Obrascon Huarte Lain SA v HM Attorney General for Gibraltar, Court of Appeal - Civil Division, July 09, 2015, [2015] EWCA Civ 712

Resolution Date:July 09, 2015
Issuing Organization:Civil Division
Actores:Obrascon Huarte Lain SA v HM Attorney General for Gibraltar

Case No: A1/2014/1684

Neutral Citation Number: [2015] EWCA Civ 712





Royal Courts of Justice

Strand, London, WC2A 2LL

Date: 09/07/2015

Before :





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Between :

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Mr Stuart Catchpole QC and Mr Andrew Fenn (instructed by Pinsent Masons Llp) for the Claimant/Appellant

Mr Nicholas Dennys QC and Ms Fiona Parkin QC (instructed by Corbett & Co International Construction Lawyers and by Triay Stagnetto Neish) for the Defendant/Respondent

Hearing dates : Tuesday 19th May 2015, Wednesday 20th May 2015 and Thursday 21st May 2015

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JudgmentLord Justice Jackson:

  1. This judgment is in nine parts namely:

    Part 1. Introduction

  2. This is an appeal by a Spanish civil engineering contractor, which was engaged upon constructing a road around Gibraltar Airport, against a decision of Mr Justice Akenhead (``the judge'') that the employer effectively terminated the contract under clause 15 of the FIDIC Yellow Book Conditions. The contractor also challenges the judge's decisions that the amount of ground contamination was reasonably foreseeable by an experienced contractor and that certain documents issued by the Engineer did not constitute variation instructions.

  3. The principal issues in this appeal are (i) whether the judge's decision about the actual and foreseeable amounts of contamination are open to challenge; (ii) whether the employer was entitled to terminate in circumstances where the contractor had embarked upon an unnecessary re-design, obtained approval in principle for the re-design, but did no work while waiting for others to certify the re-design.

  4. The contractor was Obrascon Huarte Lain SA (``OHL''). OHL is claimant in the action and appellant in this court. The employer was the Government of Gibraltar (``GoG''). GoG, represented by Her Majesty's Attorney General for Gibraltar, is defendant in the action and respondent in this court.

  5. Other organisations which will feature in the narrative of events are:

    Agua Y Estructura SA (``Ayesa''), a Spanish firm of structural Engineers; Donaldson Associates Ltd (``Donaldson''), a British firm of structural Engineers;

    Environmental Gain Ltd (``Engain''), a British firm of environmental engineers;

    Gifford Ltd (``Gifford''), a British firm of civil engineers;

    Gibraltar Land Reclamation Ltd (``GLRC''), a company registered in Gibraltar;

    Laboratorios Himalaya SL (``Himalaya''), an Andalusian company specialising in occupational hygiene and environmental analysis;

    Sergeyco, a Spanish firm which carries out geotechnical investigations.

  6. In this Judgment I shall use the following abbreviations:

    ``AIP'' means approval in principle.

    ``CEMP'' means construction environmental management plan.

    ``FIDIC'' means Fédération Internationale Des Ingénieurs-Conseils.

    ``EI'' means Engineer's instruction.

    ``MOD'' means Ministry of Defence.

    ``PAH'' means polycyclic aromatic hydrocarbon.

    ``PEE'' means pavement exposed excavation, an operation explained in paragraph 44 below.

    ``STVs'' means Soil Target Values.

    ``TAA'' means Technical Approval Authority.

  7. Anyone seeking a full narrative history of events should read the comprehensive judgment of the judge, which can be found on the Bailii website as Obrascon Huarte Lain SA v Her Majesty's Attorney General for Gibraltar [2014] EWHC 1028 (TCC). That judgment spans 170 pages. My own précis of the story is focused upon matters which are relevant to the appeal.

  8. After these introductory remarks I must now turn to the facts.

    Part 2. The facts

    (i) Background history and the contract

  9. In 1713 Spain ceded Gibraltar to the United Kingdom under the Treaty of Utrecht. The UK and the local population have occupied Gibraltar continuously since that date. The territory was attacked and besieged by Spain during the eighteenth century. It became an important naval base for Britain during the Napoleonic Wars, the Crimean War and the two World Wars. The long military history of the territory has an impact on the issues in the present litigation.

  10. A relatively narrow isthmus at the northern end of the territory connects Gibraltar to the mainland of Spain. Gibraltar Airport sits on the flat part of the isthmus. A main road called Winston Churchill Avenue leads southwards from the Spanish border to the centre of Gibraltar. That road runs over the airport runway. This means that the road has to be closed whenever aircraft are landing or taking off. That in turn causes congestion.

