(1)         Did NCRs 006, 008 and 009 apply to the TPs as well as to the MPs in each shipment?

(2)         Has Fluor waived the costs of testing and repairing any MP (and of any consequent delay) on which some testing or repairs had been carried out prior to the issue of the relevant NCR?

(3)         If issue (2) is decided in favour of Fluor, can it recover damages assessed by reference to the proportion that the number of MPs upon which work had started prior to the issue of the relevant NCR bears to the total number of MPs in the shipment?

(4)         If issue (2) is decided against Fluor, how are its damages to be assessed?  In particular:

(a)          in relation to NCRs 006 and 009, is it limited to recovering only those costs it incurred (or agreed to pay) prior to the issue of the NCR?  If so, what are those costs?

(b)         In relation to NCR 008, can Fluor recover damages to reflect the loss of opportunity to install MPs and TPs in Shipment No 2 during July 2009 that it would have had if the contract had been properly performed? 

(c)          If so, how is that loss of opportunity to be assessed?

(5)         When was NCR 006 issued or from when did it take effect?

(6)         What was the cause of the delays to the installation of the MPs and TPs?  If caused by welding defects, to what extent have those delays been waived?

(7)         What is the correct approach to the assessment of site wide costs incurred as a result of breaches of contract that have not been waived under the terms of the waiver letter?

(8)         What is the correct approach to the recovery of ancillary costs such as head office overheads?

(9)         Is Fluor entitled to recover the cost of additional supervision of NDT and repairs in Shanghai consequent upon the discovery of the weld defects and, if so, in what amount?

(10)     Is Fluor entitled to recover the costs of obtaining an ECA and, if so, to what amount is it entitled?  This head of claim raises an issue about the effect of the claim to privilege which Fluor made to the Tribunal in relation to its experts’ reports (being work the cost of some of which it now claims in respect of the ECA).

(11)     Can Fluor recover any sum in respect of the Settlement Agreement that it reached with GGOWL in May 2013 and, if so, what sum?

(12)     In relation to Shipment No 2, specific issues may arise as to the extent that Fluor might have been able to load out some of the MPs and TPs in Shipment No 2 before 29 July 2009 (when NCR 008 was issued) if there had been no welding defects and, in particular, in relation to matters such as:

(a)          The extent of the out of roundness of the MPs in Shipment No 2 (and possibly in Shipment No 1 also) and its consequences; and

(b)         the time required to carry out the base scope work to the MPs; and

(c)          the effect of the faults in the transformers; and

(d)         the effects of weather and availability of the required vessels.

(13)     The correct approach to issues of delay and, in particular, whether or not what was described as Mr Morgan’s “but for” approach to the assessment of the delays caused by the weld defects is correct.

(14)     Fluor’s entitlement to recover damages in respect of its individual claims.

(15)     Fluor’s entitlement to recover any part of the liquidated damages that it paid to GGOWL.

“501. In my judgment, the waiver letter must be read in the light of the parties’ mutual understanding of the position, namely that the claims that were to be pursued against GGOWL were for the additional costs incurred in respect of the extra contractual work instructed by GGOWL. Those are the costs that form the subject matter of the assignment by ZPMC to Fluor and which were the subject of Fluor’s release and waiver at numbered paragraph 3 of the waiver letter.

502.  The corollary of this is that costs which did not arise out of or were not incurred in respect of enhanced testing and consequent remediation of the MPs and TPs required by GGOWL are not costs the claim for which was being assigned by ZPMC to Fluor.  Similarly, such costs would not be included in the waiver given by Fluor.”

                                                                       (Original emphasis)

·               so far as Shipment No 1 is concerned, Fluor has waived its right to recover the costs and expenses (including the costs of any delay) incurred in carrying out or as a result of the testing and remedial work required by NCR 006 after 3/4 June 2009;

·               so far as Shipment No 2 is concerned, Fluor has waived its right to recover such costs and expenses in respect of the work required by NCR 008 after 29 July 2009;

·               so far as Shipment No 3 is concerned, Fluor has waived its right to recover such costs and expenses in respect of the work required by NCR 009 after 7 August 2009.

“Accordingly, I find that it was the common understanding of the parties in June 2010 that the enhanced testing and remediation of each shipment required by the NCR for that shipment was to be regarded as a result of the relevant NCR. Whether or not Fluor privately took the view that it would have carried out the enhanced testing and remediation in any event is, for the purposes of the construction of the waiver letter, irrelevant.”

“The potential problem with seeing this as a “two-stage” process is that there is an increased risk of falling into error by approaching the two “stages” inconsistently and thereby allowing Fluor to recover in respect of costs and delays which have been settled. There is a significant risk that, when one considers the temporal consequences of the unsettled periods, the temporal consequences of the NCRs are not fully taken into account.”

         ZPMC added the following footnote to this submission:

“For example, the impact of matters like out of roundness or transformers cannot be determined in isolation at a “properly performed” stage: the consequences of the NCRs influenced how these issues were experienced and addressed.”

Period (A)   Up to 3/4 June (prior to NCR 006)

Period (B)   4/5 June to 29 June (post NCR 006 but before S2 arrives)

Period (C)   29 June to 29 July (post arrival S2 but before NCR 008)

Period (D)   30-31 July (post NCR 8, both S1 and S2 at Vlissingen)

Period (E)   1–7 August (S1, S2 and S3 at Vlissingen but before NCR 009)

Period (F)   8 August 2009 onwards (post NCR 009)

“issue Hold Harmless agreement to SHL in case MPs with the diameter beyond 5107 mm are delivered offshore.”

It then said:

“SHL will confirm whether or not the MPs can be installed safely based on final DC Reports.”

I assume that “DC” refers to “dimension check”.  This does not suggest that SHL was not prepared to drive a pile that exceeded the stated tolerance under any circumstances, but that it would only do so subject to a dimension check and then at Fluor’s risk.  If it were otherwise, the indemnity would extend only to the wasted costs of loading out the MP and taking it to the site - costs which I assume Fluor would have to bear in any event if it loaded out an MP that exceeded the tolerance agreed with SHL.

