of ConsultingEngineers (FIDIC), with World Bankencouragement, introduced the Dispute Boardprocedure into its engineering standard formsby way of the 1995 Orange Book form.

This was followed by its 1996 introduction intoClause 67 of the Fourth Edition of the FIDICRed Book for Building and Engineering Worksdesigned by the Employer.

FIDIC adopted the Dispute Adjudication Board(DAB) model, whereby effect must be givenforthwith to a Board decision.

If no ‘notice of dissatisfaction’ is issued within28 days of the Board’s decision, it becomesfinal and binding. If a notice is issued, then thematter may proceed to arbitration, althoughthe parties are obliged to comply with thedecision in the meantime.

ICC DB ProcedureIn late 2004, the International Chamber ofCommerce (ICC), Paris, took the process a stepforward by launching its Dispute Board Rules,which offered, as part of the menu ofprocedures available, a hybrid of the twomodels already referred to.

Thus, the ICC scheme offers the conventionalDRB and DAB processes, but adds the option ofa Combined Dispute Board (CDB), whereRecommendations are normally issued, butDecisions may be requested.

If all goes according to plan, fusion power should be feedinginto the world’s electricity grid systems by about 2040.

SeminarsSelected recent and forthcoming presentations

For further information on papers and seminars please contact the Marketing Team: [email protected]

Society of Construction LawLondon, 4th March 2014

Relaunch of the ICC Conditions

Professor John Uff QC

Society of Construction Law Annual ConferenceLeeds, 7th March 2014

Design and build claims

Thomas Lazur

Keating Chambers Energy Masterclass – LegalIssues in EnergyLondon, 10th March 2014

“Knock for knock” clauses; Limitation of liability, capping andcarve outs; and Termination for cause and convenience

David Thomas QC, Véronique Buehrlen QC & Lucy Garrett

SCL Gulf ConferenceDubai – 24th April 2014

Building the Gulf – Legal Challenges and Solutions

Richard Harding QC

For further information please visit: www.scl-gulf.org/events

SCL Seminar – ScotlandGlasgow – 15th May

Causation on construction claims and Mediation/ADR

Vincent Moran QC and Elizabeth Repper

For further information please contact:[email protected]

International Junior SCL Event Paris – 16th May

Expert evidence in international construction disputes:Common Law v Civil Law Perspectives

Dr Robert Gaitskell QC

For further information please visit:www.scl.org.uk/events

Selection of reported cases involving members of Keating ChambersJG Walker Groundworks Ltd v PrioryHomes (East) Ltd [2013] EWHC 2916(TCC), [2013] EWHC 3723 (TCC)The claimant contractor succeeded in obtainingsummary judgment of an adjudicator’s decisionin its favour.

The adjudicator had jurisdiction to determinethe issues he did. As the defendant’s challengehad been without merit, it was required toexplain why it should not pay the costs of theapplication on an indemnity basis.

Elizabeth Repper appeared for the claimant.

Mileform Ltd v Interserve Security Ltd[2013] EWHC 3386 (QB)For several years, Interserve, the defendantcompany, had engaged the claimant company,Mileform, (amongst others) to providewarehousing, packaging, distribution andstorage services.

Mileform alleged that a subsequent writtencontract between the parties lasting for a termof two years had included an orally agreedexclusivity clause, and that Interserve, inbreach of that clause, had removed businessfrom it before the expiry of the two-year term.

On the facts, it was established that Interservehad not approved the alleged exclusivity clauseat the time of the agreement, nor had therehad been any subsequent approval of it.

As a result, no such term was incorporated intothe contract, and judgment was given for thedefendant. In any event, reliance on such aterm would have been precluded by the entireagreement clause in the contract. Furthermore,such a term would have been too uncertain tobe contractually binding.

Richard Coplin appeared for the defendant.

Devon County Council v CelticBioenergy Ltd [2014] EWHC 309 (TCC)This was the latest in a long-running series ofdisputes concerning Celtic's claims for additionaltime and money arising out of its contract withDevon for the design and construction of an in-vessel composting facility for Devon.

Celtic had commenced eight previousadjudications (failing to pay sums found to bedue to Devon in one), an ongoing arbitrationand this, the ninth referral to adjudication.

