Energy company’s £130m claim against contractor over hydroelectric scheme tunnel collapse dismissed

Lord Woolman (pictured) found against Scottish & Southern Energy in its claim against Hochtief Solutions AG over the failure of the Glendoe hydroelectric scheme, after ruling that the contractor was not liable for the collapse. However, the judge said he was minded to award SSE £1 million damages to reflect the period that the scheme was out of operation.

The court heard that the Glendoe electricity generation scheme, which was constructed between 2006 and 2008, was the biggest such scheme to be built in Scotland for many years.

It began operating in January 2009, but just seven months later a major tunnel collapsed and it ceased to generate electricity.

Rock material had fallen into the crown of the tunnel over several months, leading to an almost complete blockage and SSE lost substantial amounts of revenue while the scheme was out of commission.

It asked Hochtief to carry out the remedial works, but the two parties were unable to reach agreement about who should pay for the repairs.

In consequence, SSE instructed another engineering company to undertake the remedial works, but the project took much longer and cost far more than expected, meaning the scheme did not begin to generate electricity again until August 2012.

SSE sought to recover £130 million from Hochtief, being the loss it claimed to have sustained as a result of the tunnel collapse, relying on various provisions in the contract which it said established liability and imposed obligations on the contractor to undertake the remedial works.

The contractor disputed liability, arguing that it completed the works in accordance with the contract and that SSE assumed the risk of the collapse at takeover.

Lord Woolman said that the collapse had occurred in a part of the tunnel that lay in a geological area known as the Conagleann Fault Zone (CFZ).

The engineering geologists had known about the CFZ before construction began and had expected to find poor rock conditions there, but they found none and as a result they saw no reason to reinforce the tunnel perimeter in that section.

The tunnel collapsed because there was not enough support – poor rock conditions coincided with insufficient shotcrete and rockbolts.

SSE contended that the scheme did not conform with the accepted design, because Hochtief “misclassified” the rock and in consequence failed to install the requisite level of support to prevent the erosion of erodible rock during operation.

However, having heard concurrent evidence from a number of tunnelling experts in a “hot-tubbing” evidence session, the judge held that Hochtief used reasonable skill and care to ensure that it complied with the design and works information and that the collapse was not due to a defect that existed at takeover – accordingly, it was an “employer’s risk event”.

In a written opinion, Lord Woolman said: “I am satisfied that Hochtief did exercise reasonable skill and care. SSE’s case depends on the accumulation and interpretation of all the data that has been obtained since the collapse. Put short, it is founded on hindsight.”

However, Hochtief was found to be in breach of its obligation in terms of a clause in the parties’ contract to return to the site to carry out the remedial works.

The judge said: “From August to December 2009, Hochtief adopted an unvarying position. It was only prepared to carry out the remedial works in return for payment. It was not even prepared to share the costs on a 50:50 basis. I hold that by adopting this stance it breached its obligation under clause 82.1.”

Although Hochtief was not liable to SSE on the main grounds of action, Lord Woolman added that the parties had agreed £1 million as the ceiling figure for the lost income incurred by SSE, and that he was minded to award that sum.

The court also considered that the cost of the recovery project was “largely reasonable”.