“. . . [SHL] shall in no event be obliged to install Oversized Mono Piles or to use its equipment beyond levels acceptable to [SHL]. If [SHL] initially accepts to install Oversized Mono Piles, this will not waive [SHL’s] right to stop the installation of Oversized Mono Piles at any time and at [SHL’s] sole discretion . . . ”

         I assume that “Oversized Mono Piles” were MPs with a diameter in excess of 5107 mm.  For present purposes, the relevance of this provision is that it shows, first, that the parties contemplated that piles with a diameter in excess of 5107 mm might be presented and accepted for installation; and, second, that the decision whether or not to install or to continue to install a particular oversized pile rested exclusively with SHL.  Fluor, therefore, could not require SHL to install an out of tolerance pile.  To the extent that Mr Eisman was to be taken as saying that Fluor would have been prepared to take the risk of installing out of tolerance piles, this could only have happened if SHL, too, was prepared to take that risk. 

(1)         Fluor would have put in train a proper investigation into the feasibility of designing a suitable stiffening ring or jack in order to bring the piles within tolerance.

(2)         Fluor would have explored the extent to which out of roundness could have remedied by appropriate heat treatment.

(3)         Fluor would have ordered the larger (“first replacement”) hammer sooner than it did.

“IGE 02 - within tolerances

  IGH04 - slightly outside tolerances but considered acceptable by Fluor

  IGI 06 - slightly outside tolerances but considered acceptable by Fluor”

         It must be remembered that these MPs were driven using the first replacement hammer, which could accommodate MPs with a diameter up to 5117 mm.

“Given the above, it may have been possible to complete installation of the MP on or only shortly after 24 July 2009.”

“Again, this is an example of evidence that bears the ring of firm recollection, not of a reconstruction of events based on carefully selected documents prepared by others. I therefore conclude that what Mr Dekker said in his witness statements in the arbitration reflected Fluor’s view of the position following the issue of the three NCRs. I do not accept the evidence to the contrary that Mr Dekker gave at the trial.”

“At that point (end of July 2009), there was still hope that, when Shipment 3 arrived in Vlissingen, it would not be subjected to an NCR and there would be a supply of TPs on which SEPAM could begin the fit-out works.  Ultimately, that proved not to be the case, because shortly after Shipment 3 arrived on August 1st, GGOWL issued NCR 009, which required re-testing and repair of the Shipment 3 MPs and TPs as well.  At that point, we were left with little choice but to demobilize SEPAM, except for a skeleton crew, which we utilized to perform miscellaneous support works for the NDT remediation efforts, such as monitoring of temporary power and lighting.”

“TP installation commencing in a meaningful way before the departure of the Javelin on 19 September 2009 became impossible with the issuance of NCRs 008 and 009. Although Jumbo had offered us the option of extending the Javelin through as late as 15 November 2009 (and potentially beyond that date), we had no expectation at the time the offer was made on 7 August 2009 that meaningful progress on MP installation would be made by that time, let alone TP installation.”

“Ongoing works on vessel in preparation for TP installation.”

This was recorded in subsequent Daily Reports as continuing until 3 January 2010.

“Jetting modifications to jack up legs completed.”

These modifications were probably put in train as a result of an incident a few weeks earlier when one of the legs became stuck in the seabed.  Otherwise, the only activity recorded was:

“General maintenance around The Leviathan.”

The Daily Reports for the period 4-14 January 2010 recorded continuing general maintenance and little else.  The Daily Report for 14 January 2010 contained a reference to activities for the following day which included:

“Ballast for simulation trial for TP loadout”

And

“Head off to the GGOWF for jacking trials.”

“with 500 T of ballast on board to simulate 2 x TPs.”

According to the Daily Reports, for the next two days the vessel remained jacked up in Harwich.  Mr Anthony Morgan interpreted this as a trial to see whether or not the vessel could carry two TPs, rather than only one.  I am not sure that he is right about this, but in any event it does not matter because, if he is right, it could have been dispensed with.

“Leviathan is due to remove stiffener rings from piles after it has picked up the required access frame work, this is a way of exercising the boat and its equipment”

                                                                       (My emphasis)

There was no correction to this observation in the minutes of the next meeting.

“seafastening of all equipment complete certificate issued by LOC”

The report noted that the vessel would proceed the following day from Vlissingen to the site of IGI 04.

“7.3     The extent of the manufacturing fault could not be firmly established by ABB although the faulty transformers were consecutively numbered (ABB ID#9-12), which suggested a defective batch. The repaired transformers (the “first generation transformers”) were returned to Fluor in instalments. They had all been returned by 9 November 2009 and thus the need to send them away had no impact on SEPAM’s progress.  Because the repaired transformers were returned to Fluor in instalments, by the time SEPAM started fit-out of TPs in mid-October 2009, there were sufficient transformers on site for SEPAM to commence their works without experiencing delay.

 7.4      Had the TP works in Vlissingen not been on hold, our decision would likely have been quite different, particularly given that only four transformers were found to have suffered from this particular problem.  Since the transformers are all the same, in all likelihood, we would have proceeded with the installation of the remaining transformers in the TPs and the offshore installation of those TPs thereafter.  Had any of the transformers showed signs of problems thereafter, or needed to be switched out, we could have made arrangements with ABB to switch out such transformers offshore.  Although not ideal, it would have been quite feasible from a technical and construction schedule perspective, and, given that schedule was Fluor’s utmost priority, it is certain Fluor would have elected to do just that rather than holding up TP fit-out and installation.”

“Based upon a timing of events that this happened, and what was going on on the field from an installation standpoint, it was pretty much a straightforward decision.”

“there would have been a much more in-depth discussion about what do we do with the TPs that have transformers installed in them versus transformers that are still sitting on the ground.”

“If Fluor had been able to proceed with MP and TP installation in the summer of 2009 (i.e. if we were not prevented from doing so by the weld defects), I believe that Fluor management would not have made the decision to send the transformers back to ABB for repair. The reason is simple. By the time the issue was discovered in late August 2009 Fluor would have already installed 2-3 batches of TPs (i.e. 12-18 TPs). ABB’s report was then not received for several weeks after this.  Fluor’s priority would have been to maintain the installation programme, even if this meant that it was likely that Fluor would have to swap out the bad transformers offshore at a later date and at an extra cost. The alternative would have been for Fluor to allow the Javelin (the TP installation vessel) to sit idle and pay enormous standby charges, which Fluor was obviously determined to avoid, and Fluor would have sought to recover the replacement costs from ABB in any event. Had we not returned the transformer (sic) to ABB in September 2009, the second transformer issue would never have arisen as this was caused by ABB’s own remedial works.”

