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Articles from the Silver Shemmings Ash Team on contractual matters, recent case law changes and items of interest in the construction and property world

Unforseen Ground Conditions Meets Suits! by Conor Ahern

April 11, 2019 | Silver Shemmings

Introduction:
As a Quantity Surveyor, the aim at project commencement was always the same. Find the balance between having a keeping the client satisfied and achieving a successful commercial outcome. Few events could jeopardise these outcomes like unforeseen ground conditions, especially given that poor ground is discovered early in a project. It causes early headaches for Contractors and Clients alike and becomes an immediate point of contention. How these discussions are handled often sets the tone for the rest of the project. It’s a difficult position for a Contractor’s QS to be in, and the phase ‘experienced contractor’ and ‘foreseeability’ became terms to be treated with trepidation and fear.

So you can imagine my mind set when starting a career as a Solicitor. What I had envisaged were scenes from the TV programme Suits, running in and out of the Courts and jumping from corporate to employment to criminal law (as you do), finding leverage on everybody I came into contact with including the cleaner. All I had to work out was whether I was going to be Harvey Spectre or Mike Ross!!!

The reality I can assure you has been somewhat different. The first file I picked up as a trainee related to unforeseen ground conditions, and it continues to be a popular point of contention on construction projects. There is no new law contained nor is the case law quoted exhaustive within this blog, but rather it is intended to serve as a useful reminder to parties as to how they should seek to protect themselves should the ground not be as anticipated.

The General Position:
The general position in common law which relates to unforeseen ground conditions is clear, where the contractor has promised – in unqualified terms – to construct a building or other structure for a lump sum, then that is what the contractor must do. It is no excuse for the Contractor to argue that the ground conditions were worse than expected. This was established in early cases such as Thorn v The Mayor and Commonality of London [1876] LR 1 HL 120 (E) where the Contractor was building a bridge at Blackfriars and the method of working as described by the Employer was unsuitable, the Contractor was not granted relief. A particularly harsh position for the Contractor was established early (especially here on the facts) and this largely remains the case.

How Can A Contractor Protect His Position?
What a Contractor must do is clearly qualify his position at the outset in the contract documents. If the risk is unclear, the risk will usually remain with the contractor. Where contracts attempt to shift the responsibility from the Contractor to the Employer, this can be successful when the Contractor encounters conditions which could not reasonably have been anticipated but this can lead to a dispute. A measure which Contractors can do is to set out their baseline ground conditions in the Contract and compare this with actual conditions encountered during the Contract.

Can Standard Forms Assist?
JCT is silent when it comes to clarifying ground conditions risk, and the general position is implied. There are standard forms which attempt to alter the general position. In ICE 7, a Contractor who has encountered physical conditions or artificial obstructions which could not reasonably have been foreseen by an experienced contractor operates in this way. NEC 3 and the FIDIC Red Book have sought a similar clarification. This raises questions as to foreseeability, what level of knowledge the contractor had and then what an experienced contractor ought to have interpreted from the documents he was given. This becomes a battleground and the subject of much expert evidence and submissions to the Court.

Relevant Case Law:

Contractors Granted Relief: There have been instances where Contractors have successfully argued ground conditions were unforeseen but these are very limited and fact specific.

In Bacal Construction (Midlands) Limited v Northampton Development Corporation [1975] 8 BLR 88 (CA) the design and build contractor was given tender information which stated the ground in question consisted of a mixture of a certain sand and clay. The contractor was instructed to prepare the foundation design on this assumption. When the actual ground conditions turned out to be different, the contractor successfully argued that this amounted to an implied warranty. This case has led to employers not providing such warranties or directions to contractors.

In the case of Barton v Stiff [2006] VSC 307 a builder used general purpose bricks to build foundations. It turned out there was a high presence of salty groundwater in the ground which penetrated the brickwork. It was held that the presence of salty groundwater was highly unusual and could not reasonably have been anticipated by the builder.

Contractor Denied Relief: There are significantly more cases where contractors have made unsuccessful applications. The trend and general position developed out of Bottoms v York Corporation [1892] HBC  and Thorn v Mayor of London as previously mentioned. There are further cases which have been consistent with this approach.

The courts will not look favourably on parties who come unstuck simply because they have failed to address an issue in their contract. As Russell LJ said in Worksop Tarmacadam v Hannaby [1995] 66 Con Lr 105 (CA), p108 in which a contractor tried to claim additional cost as a result of unforeseen hard rock:

“Had the plaintiffs wished to make such a provision in the event of unforeseen conditions being encountered, it would have been the easiest thing in the world for them so to have provided in specific terms. They did not do so.”

The judge’s view could not have been clearer.

Where the parties do not proactively insert an express clause but rather enter into a “standard” form of contract, what approach do these contracts take to the allocation of risk for unforeseen site conditions?

In Obrascon Huarte Lain SA v Her Majesty’s Attorney General for Gibraltar [2015] EWCA Civ 712 sub-clause 4.12 of the FIDIC Red Book was considered and showed the risk of the contractor adopting and relying on (without question) information and analysis provided by others. Here there was contamination present on site from previous military activities, the contractor knew of these activities and thus it was reasonably foreseeable that contamination would be present. The contractor’s claim failed.

In Van Oord UK Ltd & Anor v Allseas UK Ltd 2015 EWHC 3074 (TCC) in a bespoke contract but similar in wording to FIDIC, it was held that an “experienced contractor” must consider and make allowance for the possibility that more adverse conditions may exist in parts of the site that have not been tested. The contractor’s claim failed.

Conclusion:
The general position is that the contractor takes the ground conditions’ risk. The English courts are clear that contractors should do their due diligence before they sign a contract and the courts will not interfere where one party has entered into a bad bargain.

At the time of contract, the ground risk needs to be considered in detail., the contractor should be clear and list the documents on which they are expressly relying and even go so far as to state that if the actual ground conditions are not as presented, then this will give rise to the contractor becoming entitled to additional time and money. From the author’s experience this has been the best way for a contractor to recover these entitlements in relation to ground changes.

The term “experienced contractor” is a high threshold for a contractor to overcome. The courts and experts have spent much time debating this point of law, and in the main the outcome has been consistent with the general position that the contractor takes the risk of unforeseen ground conditions.

I don’t remember an episode of Suits relating to unforeseen ground conditions. But you never know, it just might make the cut in Season 9……

Author Conor Ahern is a Chartered Quantity Surveyor with over twelve years’ experience in the Construction Industry acting for Contractors, Consultants and Developers both in Ireland and the UK,  working on contentious and non-contentious matters. Conor has also successfully completed the Arbitration Award Writing examination and is a Fellow of the Chartered Institute of Arbitrators and a Member of the Royal Institute of Chartered Surveyors. His experience includes: Adjudication, Insurance, Collateral Warranties, Bonds, Pre-Contract Advice, Contract Drafting, Final Account, Contract Formation, Parent Company Guarantee’s, Financial Security, Quantum and Delay Analysis


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