Valuation of Variations

M T Hojgaard –v- EON Climate and Renewables [2013] EWHC 967 (TCC), Lawtel

Facts

M T Hojgaard, as main contractor, undertook to design manufacture and install the foundations for 6 wind turbine generators and 2 substations for an off-shore wind farm, and was to provide a jack-up barge to install the foundations.  The barge proved to be inadequate and the Engineer issued variation orders for the substitution of a different vessel.  EON hired the vessel and supplied it free issue to M T Hojgaard.  The parties agreed that there should be an adjustment of the Contract Price to reflect the replacement of the barge.

M T Hojgaard said that the omission should be the component of the original Contract Price which reflected the cost of providing the original bar.  EON argued that there should be a much larger deduction, to reflect the fact that M T Hojgaard would have taken a very long time to install all the foundations using the original barge.  The contract provided for rates to be applied or if inapplicable for rates to be established which the parties also disagreed over.

HELD:

1. The basic scheme of the contract was that the constituent elements of the works made discreet contributions to the contract price, even though the precise amount of each contribution had not been itemised, and M T Hojgaard had not provided its detailed price as a break-down of the contract process.
2. In accordance with that basic principle the cost to M T Hojgaard of supplying the original barge was the cost that should be deducted from the Contract Price.  The avoidance of delay had nothing to do with the valuation of the Contract Price.  Delay was covered by a separate part of the Contract which offered contractual remedies by way of delay damages, and did not use the method of adjusting the Contract Price.

Comment

EON essentially argued that because it had saved the Contractor a lot of money by supplying the barge, it should be paid a lot more than simply what it would have paid the Contractor, under the original Contract Price, in respect of the supply of the original barge.  Possibly the new barge was more expensive than the old one and therefore the element of the Contract Price clawed back in respect of the original barge hire might not covered EON’s costs, but EON should have dealt with this in negotiation.

What is noteworthy about this case is that it involved 2 major law firms, 2 QC’s and supporting Counsel on what seems like a straightforward point of law.  This is a case where the use of an expert witness (say an independent QC) to give everyone a binding opinion could have saved a great deal of both time and money.

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