“I must therefore leave open for further argument the issue of whether costs of testing or repairing any TPs was required - either expressly or by necessary implication - by any of the three NCRs and, if so, to what extent. This includes the question of whether or not it is open to Fluor to take this point.”

“. . . the examination results have to be re-validated and appropriate weld repairs made to ensure that all welds meet code requirements.”

“In the meantime we have instructed ZPMC to do d-scan only until we know more.”

“NCRs 006, 008 and 009 condemned all the TPs and all the MPs in Shipments 1, 2 and 3, which brought the construction phase of) this Project to a complete halt.”

         I concluded that this reflected Fluor’s view of the position following the issue of the three NCRs.  That was a finding of fact.

“I am very pleased that we have reached an understanding on the joint pursuit of the substantial additional costs both Fluor and ZPMC have incurred as a result of the MP and TP weld testing and repair protocol required by Greater Gabbard Offshore Winds Ltd.”

                                                                       (My emphasis)

“the enhanced testing and remediation of MP and TP welds it has been required to perform as a result of the acts and omissions of GGOWL, including, but not limited to, GGOWL’s issuance of NCR 006, 008 and 009 relating to MP welds.”

         This correctly reflects the possibility that the enhanced UT procedure that GGOWL required Fluor to carry out was not to be found only in the NCRs themselves.

“. . . the issuance by GGOWL of the NCRs constitutes in the Tribunal’s view an effective direction for the Contractor to comply with its requirements for additional testing and repair about which the Contractor complains. The discussions between the Parties subsequent to NCR 006 made it clear that GGOWL would only accept D scanning at 12 db as adequate to clear the NCR, and that the retest and repair requirements extended to TPs as well as the MPs.”

“Peter,

Please find attached our reports covering the visual and NDT inspections carried out in Vlissingen last week.

I will use Ian’s NDT report supported by the RTD report as backup to the NCR.

Regards

Bob”

“Bruce,

Please find attached initial documents re further NCR on Monopiles for discussion tomorrow morning 08:30 hrs, an up to date of (sic) NCR log is attached for completeness, you should also note that the power transformer failure is included.

Peter”

         The attachments to this message were: the NCR itself, the RTD Interim Report, the NDT Report Summary and an extract from the NCR log (which recorded that the NCR had been issued on 3 June 2009).

“the examination results have to be re-validated and appropriate weld repairs made to ensure that all welds meet code requirements.”

As I have already mentioned, a point which emerged towards the end of this hearing (I think for the first time as a live issue) was that the NCR did not specify what work was required in order to satisfy it and, in consequence, was not effective as an instruction at the time when it was issued.  However, this point was addressed indirectly in the Liability Judgment, at paragraph 405, where I said:

“At some stage in June Mr Hardie had a conversation with a Mr Pashley, of GGOWL, to discuss what Fluor had to do in order to have the NCR released.  Apart from providing the relevant paperwork in relation to the welds, Mr Pashley made it clear that Fluor would have to scan all the welds using D scanning. Mr Hardie said that it was not practicable to scan unground welds with the probe on the weld cap on account of the irregularity of the surface, but he was told that it could be done using copious amounts of couplant.”

“Transverse scans should be carried out from the weld cap provided the surface is smooth enough, which it should be on normal submerged arc welds of this size”.

“A.       My view is the seed was planted here. I kept pushing back. What disturbed me about it is I had provided some input. In most cases if I provided a reasonable explanation the issue got closed. I think, however, in this case it would not go away. I had numerous discussions, you can see that in my witness statement, with Peter Reilly and others that: we want to re-test in Vlissingen, we want to re-test in Vlissingen. Then as soon as the re-tests occurred in Vlissingen, NCR hit us, so, at a minimum, the manifestation of it was in Vlissingen with the first NCR.

“On 5 June 2009, I was tasked with developing the process to address NCR 006 and get it released. My first step was to find the equipment, facilities and labour needed to carry out this work. I immediately asked our procurement people to look into obtaining additional rollers from Bode Positioners to support the MPs. We had already procured one set of rollers from Bode to support the China NCR works . . .”

“now had to get GGOWL’s buy in to the testing and repair exercise which was already full steam ahead and we knew that this would be laborious (which it was)”.

“He also would like Martin Hoskins [Hickson, I think he meant] NDT to also work alongside his NDT men and come to some agreement with regards to the best way of identifying the defects and the way to go ahead.”

“instructed Doug [Mr Hardie] to provide a copy of the ZPMC NDT procedure to QIS and to make clear to QIS that they were to test in accordance with that procedure . . ..”

         He went on to say, paragraph 7.12, that this is what QIS started to do on the morning of 4 June 2009. 

“PB Inspection Report No 09IM027 (date 1^st June 09)

PB used RTD to UT inspect various, cap ground circ. welds, on the MPs: IGH 06, and IGI 04 . . .

UT Inspection

On Thurs  4 June, six UT operators, from QIS, began scanning the Circ. Welds of IGI 05, which were internally ground on the weld cap . . .”

         The report concluded by listing seven “Proposed Actions/Recommendations”, of which five had nothing to do with the NDT procedures. The two which did were in the following terms:

“i)     send David Thomas, Fluor’s level III, UT consultant, to ZPMC to perform a detailed review of all NDE activities associated with the GGOWF Project.

vii)    Get Sonovation to rapidly scan large volumes of weld, leaving detailed sizing by slower UT”

“From the start, in October 2009, I was directly involved in the negotiation of what became known as the “Early Start Agreement” with Jumbo, which allowed for a Jumbo vessel to return to the Project in March 2010 to commence TP installation. The decision as to which vessel to supply and use was made by Jumbo. Jumbo was pushing to start the installation of TPs as early as possible as they had vessel availability. While we considered bringing on the installation vessel earlier, a number of factors/concerns militated against it:

(a)     We were concerned that due to the cold weather the grout (used to connect the TP to the MP) would not have enough time to set properly during the weather window which would make the connection between the TP and MP less stable and susceptible to shifting in later or unforeseen adverse weather conditions and put Fluor at risk of having to correct the grout outside the weather window.