  11. In 2005 GoG decided to resolve this problem by constructing a new dual carriageway road which would skirt round the side of the airport and run down the east coast of the isthmus. The plan was for the road to pass through a twin bore tunnel under the eastern end of the runway.

  12. In 2006 GoG retained Gifford as consulting engineers to advise on the project. GoG retained GLRC as project manager for the design and construction of the new road and tunnel.

  13. In April 2007 Gifford produced a contaminated land desk study (``the desk study''), which reviewed the history of the site and the degree of contamination likely to be present. A plan annexed to the desk study shows the site divided into six areas forming a semi-circle around the north, east and south sides of the airport. Area 1 is a strip along the south of the airport. Area 2 is at the south east corner. Areas 3 and 4 run up the east side of the airport to the north east corner. Areas 5 and 6 form a strip along the north side of the airport. The desk study outlines the history of each area. Previous uses of the site include a racecourse, a rifle range at the east end of the racecourse and much military activity. The butts of the nineteenth century rifle range were in Areas 3 and 4. The Royal Navy established an emergency landing base on the site in 1939. After the Second Word War the airfield was put to civilian use. The desk study identifies a wide range of likely sources of contamination. The desk study also identifies the need to protect the groundwater passing beneath the site. This is a source of drinking water for the population of Gibraltar.

  14. GoG engaged Sergeyco to carry out a ground investigation at the site. Sergeyco sunk a number of boreholes and trial pits. They extracted samples which they tested for contamination. Sergeyco set out the results of their investigations in a report dated July 2007.

  15. In order to proceed with the project, GoG was required to carry out an environmental impact assessment and obtain planning permission. Like any other developer GoG had to comply with the Town Planning (Environmental Impact Assessment) Regulations 2000 and the EC EIA Directive 85/337/EEC (as amended by Directive 97/11/EC). For this purpose GoG engaged Engain to prepare an Environmental Statement.

  16. Engain produced its Environmental Statement in November 2007. The Environmental Statement is essentially an interpretation of, and commentary on, the information which had been gathered concerning the site. The Environmental Statement estimates that the project will require excavation of approximately 200,000m3 of spoil. This will come principally from two sources, namely stripping the surface of the site and excavation for the tunnel together with ramps leading down to the tunnel at each end. The Environmental Statement estimates that approximately 10,000m3 of the spoil excavated will be contaminated. The Environmental Statement uses the STVs set out in an appendix as the criteria for contamination.

  17. The Environmental Statement describes the 200,000m3 of spoil as ``not significant''. This means that, if all the material is transported to landfill sites in Spain, it will not have a significant environmental impact. That is because 200,000m3 is a relatively small quantity compared to the total volume of material disposed of in Spain every year.

  18. Paragraphs 3.5 and 3.6 of chapter 10 of the Environmental Statement say:

    ``3.5 Wherever possible construction waste will be re-used on site or on other development projects in Gibraltar. Where construction waste has to be disposed of it may be taken to registered landfill in Spain. This will be based on the most commercially and environmentally advantageous option.

    3.6 The predicted limited quantity of contaminated material may be left in-situ and capped with a boundary layer (based on good practice guidance) to prevent contamination spread. However, the contaminated waste may also be disposed of at approved facilities in Spain. These options are assessed in the Land Contaminated Chapter (Volume 2: Technical Reports).''

    The phrase ``may be left in-situ'' in paragraph 3.6 is shorthand for removing and subsequently re-using on-site.

  19. In November 2007 GoG invited a number of contractors to tender for the design and construction of the Gibraltar Airport and Frontier Access Road, including the tunnel under the eastern end of the runway. The invitation to tender included copies of the desk study, the Sergeyco report and the Environmental Statement. Tender Bulletin number 1 informed tenderers that the contractor would be responsible for disposing of spoil and that no off-site storage area had been identified. In other words it was expected that all or most waste materials from the site would be removed to landfill sites in Spain.

  20. OHL emerged as the successful tenderer. On 21st November 2008 GoG and OHL entered into a written agreement, under which OHL would design and construct the Gibraltar Airport and Frontier Access Road for the sum of £30,231,068.36. The time for completion was two years after the commencement date, 1st December 2008. The contract documents included an Illustrative Design prepared by Gifford. The contractor was not obliged to adopt the Illustrative Design.

  21. Subject to some...

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