This judgment dealt with the costs of Devon'sapplication for an interim injunction restrainingCeltic from proceeding with an adjudication andits Part 8 claim for declarations that theadjudicator lacked jurisdiction on the groundsthat there was no dispute and whether theadjudicator could order Devon to make paymentof any sum found to be due to Celtic to Knowlesto whom Celtic had assigned the proceeds ofany claim.

Upon Celtic belatedly giving an undertaking topay Devon the sum outstanding from an earlieradjudication upon receipt of an invoice, theapplication for an injunction was adjourned andcosts reserved.

In a later ex tempore judgment, Stuart-Smith Jdecided that Devon succeeded in obtaining adeclaration that the adjudicator could not directDevon to make payment to Knowles (but wasunsuccessful in relation to the 'no dispute' issue).

Liability for costs was decided and this judgmentdealt with the quantum of costs as a result ofthe orders made in relation to liability for costs.

The case was notable for the fact, remarkedupon by the judge that Celtic, being insolvent,was enabled to pursue the proceedings by virtueof a “strange deed of assignment”, which gave afirm of claims consultants the right to receive allsums due under the contract, while representingCeltic and charging for doing so and whileproviding an expert witness.

Stuart-Smith J observed that he had not beenasked to rule “on the legitimacy of thatarrangement”.

The principal issue concerned the costs of theinjunction and declaration hearings and whetherfurther issues remained to be determined (otherissues having been pleaded but by reason oftime constraints not dealt with at the hearing).

Celtic had claimed £62,181 as costs in anapplication by Devon for a declaration relating tothe adjudications, including £33,561 for theclaims consultants fees.

These were reduced by some two-thirds, withfurther reductions of solicitors and counsels fees,resulting in the sum of £62,181 claimed beingreduced to £31,430, producing a net liabilityfrom Devon of £13,000.

The court rejected the submission by Celtic “thatit would be an abuse of the process for issuesthat were not addressed or resolved by theCourt’s judgment on that occasion to be raised,if appropriate, at a later date”. Devon’s draftform of order was largely adopted by the court.

Jessica Stephens represented Devon CountyCouncil.

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Greenwich Millennium Village Ltd vEssex Services Group plc andOthers [2013] EWHC 3059 (TCC)The claimant building owner, GreenwichMillennium Village (“GMVL”), brought actionsagainst parties responsible for the originaldesign and construction of a block of flats inthe Millennium Village development.

Two separate but related failures in thebuilding’s cold water riser mains had resultedin water cascading over the building’sbalconies, and leading to £4.75 million worthof damage.

On the evidence, it was established that aprincipal cause of the leakage was defectiveworkmanship by Robson, a sub-sub-sub-contractor, which meant that mechanical andelectrical contractor Essex Services hadbreached its warranty to GMVL.

GMVL further succeeded in establishingliability against the system designers, and HSE,a third-party sub-contractor, succeeded inestablishing liability on the part of Robson inits operation of the system.

The case is of interest, not just because of theprestige of the project concerned, but for thediscussion and adjudication of the rulesrelating to causation.

Having established that there were twoindependent causes of the system failures, thejudge departed from the classic “but for”approach to causation of loss and held thatboth operated as effective causes of thedamage suffered. Essex Services’ allegations ofcontributory negligence against GMVL wererejected.

Piers Stansfield QC appeared for the claimant.Simon Hargreaves QC appeared for HSE.

Viridis UK Ltd v Mulalley and Co Ltd[2014] EWHC 268 (TCC)Viridis, the claimant, was the specialistwindow sub-contractor on a housingrefurbishment project in NE London, forwhich Mulalley was the main contractor.

Following termination by Mulalley, Viridisreferred a substantial final account claim toadjudication. Mulalley challenged theadjudicator’s jurisdiction on the ground thatthe dispute encompassed claims arising undersix separate contracts and resistedenforcement of his decision.

The court held that the orders from the maincontractor amounted to separate contractscomplete in themselves, containing in somerespects materially different terms, so that itwas simply not the case that they could beviewed as sub-orders under an overarchingframework of one contract.

In this instance, there was no agreed singlecontract that could give the adjudicatorjurisdiction to decide the multiple contractsargument as a substantive issue, and even ifthere had been, once the Court had foundthat there were in fact separate contracts theadjudicator’s decision would not have beenenforceable.

Gaynor Chambers appeared for thedefendant, Mulalley and Co. Ltd.