(b)     Also, even if we were able to get some of the TPs installed starting in February, we could not begin IA cable installation until early April 2010 (the date that the IA cable installation vessel was contracted to mobilise).  Therefore, it did not seem to us to be reasonable or beneficial to expedite TP installation, only to have the TPs sit idle for two months (or more) before IA cable installation could begin.”

“The handling of MPs and TPs which could not be installed required very large additional storage areas and associated infrastructure (including crawler mats and gravel dykes, laying sand, gravel and specially made concrete supports for TPs). Fluor was forced to contract for additional self-propelled modular transporters (SPMTs) and cranes. The atmospherically-controlled warehouse was too small for the increased demands, and an additional warehouse was procured and air conditioning and atmospheric controls installed. Additional costs were incurred in respect of fork lift trucks and fuel for the additional generators required to provide power for the welding. As the number of subcontractors on site expanded dramatically, Fluor had to contract for additional storage, canteen and sanitary facilities to accommodate them and their materials, housed in a new contractor park. The division of the sums paid to VZT between works to MPs, TPs and site-wide costs (and various sub-categories of costs within those heads) is explained by Mr Ross in his first report.”

         I shall take these claims in turn.

(1)         In order to carry out testing and repairs to an MP it is necessary to mount it on a device which enables it to be rotated about its axis.  This is known as a positioner or rotator, and in this case they were supplied by Bode.  However, in addition to the positioner itself, other materials are required in order to use it.  Fluor initially hired one positioner, prior to the issue of NCR 006, for a period of 9 weeks in anticipation of the need to carry out some testing of MPs.  However, it omitted to make a claim for it.

(2)         The claim for that initial positioner was, I think, added following an observation from the court during the hearing and was treated as a de facto (and unopposed) amendment.  However, no claim was intimated in respect of the materials: presumably, this was because the order for the materials was not initiated until 6 June 2009, after the issue of NCR 006.  Fluor now submits, in its Closing Note, that this was, in effect, an expense to which it was committed prior to the issue of the NCR because the positioner was of little use without the materials. 

(3)         Whilst I can see the force of this submission as a matter of logic, it seems to me that it comes too late.  At the time when it submitted its closing submissions ZPMC did not know whether or not Fluor was making any further claim in respect of the positioners or materials (see paragraph 180.5 of Appendix 1 to its Closing Submissions).  As I have said, Fluor was effectively allowed to amend its claim to include the cost of the initial positioner, which ZPMC admitted, but I consider that it is too late now for this head of claim to be enlarged any further.  There has been no agreement of the figure now claimed, and ZPMC had no opportunity to address it before submitting its closing submissions.  In these circumstances I consider that Fluor is entitled only to the sum originally claimed, namely £18,010.

(1)         This claim is in respect of the very large cranes required for loading out the MPs. It was anticipated that these would be off hire at the end of the 2009 season, but as a result of the defects in the welding they remained on hire until all the loading out was complete in about May 2010.  A very substantial sum, of the order of €3.8 million, was paid for the hire of these cranes.  The experts have helpfully agreed the rates for period (F) and the proportions of those rates attributable to the MPs and the TPs.  Dr Mastrandrea originally excluded these sums in their entirety on the grounds that they were referable to period (F) onwards and therefore fell within the waiver.  However, in cross examination he agreed that Fluor should be entitled to recover a proportion of this sum paid, but he was not able to say what it should be.

(2)         Fluor submits that during period (C) the cranes were lying idle for a period when, but for the breaches, they would have been in active use loading out MPs.  This is the 20 day period from 10 to 29 July 2009 when, on the counterfactual scenario, Fluor would have had the opportunity to load out and install MPs.  I accept this head of claim in principle, but I do not see why ZPMC should be liable for the three days (17, 18 and 19 July 2009) when bad weather brought installation of the MPs to a standstill.  In relation to the MPs, there would have been nothing for the cranes to do during this period, but that was not the fault of ZPMC. 

(3)         In cross examination Dr Mastrandrea agreed that Fluor was entitled to recover a sum, but he could not say what it was save that it would be the result of taking the appropriate amount of time and multiplying it by “the 28,000 euro daily rate” (Day 14/175).  By this I took him to mean that rate of €28,291 - which was the rate that had been agreed for period (F).  However, in its Closing Note Fluor provided a new calculation of the daily rate for period (C).  I do not consider that Fluor should now be allowed to advance, based on material presented for the first time in its Closing Note, a figure higher than the only which had been agreed.  Accordingly, I consider that Fluor is entitled to recover, not the sum claimed, but €341,472 in respect of this loss (that is to say, 17/20^ths of €401,732 (€28,291 x 71% x 20), which is €341,472).

(4)         Fluor submits also that, in respect of the cranes, it should be entitled to recover the additional costs in respect of weather related downtime consequent upon its inability to use The Stanislav Yudin to install MPs between 29 June and 29 July 2009.  I have already concluded that Fluor is entitled to recover the cost of The Stanislav Yudin for 7.5 days in respect of this weather related downtime, and I accept that Fluor is entitled to recover an appropriate sum in relation to the cranes on the same basis.

(5)         Since I have not accepted Fluor’s case in relation to the amount of the weather related downtime, it is not entitled to the sum claimed. However, in my judgment it is entitled to recover €150,652 in respect of 7.5 days.

(1)         Given that the sums in dispute are relatively small, this was an issue that consumed a disproportionate amount of time and energy.  Dr Mastrandrea adopted what is known as a value based apportionment approach (“VBA”), which involved taking the costs of testing, repairs (and surface cleaning) and scaffolding for Shipment No 2 for the period 29 June to 29 July 2009 and then dividing it by the total costs claimed for those items for both Shipment Nos 1 and 2 for the same period and expressing a result as a percentage.  Mr Ross disagreed with this, because in his view it brought into the calculation considerable costs for equipment, material and off-site labour, all of which are costs that he says were unrelated to the headcount at the Vlissingen site.

(2)         The percentages originally arrived at by Dr Mastrandrea on the first three occasions that he carried out this exercise for period (C) were, respectively, 5.17%, 5.3% and 5.95%.  However, following the quantum experts’ fifth Joint Statement dated 6 July 2017, Dr Mastrandrea increased his figure to 11.19% for period (C).

