Perth-based energy giant Scottish & Southern Energy (SSE), which was seeking £130 million in damages from engineering contractor, Hochtief Solutions AG, following the collapse of a tunnel at a Fort Augustus hydro-electric scheme in 2009, has won its appeal.
By a majority of two-to-one, the Inner House of the Court of Session allowed a reclaiming motion by Scottish & Southern Energy (SSE) Generation against a Commercial Court ruling that Hochtief Solutions AG was not liable for the collapse at the Glendoe scheme in 2009, although the commercial judge at that stage had awarded £1 million to SSE to reflect the period during which the electricity generation scheme was out of operation.
The Glendoe scheme was constructed between 2006 and 2008. It began operating in January 2009, but just seven months later it ceased to generate electricity. SSE discovered that rock material had fallen into the tunnel leading to a complete blockage. Having lost substantial amounts of revenue while the scheme was out of commission, SSE asked Hochtief to carry out the remedial works, but a dispute arose about whether the collapse was as a result of a defect in the design or in the construction.
In its defence, Hochtief contended that it had completed the works in accordance with the contract, and that SSE had assumed the risk of the collapse at takeover.
The collapse occurred in a part of the tunnel that lay in a geological area known as the Conagleann Fault Zone (CFZ); a tear in the ground caused by an ancient earthquake and is an area in which rock conditions for tunnelling could be anticipated to be difficult. The engineering geologists had been aware of this before construction began and had expected to find poor rock conditions there, but found none – so they saw no reason to reinforce the tunnel perimeter in that section. However, the collapse was found to be caused by insufficient support.
Having heard the evidence of a number of experts in tunnelling construction, the commercial judge held that Hochtief was not liable, having been satisfied that the company exercised “reasonable skill and care”. SSE appealed, and Lord Menzies and Lord Glennie disagreed on the question of whether the collapse of the tunnel was due to a defect which existed at takeover, with Lord Glennie concluding that the defence of having used reasonable skill and care to ensure that the design complied with the works information was not available to the contractor.
Lord Glennie wrote: “I consider that the collapse of the tunnel was indeed due to a defect existing at takeover. Further, I consider that that defect was not due to the contractor’s design of the works but rather to the implementation of that design.”