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Véronique Buehrlen QC

Knocking at the Door of Radical BreachKnocking at the Door of Radical Breach

The issue of whether the Courts will enforce ‘knock for knock’clauses that purport to absolve a party from performing the veryobligation he contracted to undertake is explored in this article.

Mutual indemnity hold harmless clauses,‘knock for knock’ clauses for short, area mainstay of the tools used by

participants in upstream oil & gas projects andventures to re-distribute and allocate risk.

These types of clauses are also commonlyreferred to as “mutual hold harmless” clauses,

“mutual indemnity and hold harmless”agreements or clauses and “cross-indemnities”.

The primary aim of these particulararrangements is to allocate responsibilitybetween the various parties in such a way thateach will be responsible for his own property,personnel and consequential loss.

The clauses operate both where the losses arecaused by a party’s negligence as well as wherethose losses are caused by his breach ofcontract.

However, a distinction needs to be made.Negligence is concerned with a party’s failure tomeet a certain standard of performance. Abreach of contract can go much further, toinclude both non-performance and evendeliberate non-performance of the veryobligations a party has agreed to undertake.

Where a clause requires A to indemnify B, thecontract breaker, for the consequences of thelatter’s breach of contract, there is animmediate tension between the contractualobligations B has undertaken to perform andthe consequences of his non-performance.

If the consequences of non-performance arenot to be visited upon the contract breaker, the

obligations he has agreed to perform are at riskof becoming no more than mere declarationsof intent.

Will the Courts enforce an indemnity clausethat absolves a party from performing the veryobligation(s) he contracted to undertake?

The answer depends on what, on trueconstruction of the relevant provision, wasintended by the parties.

The argument begins with the constructivetotal loss of a vessel in Robin Hood’s Bay inNorth Yorkshire some 100 years ago: Owners ofthe Cap Palos v Alder (1921) 8 Lloyds LR 309.

The defendant contracted to tow the plaintiff’sschooner, the Cap Palos (C.P.), on a roundvoyage.

As a result of the negligence of the defendant’stug masters, the vessels got into Robin Hood’sBay, where the tugs abandoned the C.P.

The C.P. could not get out and eventuallydrifted onto rocks. Meanwhile, the tug owner(being under a contractual obligation to sendassistance) cancelled an order for another tugto go to help the C.P. thinking (erroneously)that the Salvage Association had sent tugs toassist.

When sued for breach of contract andnegligence, the tug owner relied on a clause inthe towage contract that absolved him ofresponsibility for damage caused by (amongother matters) “default of the steam tugowner”, i.e. default in failing to send assistance.

The then Master of the Rolls held that, havinggiven up the towage, the tug owner could notavail himself of the words “default of the steamtug owner”, which on true construction of theclause only extended to cover defaults duringactual performance of the tug owner’scontractual obligations:

“I think the whole clause points to the exceptionsbeing confined to a time when the tug owner isdoing something or omitting to do something inthe actual performance of the contract, and donot apply during a period when, as in this case,he has ceased even for a time to do anything atall and has left the performance of his duties tosome one else. In other words, I think theexception extends to cover a default during theactual performance of the duties of the contract,and not to an unjustified handing over of thoseobligations to someone else for performance.”

That same theme found support in the muchmore recent case of A Turtle Offshore v SuperiorTrading Inc [2008] EWHC (Admiralty) 3034.

Here, Teare J recognised, albeit obiter, thatwhilst an indemnity clause might well apply toa breach of contract, it would be difficult toconstrue the provision as applying to a breachthat amounted to non-performance.

The facts, echoing those of the Cap Palos case,were these:

The claimant rig owners hired the defendanttug owners to tow a rig from South America toSingapore via Cape Town.

As a result of their negligence, the tug ownersran out of bunkers in the South Atlantic. Thetowage connection was released and the rigdrifted off. Another tug refuelled the originaltug and both tried to find the rig withoutsuccess.

When finally located, the rig was found to be atotal loss. The indemnity clause provided thatany loss, howsoever caused, to the rig would befor the sole account of the rig owner, whether

or not caused by a breach of contract,negligence or any fault of the tug owner.

The clause was held to apply to the tug owner’sbreach of contract in failing to ensure that thetug was seaworthy on departure – a breach asto the standard of performance of the tugowner’s obligations.

However, Teare J considered the situation wherethe tug owner committed a “radical breach” ofcontract.

Would the indemnity apply where the tugowner deliberately released the towageconnection in order to perform a moreprofitable contract?