(3)         The approach originally adopted by Mr Ross was based on the number of claimable MPs/TPs present during each period and the average costs per MP/TP in each period.

(4)         However, in the fifth Joint Statement of the quantum experts, dated 6 July 2017 (after conclusion of the evidence) Mr Ross set out his views “concerning those costs against which a VBA ratio might reasonably be applied”: he preferred apportioning costs based on labour hours site headcount.  In the fifth Joint Statement the VBA ratios put forward by each expert were as follows:

(5)         So far as period (C) is concerned, the figures are close, but there is a noticeable difference for period (E).  However, in the end Mr Ross proposed a hybrid solution, using the VBA approach for the headcount related items, and the MP/TP apportionment for those costs that he identified as not varying with the headcount.  This produced the following figures:

(6)         Against these figures, Dr Mastrandrea’s calculation, using his percentages of 11.19% and 4.43%, produces figures for periods (C) and (E) of €67,885 and €6,426, respectively, which are, somewhat ironically, higher than Mr Ross’s figures.

(7)         In my view, neither approach is entirely satisfactory.  In principle, I prefer the hybrid approach of Mr Ross because I see the force of his objection to the inclusion of sums in respect of, for example, equipment and off-site labour.  However, I consider that the application of the MP/TP ratio is something of a blunt instrument.  It seems to me that it is very difficult to form a view about the correct approach to sitewide costs if one is not actually on the particular site at the time. 

(8)         However, since I am having to form a view based on material assembled many years after the event, I can do no better than adopt Mr Ross’s figures: I do not consider that it can be said that they overstate the position so long as the figures being put forward by Dr Mastrandrea are higher.  Accordingly, under this head I consider that Fluor is entitled to recover €61,263.

“Fluor’s Claim 9 is founded on an express connection between headcount for NDT and repair, and on the individuals who make up the claim. On the assumption that all those individuals are properly allocated to that claim, in my opinion the VBA should achieve a reasonable overall evaluation for that group of individuals.”

“I was informed by Fluor management around August 2008 that we needed a dive vessel to accommodate and support divers to carry out the installation of J-tubes required to enable the IA cables to enter and rise up the MPs before the TPs were placed on top of the MPs.  Of course, we also needed the actual divers, and specialist supervision of the divers.”

“The point at which this became impossible was the arrival of defective Shipment 3 TPs in Period E. Effectively; from the moment that this Shipment arrived (1 August 2009) the demobilisation became inevitable. On this basis, on a proper analysis, the cost is one attributable to a cause in Period E and crystallised shortly after.”

“At that point (end of July 2009), there was still hope that, when Shipment 3 arrived in Vlissingen, it would not be subjected to an NCR and there would be a supply of TPs on which SEPAM could begin the fit-out works. Ultimately, that proved not to be the case, because shortly after Shipment 3 arrived on August 1st, GGOWL issued NCR 009, which required re-testing and repair of the Shipment 3 MPs and TPs as well. At that point, we were left with little choice but to demobilise SEPAM, except for a skeleton crew . . . ”

“GGOWL’s issuance of NCRs 006, 008 and 009, and its demands that Fluor change its NDT procedure and retest and repair welds previously tested, had a profound and devastating impact on the Project.  Not only did all offshore installation activities relating to the foundation works come to a halt, but even when we ultimately made the decision to cease the retesting and repair effort in Vlissingen, the construction schedule was destroyed. Once we decided to restart the construction phase, we had to remobilise contractors (such as SEPAM) and procure vessels to perform the work, or modify existing vessel contracts to account for the delays.”

“Those days were lost because the defects in the TP welds meant that no TP installation vessels were able to complete the first TP String until 17 March 2010.”

“It was obvious to Fluor by mid-August 2009 that there would not be enough MPs actually installed to warrant a possible extension of the charter period of the TP installation vessel and its charter period ended on 19 September 2009. At this point the critical path moved into the TP installation.”

(1)         135 days of critical delay was caused by the loss of The Javelin (127 + 8 days, as discussed above).

(2)         No TPs could be worked on from 3 June 2009 to 19 September 2009, being 119 days.

(3)         The start of work to the Shipment No 2 TPs was delayed by 23 days during period (C); this is 19% of 119 days.

(4)         Applying that percentage to the 135 days delay caused by the loss of The Javelin gives rise to a further 26 days of critical delay caused once the critical path shifts from the MPs to the TPs.

“4.2  The way the Project was originally resourced in China - shown in the organisation chart dated 24 September 2008 - reflected the intention that Fluor would monitor ZPMC’s work at a high level. Accordingly, Fluor initially planned for a team of 12 personnel in total, comprising a welding engineer, a project coordinator and a team of inspectors from SQS, reporting to Jason Estabrook, the SQS Manager. In particular, ZPMC was responsible for quality control (“QC”) and Fluor would carry out quality assurance (“QA”) “spot checks”.

 4.3   In the event, there were numerous and ongoing issues with the quality of ZPMC’s work so that it became necessary for Fluor to increase its QA team. Fluor progressively ramped up until, at its peak, the QA team numbered 132 inspectors from SQS (see the organisation chart dated 19 September 2009).”

“In response to the discovery of defects in the welds in the MPs and TPs in Vlissingen, it was also necessary for Fluor to commit significant internal and subcontracted resources to undertake further NDT, as well as additional QA supervision/coordination, in respect of weld activities in Shanghai.”

“As must be apparent to ZPMC, the further NDT carried out on Shipments 4 to 8 included particularly D scans on welds. ZPMC carried out D scans, and Fluor incurred expense in overseeing that, because it had become apparent to ZPMC and to Fluor that E scans were insufficient to detect transfers defects in welds.”

         This, I regret to say, was not a model of clarity either. However, when read in conjunction with the relevant paragraphs of Mr Ho’s first witness statement (to which there was a reference in the immediately preceding section of the answer) I consider that it was clear that the costs which Fluor was claiming were costs of supervising NDT, and not carrying it out.

“Indirect and/or consequential damages, or whatever the cause may be shall be explicitly excluded from this Purchase Order.”

“What is the recoverable quantum of (a) the historical costs and (b) the future monitoring and testing costs?

