A decision by Lord Woolman in the Court of Session in Edinburgh yesterday concluded that SSE Generation (SSE) could legally launch a claim for £130M against contractor Hochtief over the Glendoe tunnel collapse.
The case centres on the collapse of the headrace tunnel at the Glendoe hydroelectric scheme at Fort Augustus in Scotland soon after the facility became operational in 2009.
Initially the parties entered into discussions about rectifying the problem but they were unable to agree the scope and nature of the remedial works. More fundamentally, they disagreed about who bore the risk of the collapse. In the absence of agreement, SSE employed another contractor to carry out the remedial works. They took place between 2010 and 2012. During that period the scheme did not generate electricity.
The present litigation arises out of those events. In the principal action, SSE seeks to recover a sum of over £130M, being the loss it claims to have sustained as a result of the tunnel collapse. In the alternative, it claims £102M based on a different ground of action. Hochtief counterclaims for a sum of almost £10M. That represents the profit it would have made if it had carried out the remedial works itself, together with the costs of investigating the tunnel collapse.
Hochtief also attempted to bar SSE from taking its claim to court on the basis that its insurance displaced its liability under the NEC contract.
Accordingly to the court record, Lord Woolman concluded that SSE should not be barred from bringing any part of the present action and court proceedings are now set to follow.
Both SSE and Hochitef have declined to comment on the judgement.
Glendoe facts
SSE awarded Hochtief a £125.9M contract to design and build a new hydro-electric scheme at Glendoe, Fort Augustus in December 2005.
Glendoe is within a geological area known as the Conagleann Fault, or Great Glen Fault.
Hochtief engaged Jacobs to provide it with engineering assistance during the construction of the scheme.
The scheme, which comprises an underground powerhouse, a dam, an upper reservoir, two tunnels and various ancillary works. The completion date was 28 February 2009. The civil works had a projected design life of 75 years, during which they were to provide a reliable service without the requirement for a major refurbishment or significant capital expenditure. No employees were to be based at Glendoe. Instead, the scheme was to be monitored by SSE staff in Perth.
The headrace tunnel is 5m in diameter and conveys water from the reservoir to a turbine 6.3km below in the powerhouse. The tailrace tunnel conveys water for discharge into Loch Ness. Hochtief used a tunnel boring machine to excavate the rock. It chose a design to support the tunnel that relied on the inherent strength of the surrounding rock. It varied over the length of the tunnel and was categorised by reference to different rock excavation classes.
Hochtief completed the headrace tunnel in early 2008, well ahead of schedule. There followed a period of inspection and testing. Inspections in February and again in October 2008 disclosed some evidence of deterioration in surrounding areas of rock. In late October, Hochtief “watered up” the headrace tunnel for wet commissioning, which appeared to be successful and the scheme began operating. In February 2009, SSE issued a completion certificate. It was backdated to 18 December 2008, which became the defects date.
In May 2009 the SSE’s staff noticed that the scheme was generating anomalous data readings. SSE asked Hochtief to investigate and report. Apart from one short test run, SSE did not operate the turbine between 2 and 29 June. It wished to preserve the reservoir level in advance of the official opening of the scheme by The Queen on 29 June.
On the day of the opening ceremony, the scheme generated a “fail to start” message. Some days later, on 10 July, the GOC staff noticed further odd data readings. They wondered whether they were caused by instrumentation error. SSE again asked Hochtief to investigate and report.
In the week commencing 13 July, an SSE hydro-engineer visited the scheme. He noticed a discharge of black water into Loch Ness. He thought that it might be due to peat from the upper reservoir, which would have been harmless to the turbine. The discolouration was still present in early August.
On 5 August the plant did not run normally. It did not reach its set load of 100MW. Preliminary investigations indicated that that the headrace tunnel was blocked. SSE shut down the scheme. The following day it issued a Defects Notice stating that there appeared to be inadequate support in part of the tunnel.
The parties investigated the cause of the problem over the course of the following week. They arranged to de-water the headrace tunnel to allow access. On inspection, they found a significant blockage. It appeared to have been caused by the collapse of the crown of the tunnel.
Believing the collapse to be a contractor’s risk event, on 31 August SSE instructed Hochtief to remedy matters within a reasonable period. Hochtief replied the next day to the effect that the collapse was an employer’s risk event. Accordingly, it was entitled to carry out the remedial works and to be paid in full for doing so.
The parties continued to negotiate until the end of 2009, but their discussions did not reach agreement. SSE indicated that it would allow Hochtief to carry out the remedial works, subject to three conditions: SSE would have control over the design of the works; Hochtief undertook to commit to the contract programme set out by SSE; and Hochtief bore half of the costs.
Hochtief did not accept those conditions. On 24 March 2010, SSE engaged Bam Nuttall to undertake the remedial works, which lasted over two years. During that period, the scheme did not generate electricity. SSE notified Hochtief of further problems in the headrace tunnel. The scheme re-opened on 21 August 2012.
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