Could an indemnity operate to deprive a party’sobligations of all contractual force? Teare Jthought not. Like Lord Sterndale in The CapPalos before him, Teare J saw a way round theproblem by construing the indemnity asapplying only so long as the tug owners wereperforming their contractual obligations albeitnot to the required standard.

The clause would not operate to protect the tugowner where he was not performing hisobligations:

“Had it been intended that the tug owners werenot responsible for loss …occurring after the tugowner had chosen not to perform the towagecontract by, for example, releasing the towageconnection in order to perform a more profitablecontract, then very clear words would berequired because that would be a very radicalbreach indeed.

Whilst the wide words of cl 18 are literallycapable of applying to such a radical breach I donot consider that cl 18, if it is to be construed inthe context of the TOWCON, is fairly susceptibleof only one meaning, namely that it applieshowever radical the breach.

The words, when read in the context of theTOWCON as a whole, are also susceptible ofapplying so long as the tug owners are actuallyperforming their obligations under the TOWCON,albeit not to the required standard. That ensuresthat the obligations of the tug owners are morethan a mere declaration of intent.”

A year later, in Internet BroadcastingCorporation Ltd (trading as Net TV) v Mar LLC(trading as MarHedge) [2009] EWHC 844 (Ch),Gabriel Moss QC (sitting as a deputy High CourtJudge) took the matter much further, setting outrules for true construction of exclusion clausesin the context of a deliberate or repudiatorybreach of contract.

Negligence is concerned with a party’s failure to meet acertain standard of performance. A breach of contract cango much further, to include both non-performance and evendeliberate non-performance of the very obligations a partyhas agreed to undertake.

Parties still have a long way to go if they want theiragreed contractual risk allocation provisions toprovide a comprehensive code for the allocation ofrisk between them.

Will a mutual indemnity hold harmless clause bite?

Véronique Buehrlen | Call: 1991 | Silk: 2010 | Email: [email protected]

The case was concerned with an exclusion clausein a joint venture contract for internetbroadcasting.

The Deputy Judge concluded that the clause atissue did not extend to a deliberate repudiationof the contract by the defendant.

He made clear his view that there was apresumption against an exemption clause beingconstrued to cover a deliberate or repudiatorybreach of contract, that very clear languagewould be needed to do so and that such clausesought not to be construed as exempting a partyfrom the consequences of a repudiatory breach ifthat would defeat the main object of the contract.

MarHedge therefore suggested clear limits toclauses restricting or exempting a party fromliability for breach of contract.

That approach went too far. Two years later, inAstrazeneca v Albemarle [2011] EWHC 1574(Comm), Flaux J was having none of it. He(rightly) rejected the approach in MarHedge as

“heterodox and regressive” and not reflecting thecurrent state of the law.

There is no presumption that an exemptionclause will not apply to a repudiatory breach.Whether or not Albemarle’s liability fell to belimited by the relevant clause (here a cap ondamages for non-delivery of goods) was no morethan a question of construction, albeit strict, as tothe scope of the provision.

Similarly, there is no rule preventing anexemption clause from excluding or restrictingliability in the case of a deliberate breach, as wasmade clear by the House of Lords in SuisseAtlantique [1967] 1 AC 361.

True construction of the relevant contractualprovision is, of course, precisely the approachLord Sterndale took in The Cap Palos and Teare Jin A Turtle Offshore.

However, contract interpretation is an art and nota science. It is an exercise to be undertaken byreference to the contract as a whole and its

“factual matrix”; an exercise that is likely toproduce different answers from different judges.

Like many of the limitation, exclusion andallocation of liability clauses relied upon toprotect a contract breaker from theconsequences of his breach, mutualindemnity hold harmless clauses have thepotential for draconian consequences.

They are not limited to the exclusion ofcertain types of liability or loss, but operateto render the innocent party responsible forthe damage (often all the damage) inflictedon him by the contract breaker’s breach orother default.

This sort of departure from the usualallocation of loss rules developed by theCourts over centuries continues to ensurethat such provisions are construed strictly.

Parties still have a long way to go if theywant their agreed contractual risk allocationprovisions to provide a comprehensive codefor the allocation of risk between them, aswas recently illustrated by the Court ofAppeal’s endorsement of Flaux J’s judgmentin Seadrill Management Services v OAOGazprom [2010] EWCA Civ 691.