GGOWL’s case is that it is entitled to (a) the historical costs of £19,868,927.61 plus €546,224.58; and (b) the costs of the proposed monitoring and testing regime at a cost of £44,233,706 (net present value) as damages by reason of:

(a)     Fluor’s breach of contract in manufacturing the structures with weld defects;

(b)     Fluor’s breach of contract in failing to repair the defects discovered in Vlissingen or to produce ECAs to justify non-repair;

(c)     Fluor’s breach of contract in installing the structures offshore in October 2009 in a defective state;

(d)     Fluor’s breach of contract in prohibiting GGOWL from carrying out further testing of the structures from August 2009 onwards;

(e)     Fluor’s breach of contract in failing to carry out offshore inspection and testing of the structures as instructed by GGOWL or to agree to joint testing.”

(1)         GGOWL would pay Fluor £42.65 million (plus VAT) in respect of unpaid Milestone Payments and Variation Orders; and

(2)         Fluor would pay £32.325 million in respect of what were described as “Counterclaim Damages”; and

(3)         Fluor agreed to provide an extended warranty in relation to the unrepaired MPs (which included a liability for extended monitoring in event of pile failure, capped at £28 million); and

(4)         Save for (2) above, the parties agreed a complete “walk away” so that GGOWL would take over responsibility for the limited works which remained uncompleted or un-rectified.

(5)         There would be a mutual release from all other claims and costs (including legal fees and disbursements) relating to the project or to the arbitration.

“That [the payment into court] has to be taken into account in some way seems to me to be beyond doubt and it is, of course, always open to a plaintiff who wishes to accept a payment in or thinks that its acceptance may cause him some embarrassment in the matter of apportionment to request an amendment of the notice of payment in to apportion the sum paid among the causes of action in respect of which it is paid. In the ordinary way that would, I think solve any difficulty, though I would like to reserve the position - which of course does not arise here - where there may be grounds for asserting that the apportionment is collusive or not made bona fide.

Where, however, the party who has to bring the money into account himself provides no material to show how any apportionment should be made (or, as in this case, invites the judge to deal with it in a particular way) the judge has to do his best with what material he has, and the only material he had in this case was the claims themselves. What he had to ascertain was what the plaintiffs had lost, and to what extent that loss had been mitigated or satisfied by what had been received. There was really no other reliable way of doing this except by assessing the true value of the plaintiff’s claim against [the contractor], and comparing it with the £30,000 received.”

“Unless the claim is of sufficient strength reasonably to justify a settlement and the amount paid in settlement is reasonable having regard to the strength of the claim, it cannot be shown that the loss has been caused by the relevant eventuality or breach of contract. That is not to say that unless it can be shown that the claim is likely to succeed it will be impossible to establish that it was reasonable to settle it. There may be many claims which appear to be intrinsically weak but which, common prudence suggests should be settled in order to avoid the uncertainties and expenses of litigation.  Even the successful defence of a claim in complex litigation is likely to involve substantial irrecoverable costs.  It is thus an every day event for shipowners or their P&I clubs to settle cargo damage claims based on allegations of bad stowage or unseaworthiness for well under 50% of the claim when the alternative explanation of the damage is the inherent condition of the goods or some other cause for which owners are not liable. Unless it appears on the evidence that the claim is so weak that no reasonable owner or club would take it sufficiently seriously to negotiate any settlement involving payment, it cannot be said that the loss attributable to a reasonable settlement was not caused by the breach by reason of which the goods are in a damaged condition.”

“Where a settlement agreement does allocate sums to particular claims or causes of action, that will not necessarily be conclusive. The court will look behind the form or words used in a global settlement to ascertain the underlying position and to ensure that third parties’ rights are not unjustly affected.”

The final deduction was said to apply only if all other claims were settled.  On this basis the net amount being claimed by GGOWL was about £62.5 million.  Against this, Fluor eventually paid about £32 million in addition to giving the warranty and foregoing its own claims.  The warranty addressed the future monitoring and inspection - item (1).

“GGOWL last offer

1. GGOWL to pay £41.6M for outstanding milestone payments (inclusive of interest) plus £1.5M for agreed VOs.

2.  Fluor to provide an Extended Warranty in the form of an extension to GGOWL’s rights under the BOP Contract.

3.  Fluor to pay £21M for inspection and monitoring costs (to be paid as incurred, on a 75/25 basis as between Fluor and GGOWL, capped at £28M at 2013 prices)

4.  Fluor to complete the remediation of the Transformers, Tekmar Seals and Met Mast Defects plus other undisputed Defects and snagging

5.  Fluor to pay GGOWL £30.35M to settle GGOWL claims for: legal costs (10.85), Siemens claims (7.0), other project claims (2.5) and historic Weld Dispute costs (10.0)

6.  GGOWL to pay Fluor £9.75M to settle Fluor claims for: Harwich (2.95), Adverse weather (1.8) and other Project claims (5.0)

Fluor last offer

1.  GGOWL to pay £41.6M for outstanding milestone payments (inclusive of interest) plus £1.5M for agreed VOs.

2.  Fluor to provide an Extended Warranty in the form of an extension to GGOWL’s rights under the BOP Contract.

3.  Fluor to reimburse GGOWL up to 100% of any inspection and monitoring costs incurred up to a cap of £28M on the occurrence of any valid claim under the Extended Warranty.

4.  The parties walk-away on their Project Claims.

5.  Fluor to rectify the Transformers, Tekmar Seals and Met Mast defects and GGOWL to complete the balance of defects and snagging in return for a payment from Fluor of £10M.”

“4.    Fluor will pay GGOWL the sum of £26 million in full satisfaction of all GGOWL’s claims, including but not limited to, the legal fees, Siemens Delay Claim, Historic Costs, Esbjerg Claim, WTG Storage, etc

5.      GGOWL will assume responsibility for completion of all work remaining on the Project, including but not limited to, warranty claims and snagging matters and Fluor shall have no further responsibility [or] liability for such work.

6.      . . .         

7.      . . .

8.      The parties will cooperate in the structuring of the final settlement agreement so as to satisfy their respective internal accounting, tax, and other requirements.

9.      Except as provided herein, neither party will have any obligation whatsoever . . .”

“…    in full and final settlement of the following:

.1      all legal costs incurred by GGOWL in relation to the Claims and the Proceedings;

.2      [the Siemens claims];

.3      all costs incurred in relation to [the disputed defects and snagging items set out in Schedule [  ] of this agreement;

.4      [all historic costs]”

         Clause 10 provided for a “GGOWL Settlement Payment”.  Again, the figure was left blank but was expressed to cover:

“.1    the Fluor claim for delay for the Harwich work stoppage . . .

  .2    [adverse weather]

  .3    [other Project claims].”

“1.       DEFINITIONS

…

“Claims”      means (in each case whether past, present, future, known and/or unknown, but subject to clauses 3.4 and 12.1) all and any actions, causes of action, claims, liabilities, obligations, claims for costs or expenses (including but not limited to legal fees and disbursements), damages, losses and demands of whatever nature which relate to and/or arise out of the Project and/or out of the Proceedings;

…

“Proceedings” means the legal action commenced by Fluor against GGOWL under claim number 111822 in the LCIA and the counterclaim brought by GGOWL against Fluor under claim number 111822 also in the LCIA;

“Project” means the project for the design, construction and operation of the Greater Gabbard Offshore Wind Farm;

…

3.         SETTLEMENT

3.1    The parties agree to settle the Claims and Proceedings and any further obligations and/or liabilities arising in relation to the BOP Contract and the Project, on a full and final basis on the terms of:

3.1.1 this agreement; and

3.1.2 the Extended Warranty Deed.

…

5.         PAYMENTS DUE FROM GGOWL TO FLUOR

5.1    GGOWL shall pay Fluor (collectively the “GGOWL Payments”):

5.1.1 the sum of £41,600,000 (forty one million, six hundred thousand pounds) including interest but excluding VAT (the “Milestone Payment Sum”); and

5.1.2 the sum of £1,050,000 (one million and fifty thousand pounds) including interest but excluding VAT (the “Variation Order Sum”) and;

5.1.3 the sum of £3,009,198 (three million, nine thousand and one hundred and ninety eight pounds) being the VAT payable on the sums in sub-clauses 5.1.1 to 5.1.2 (inclusive) above

5.2    GGOWL shall make the GGOWL Payments subject to and in accordance with clause 7 of this agreement.

6.         FLUOR PAYMENT

6.1    Fluor shall pay GGOWL the sum of £32,325,000 (thirty two million, three hundred and twenty five thousand pounds) (the “Counter Claim Damages”).

6.2    Fluor will pay the Counter Claim Damages subject to and in accordance with clause 7 of this agreement.

7.         PAYMENT ARRANGEMENTS

7.1    The parties acknowledge and agree that within 60 days of this agreement:

7.1.1 GGOWL is due to pay to Fluor the GGOWL Payments …

7.1.2 Fluor is due to pay to GGOWL the Counter Claim Damages …

7.2    The payments in clause 7.1 can be set off against each other, such that the only payment to be made within 60 days of this agreement is the payment by GGOWL to Fluor of £10,325,000 … plus VAT of £3,009,198 …. (the “Net Payment”).

…

8.         COMPLETION OF OUTSTANDING WORKS AND DEFECTS

8.1    GGOWL shall following the date of this agreement assume responsibility for the Works (as defined in the BOP Contract) and for completion of any outstanding works relating to the BOP Contract (the “Outstanding Works”) and for the remedying of any outstanding defects in the Works (as defined in the BOP Contract) (the “Outstanding Defects”) and for the completion and continuing operation of any obligations owed to Competent Authorities with jurisdiction or authority in relation to the Project.

…

9.         EXTENDED WARRANTY

Upon the date of this agreement the parties shall each deliver to the other the Extended Warranty Deed, fully executed and unconditionally released.

…

11.       WITHDRAWAL OF THE PROCEEDINGS

11.1  The parties acknowledge the decisions, awards and findings of the Tribunal on all matters decided by the Tribunal in relation to the Proceedings. The parties shall not in any future claim or proceedings seek to re-open or challenge any decisions, awards or findings of the Tribunal in relation to the Proceedings.

11.2  The parties agree within 14 (fourteen) days of the date of this agreement to issue a letter to the Tribunal appointed in relation to the Proceedings confirming that the Tribunal is released from its appointment, and that no further award will be made by the Tribunal in relation to the Proceedings.

11.3  Each party agrees to pay 50% (fifty per cent) of any outstanding fees and expenses of the Tribunal, the LCIA, IDRC and other costs of the Proceedings such as transcription costs, that are not covered by the payments on account of the Tribunal’s fees and expenses that have already been made to the LCIA. The parties agree that will be no order as [to] costs in relation to the Proceedings.

12.       RELEASE

12.1  In consideration of the terms and conditions of this agreement and the terms of the Extended Warranty Deed, the parties agree to waive and unconditionally and forever release each other, their parents, subsidiaries, affiliates and associate companies (included but not limited to their respective directors, officers, employees, agents, successors, assigns and heirs) from the Claims, from the Proceedings and from any further obligations and/or liabilities arising in relation to the BOP Contract and the Project, but any such waiver and release does not take away the rights of the parties to enforce (i) the obligations set out in this agreement (ii) the obligations and warranties set out in the Extended Warranty Deed and (iii) the indemnities set out in clause 17.1 of the BOP Contract.”

“And no doubt if other numbers hadn’t been right, then the extended warranty just by itself wouldn’t have been acceptable [to GGOWL] because it had to be supported by other payments or settlements across the board. Is that right?

A         My lord, you hit it right on the head. The reason why the amounts seemed to go up in terms of cash was because they were not satisfied with the amounts contingent in the warranty.”

“Q        So Fluor’s position was that it only wanted a mediation if there was a complete global settlement of all outstanding issues, correct?

  A       A global settlement is what I desired as well.

  Q       This would include all of its possible claims?

  A       If we could sweep up and offer our claims and their claims as well as the litigation risk and put a price on it that was acceptable to GGOWL, that would be a good settlement.”

“Because of the occasions, circumstances and developments that occurred in the middle of April.”

“A        There is a process under which it was increased to 32 million, which is the important ingredient that is missing from the April 9th communication.

  Q       What is that ingredient?