Given the sums at stake in the upstream oil &gas industry, coupled with the fact that thescope of knock for knock clauses remains amatter of construction by reference to theindividual contract and circumstances ofeach case, it is inevitable that arguments asto whether or not a particular clause will bitein the event of a “radical” or deliberatebreach of contract will continue to play out.

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The first offshore wind farm in the UKwas completed in North Hoyle in 2002.Since that time, and despite significant

controversy in the popular press, the UK’swind energy industry has continued to growrapidly. 2.7 gigawatts of new wind power wasbrought online during 2013 and the offshorewind industry continued to be the drivingforce behind this growth, with London Array,the world’s largest offshore wind farm with175 turbines generating 630 megawatts ofelectricity, becoming operational.

By the beginning of January 2014, wind powergeneration in the UK consisted of 5,276 windturbines and over 10 gigawatts of offshorecapacity. As a result of this recent surge ingrowth, the UK is now ranked as the world’ssixth largest producer of wind power and, by2020, RenewableUK estimates that the UK isexpected to have more than 28,000 gigawattsof wind capacity.

The expansion of the wind energy sector, andparticularly the growth of offshore wind farms, has led to many disputes associated with thecomplex and novel technical challenges posedby the installation of wind turbines and theirsupport structures and unrelentingenvironmental conditions in which they areinstalled.

For example, the dispute between the owners ofthe Greater Gabbard site (GGOWL) and Fluor,who constructed the wind farm, has been thesubject of widespread reporting in the press andthe specialist wind farm media in particular.

Disputes about wind farms, most of which havebeen dealt with in confidential arbitrations, havecentred on defects and delays to completion. Thisarticle considers some of the main issues that have arisen in offshore wind farm disputes inrecent years.

Offshore Wind Farm ContractsOffshore wind farms are usually owned anddeveloped by a joint venture or project company.Various contracts need to be put in place todevelop the wind farm, including a constructioncontract, an operation and maintenance contractand financing and security arrangements.

Engineering, procurement and construction (EPC)contracts are the most commonly used form ofconstruction agreement in this sector. Under anEPC contract, the contractor usually accepts thefull risk for design, the procurement of theturbines and their associated parts, and theirinstallation offshore. In terms of defects, thissingle point of contact is of considerableadvantage to the owner.

However, there are currently no standard formEPC contracts for the offshore wind industry andso many companies have used bespoke or heavilyamended EPC forms developed in other sectors.

This can give rise to a lack of clarity about theextent and exact nature of the contractor’sresponsibilities.

One area of difficulty has been the extent towhich contracts include a ‘fitness for purpose’warranty, particularly in relation to theoperational life of the wind farm. Plainly, such anobligation is onerous for the contractor butjustified by the owner’s reliance on thecontractor’s expertise and experience.

This was a key issue in the TCC case of MTHøjgaard v E.ON Climate & Renewables beforeMr Justice Edwards-Stuart (in which John MarrinQC and Paul Buckingham appeared for E.ON).The decision is expected in Spring 2014 and willbe relevant to the industry, since similar termshave been incorporated into many suchcontracts.

ScourDisputes concerning surveying data and, inparticular, seabed conditions have repeatedlyfeatured in disputes, as the impact of scour hasoften been underestimated. Scour is the lateralerosion of the seabed caused by the ebb andflow of the tide and sea currents.

It is often difficult to predict and can have asignificant impact on the monopile design lengthand cost. It can also affect the suitability and useof jack-up vessels for the installation works. Thishas led to disagreements about theforeseeability of scour and responsibility for thecost of “rock dumping” on the seabed to guardagainst scour.

Vessel Suitability The offshore wind market is currently facinglarge bottlenecks in terms of suitableinstallation vessels. This is mainly because of alack of specialised vessels.

Considerable problems have arisen becausevessels mainly used in the oil and gas industryhave not been suitable for the installation ofmonopiles, despite extensive adaptations.

This was an issue that arose in the case of MTHøjgaard A/S v E.ON Climate & Renewables UKRobin Rigg East Limited & Ors [2013] EWHC 967(TCC) (in which Adrian Williamson QC and PaulBuckingham appeared for E.ON).

In this case, Mr Justice Stuart-Smith had to dealwith the problem of valuing omitted works afterthe anticipated installation vessel proved to beinadequate.

In summary, the contract specified that MTH(the design and build contractor) was to providea jack-up barge called the LISA, use of whichwas to be integral to the installation of themonopiles and transition pieces.

However, both parties agreed that initialoperations had shown that the LISA wasinadequate because she could not install thefoundations at an acceptable rate.

As a result, the Engineer issued three variationorders for the substitution of a different vessel,and E.ON engaged the Resolution, enablingMTH to install the remaining 62 foundations.

The parties agreed that there should be anadjustment to the contract price to reflect thefacts that the LISA had been omitted from thecontract and that additions had to be made forthe new work content attributable to MTHworking with the Resolution.

MTH argued that what should be omitted wasthe component of the original contract price,which included the provision of the LISA.

E.ON argued that the rates in a separatevariation pricing schedule should apply, usingthe period of time that it was predicted that theLISA would have taken to carry out the works.

E.ON maintained that, as the LISA had provedinadequate, MTH would have taken a very longtime to install the foundations and therefore thevalue of the variation should be referable to theactual change in cost. The difference betweenthe parties’ valuation methods led to a verysignificant difference in the value of thevariations.

The Judge rejected E.ON’s approach. Heconsidered that it ignored the fact that the sumsthat MTH would be entitled to be paid forexecuting part of the works would be the same,however long it took to execute them. That wasso whether MTH had overpriced or underpricedthe works.

Furthermore, the contractual mechanism fordealing with delay was the application ofliquidated damages. If the LISA had completedthe works and the variation orders had not beenissued, E.ON could have argued that MTH had acontractual responsibility for that delay, entitlingE.ON to liquidated damages.

However, there would have been no adjustmentto the contract price. As a result, the Judgefound that there was no reason why the issuingof the variation order should have the result thatthe additional delay, which would have beenincurred had work with the LISA continued,should be reflected in an adjustment to thecontract price when the delay had, in fact, beenavoided.

This case is currently being appealed to theCourt of Appeal and will no doubt be of greatinterest to those working in the wind energysector.

Until clarification of the issue is provided by theCourt of Appeal, those negotiating wind farmagreements would be well advised to payparticular attention to the contractualprovisions concerning the valuation ofomissions and, if omissions are to be priced inthe same way as additions, the contract shouldclearly and expressly make provision for this(rather than simply setting out a pricingstructure for “adjustments to the contract” asdid the MTH/E.ON contract).

Grouted ConnectionsGrouted connections have been used in theoffshore oil and gas industry for many years.The first offshore wind farm using groutedconnections was built in 2000 in Utgrunden inSweden.

Basically, the monopile is driven into theseabed (thereby transferring operational andenvironmental loads into the ground).

Grout is then used to fill the void in theconnection between the monopile and thetower (or the monopile and the transitionpiece). A grouted connection has the advantageover other types of connections in that anyverticality issues with the monopile can becorrected relatively easily.

Even though grouted connections were well-known in the oil and gas industry, the loadcharacteristics for grouted connections inoffshore wind farms were challenging becauseof the combination of the wind and wave loads,coupled with the height and slenderness ofwind turbine support structures which,together, caused large bending moments.

In 2004, Det Norske Veritas (“DNV”) publishedits “Offshore Standard – Design of OffshoreWind Turbine Structures”. These rulescontained design equations andrecommendations for grouted connections onwind farms and were the widely relied upondesign standard “J101”. Between 2004 and2009, the majority of offshore wind farmsrelied on grouted connections based on thedesign principles in J101.

Vincent Moran QC, Paul Buckingham & Alice Sims

Wind Farms: Legal and Technical Challenges

Despite significant controversy in the popular press, the UK’s wind energy industry hascontinued to grow rapidly. This article considers some of the main issues that have arisen inoffshore wind farm disputes in recent years.


Scour, the lateral erosion of the seabed, is often difficult topredict and can have a significant impact on the monopiledesign length and cost. It can also affect the suitability anduse of jack-up vessels for the installation works.

20 21

EngineeringMembers of Keating Chambers have that experience and expertise. Chambers boasts no fewer than sixbarristers with engineering qualifications, covering the civil engineering, electrical engineering andchemical engineering disciplines. Their experience ranges from consultancy as an electrical engineer onNorth Sea oil rigs to civil work in Hong Kong to electronics work with the BBC’s Planning and InstallationDepartment and to oil and gas process work with BHP. With an ICE Gold Medallist, a former IEE Vice-President and a member of the Hong Kong Institution of Engineers, no other chambers can match KeatingChambers’ engineering pedigree.

Keating Chambers also provides dispute resolution services to the engineering, energy, shipbuilding,procurement and technology sectors worldwide.

EnergyThe exploration, development, recovery and distribution of energy, whether carbon-based, nuclear or alternative,is central to the modern world. At Keating Chambers, you will find specialists with a genuine understanding of thedemanding technical issues which disputes within each of the major energy sectors involve.

ProcurementWhile members of Keating Chambers regularly act in high-profile proceedings concerning procurement law,their involvement with procurement is not limited to representation of litigants in the courts. Its membersroutinely advise at early stages of projects when it is often possible to identify crucial mistakes in thetender process. Members of Keating Chambers' advice is especially sought by project sponsors, lendersand contracting authorities and their consultants, all of whom wish to ensure compliance with theregulatory regime.

TechnologyKeating Chambers has specialists with substantial track records in dealing with IT contracts and disputes. With several of our members possessing science or engineering backgrounds, Chambers is able to handle animpressively wide variety of IT matters.

Shipbuilding and Marine EngineeringMembers’ experience extends not only to vessels destined for the oil and gas industries, such as FPSOsand jack-ups, but also to ferries, and to cable laying, naval and general cargo vessels. They haveexperience of disputes not only in the Commercial Court and TCC, but also under the major arbitralregimes such as LMAA and LCIA.

Barristers

Ian Pennicott QC | His Honour Peter Bowsher QC | Professor Michael Furmston | Michael Stimpson | Chin Leng Lim

Door Tenants/Practising Associate Members

Paul Darling QC | Professor John Uff CBE QC | Richard Fernyhough QC | Dr Christopher Thomas QC | John Marrin QC |Stephen Furst QCTim Elliott QC | Dr Robert Gaitskell QC | Philip Boulding QC | Marcus Taverner QC | Finola O’Farrell QC | Adrian Williamson QCDavid Thomas QC | Rosemary Jackson QC | Alexander Nissen QC | Nerys Jefford QC | Sarah Hannaford QC | Simon Hargreaves QC Richard Harding QC | Veronique Buehrlen QC | Vincent Moran QC | Adam Constable QC | Simon Hughes QC | Marc Rowlands QCPiers Stansfield QC | Fionnuala McCredie QC | Justin Mort QC | Alan Steynor | Louise Randall | Robert Evans | Jane Lemon | Jonathan LeeAbdul Jinadu | Paul Buckingham | Krista Lee | Richard Coplin | Gaynor Chambers | Samuel Townend | Gideon Scott Holland | Jonathan SelbyJessica Stephens | Lucy Garrett | Elizabeth Repper | Calum Lamont | Alice Sims | William Webb | James Thompson | Thomas LazurPeter Brogden | Ben Sareen | Sarah Williams | Paul Bury | David Sheard | David Gollancz | Tom Owen | Simon Taylor | Matthew Finn

www.keatingchambers.com www.keatingchambers.com KCConstructionUpdate Spring 2014KCConstructionUpdate Spring 2014

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However, in September 2009, it was observedthat the grouted connections at the Egmond aanZee wind farm (in the Dutch North Sea), whichhad utilised the guidance from J101, were

“slipping” as the grout inside the connections wasdisintegrating.

In September of that year, DNV issued a warningletter to the industry because the standard hadoverestimated the axial load bearing capacity ofgrouted connections in monopile substructures.

A joint industry project was initiated and revisedrules and design equations for groutedconnections were issued in 2011 and,subsequently, 2013.

It is believed that there are approximately 14offshore wind farms built in UK waters utilisingthe principles in J101.

Liability for the cost of remedying those groutedconnections will depend upon the precisecontractual arrangements between the employerand the design/build contractor and, in particular,may turn on whether there is a “fitness forpurpose” obligation in the contract

Nevertheless, there is also a question as towhether reliance on the J101 code, with itsinherent design limitations, was reasonable atthe time, without the need for further testing.

This is a key issue for the industry, and one thatwill be answered in the eagerly awaitedjudgment of Mr. Justice Edwards-Stuart in theMT Højgaard v E.ON dispute.


DecommissioningThere is an estimated £10.4bn to be spenttaking both oil and gas and wind farm assets outof UK waters between now and 2022. Most ofthis figure is to be spent on removing oil and gasinstallations but the decommissioning of windfarms is likely to gather pace between 2022 and2040, with an estimated £30bn being spentremoving such assets in this period.

The exact time frame for offshore wind farmdecommissioning is difficult to predict with anyaccuracy, as the achievable operating life ofoffshore wind farms is still unknown, but it isgenerally believed that Denmark will lead theway in this process, as its first wind farms, builtfrom 1992 onwards, are now thought to benearing the ends of their service lives, which istypically 20 years.

The challenges facing offshore wind farmdecommissioning should not be underestimated.It is an enormously complex and noveltechnological undertaking involving, for instance,the installation of extensive temporary worksfollowed by high risk dismantling and asubsequent environmentally difficult disposalprocess.

Given these difficulties, the Government hasnow made the preparation of adecommissioning programme a condition ofplanning consent and has also introducedlegislation so that operators now have toprovide surety for future decommissioning costs(given that cost modelling by the Crown Estatehas predicted that decommissioning costs willbe around 60% of original installation costs).

However, such preparation and financialsecurity was absent from early wind farmdevelopments in the UK and so this may giverise to future disputes about liability fordecommissioning costs between licensees,operators, installation owners, partners tojoint operating agreements and parentcompanies.

Aside from disputes about liability for costs, itis readily predictable that other disputes willarise in relation to the design ofdecommissioning technology, the suitabilityand capability of vessels, and themanagement of such programmes. It is alsolikely that there will be an increasing numberof disputes concerning responsibility formeeting the extensive environmentallegalisation that governs the removal ofoffshore wind farms such as the Conventionon the Protection of the Marine Environmentof the North East Atlantic (the OSPARConvention).

ConclusionsThe offshore wind energy industry is relativelyyoung and has expanded rapidly. This has ledto many technical challenges, the products ofwhich are only now being fully understoodand experienced. There are certainly furtherchallenges ahead, particularly when the fullimpact of decommissioning becomes known.

The exact time frame for offshore wind farm decommissioningis difficult to predict with any accuracy as the achievableoperating life of offshore wind farms is still unknown…

Vincent Moran QC | Call: 1991 | Silk: 2011 | Email: [email protected]

Paul Buckingham | Call: 1995 | Email: [email protected]

Alice Sims | Call: 2004 | Email: [email protected]

Members of Keating Chambers haveplayed a leading role in many of thesematters with more than 20 members,across all levels of seniority, beinginvolved in some fifteen offshore windfarm cases and a number of onshoredisputes.

Strength in depthKeating Chambers has 57 barristers, 27 Queen’s Counsel, 31 Juniors and five door tenants/practising associate members.

This means that assistance is available for construction disputes of every type and size, froma domestic party wall case to a multi-million-pound claim in an oil and gas industry project.

Standing“Keating Chambers continues to enjoy a strong reputation in the construction industry forproviding all manner of construction law advice and handling a vast array of disputes.Clients appreciate that its barristers are ‘down to earth, well organised, approachable andknowledgeable’. Sources also note the set's impressive strength in depth.”Chambers & Partners 2014 Construction

“A construction set with a terrific track record on energy sector disputes. It is often instructedon large international projects demanding consummate expertise and the assurance of thework ethic and commercial perspective Keating Chambers is known for. Its name isfrequently seen in energy matters before the TCC.”Chambers & Partners 2014 Energy & Natural Resources

“A set with first-rate capabilities on the international stage when it comes to constructionarbitrations. It offers a profoundly broad spectrum of services to clients and its members areregularly instructed on difficult and significant cases.”Chambers & Partners 2014 International Arbitration: Construction/Engineering

“A construction heavyweight that houses barristers who regularly handle the most complexand high-value claims. Keating stands out in this area, with sources noting that ‘on theconstruction side, it is the go-to set for TCC work’.”Chambers & Partners 2014 Professional Negligence: Technology & Construction

“This set continues to enjoy a sterling reputation for its work in procurement, and handlescontentious matters and provides strategic advice to contracting authorities and bidders.The number of members specialising in procurement matters has grown in the last few years,and the set is increasing its presence in the area.” Chambers & Partners 2014 Public Procurement

In September 2009, Keating Chambers won the title Construction Set of the Year at theannual Bar Awards for the fourth consecutive year, by “excelling in both international anddomestic construction markets”, in the words of the judges’ citation.

In 2011, 2012 and again in 2013 Keating Chambers was again named ‘Construction Set of the Year’ at the Chambers and Partners Awards.

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