  A       There was a recognition, a realisation, some time in the middle of April, that what was contemplated with respect to the warranty was much different, if not completely different, by Gabbard and Fluor. We had to have the warranty with issues of trigger and breadth such that it would not be valued currently or it might trigger a loss.  Gabbard’s position was that there was going to be an easy access to the 28 million by virtue of an easier trigger, and that it would be extrapolated across the entire . . .

  Q       Yes, the extrapolation issue.

  A       . . . 32 if one [MP] failed.  So that was a sea change some time in the middle of April.

  Q       What has that to do with increasing the offer from 25 (sic) to 32 million?

  A       Once we got a more limited warranty negotiated, GGOWL wanted an increased amount of money upfront, and that is when the particularisation that you have shown me in the April 9th communication broke down and it became just dollars being traded.”

“61.2   Appendix 1 hereto is an estimate prepared by Fluor of the cost of a replacement met mast and installing it on the Met Mast’s existing foundation. The total cost is estimated to be £1,600,000 (the “Met Mast Replacement Costs”).

  61.3   Fluor will not itself procure and install a replacement met mast, since on 14 May 2013, Fluor and GGOWL executed a settlement agreement (the “Settlement Agreement”), under which Fluor was relieved of any further responsibility under its contract with GGOWL including its responsibility for procuring and installing a replacement met mast and agreement was reached as to the final account between Fluor and GGOWL in respect of the project. Clause 6 of the Settlement Agreement provided that Fluor should pay to GGOWL the sum of £32 million as Counterclaim Damages, such sum including the Met Mast Replacement Costs. Fluor paid the said sum of £32 million to GGOWL on 14 May 2013, by the procedure stipulated in clause is 7 of the Settlement Agreement.

  61.4   Accordingly, Fluor has lost and seeks to recover from:

(a)     [the first designer] as damages . . . that portion of the Met Mast Amount which relates to the transportation and installation costs of a new met mast. As shown in the breakdown at Appendix 1, these amount to £1,442,500; and/or

(b)     [the second designer] as damages . . . the Met Mast Replacement Costs.”

                                                                                 (My emphasis)

Thus the total value of GGOWL’s claims amounted to about £50 million (or £40 million if the costs to complete were £10 million, or £34 million if the costs to complete were reduced to £4 million).  Of these, as against ZPMC (1) was a cost that Fluor had agreed to bear under the terms of the waiver letter, and it was not suggested that (3) and (5) had anything to do with the defective welds.  The Siemens claim was a consequence of delays caused by the additional testing and remediation required by the NCRs.  It was therefore a cost that was waived by Fluor as against ZPMC.  The historic Weld Dispute costs of £10 million were in relation to the unrepaired piles and therefore fell outside the waiver agreement.  Accordingly, if at that point Fluor had agreed to pay a sum to settle these claims, on the face of it at most only £10 million of that sum would have been attributable to costs that had not been waived resulting from breaches of contract by ZPMC.

“Over the course of those four years, Fluor engaged the team of external experts identified in section 5 below. Those experts were primarily engaged to support Fluor’s efforts to obtain satisfactory ECAs to justify installing the structures with unrepaired defects and, later, in defending the counterclaim.”

“Fluor continued with the ECA work long after taking the decision to ignore the NCRs because it had (1) to defend its decision to install against GGOWL’s allegations regarding structural integrity (which eventually evolved into its counterclaim) and (2) to protect its reputation in the market, particularly with regard to having decided to install a product with known defects.”

(1)         Had the NCRs not been issued and had Fluor not had to undertake the testing and repair programme, it would not have needed the ECA; and

(2)         obtaining an ECA was a means of complying with the NCRs. In this context ZPMC relies on clause 502 of the MP-0S-C401, which appears under the heading “Acceptance Criteria for NDT”, and provides:

“502 Acceptance of defects exceeding the given limits may be granted based on fracture mechanics testing and appropriate calculations. If this approach is considered, the inherent inaccuracy of the NDT methods shall be considered when the critical defect size is determined.”

 “In my view, this evidence clearly establishes that, as a result of the cracking that had been found in the piles at Vlissingen, the only reasonable option available to Fluor was to carry out an investigation into the true condition of the piles and to establish the extent (if any) to which this might affect their performance in service.”

         And, at paragraph 573:

“As a result of the presence of this cracking the MPs and TPs on delivery at Vlissingen were not fit for the purpose of being installed forthwith without either further examination, testing and repair or a satisfactory Engineering Critical Assessment indicating that repairs were not necessary and that the MPs and TPs would, from a structural point of view, perform satisfactorily in service for 25 years.”

“There can be no doubt that by this time ZPMC’s welding, as Respondent well knows, was directly at issue between the parties. Respondent had already rejected Shipment #1 on 3 June 2009 due to welding issues, causing Claimant to seek damages that, at that time, it contemplated recovering against ZPMC through the legal process. To that end, Claimant then directed first TWI, and later Jan Ibsoe, to perform certain tasks and prepare reports to be utilised for the dominant purpose of substantiating the legal claims that Claimant was then contemplating asserting against ZPMC, which claims were later re-directed to Respondent as a result of Fluor’s determination that the Employer Required NDT and Remediation and the NCRs issued by Respondent were without justification . . .”

“In addition, it must be noted that this issue and the other set forth by Claimant (i.e.  the relevance and admissibility of all weld NDT data) are still in dispute solely because Respondent wrongly refuses to acknowledge that the issue of the structural integrity of the foundation works is and always has been at issue in this case as it is presently pleaded.”

“In general terms the purpose of an ECA is to seek to establish whether indications/defects jeopardise the structural integrity or design life of a structure. This was in fact the purpose or at the very least one purpose of the ECAs undertaken by Fluor as can be seen from the contemporaneous correspondence and Fluor’s Amended Statement of Case . . .”

“9.    Fluor’s dominant purpose in retaining TWI in June 2009 and later, Jan Ibsoe, was to investigate the welds and testing procedures at issue for the purpose of substantiating Fluor’s then contemplated legal claims against ZPMC based on what was then thought to be ZPMC’s defective welding. An additional and also critical purpose was to determine whether GGOWL’s allegations of improper welding and NDT on the part of ZPMC were valid and supportable.  Only later did that purpose evolve into substantiating Fluor’s assertions that GGOWL’s criticism of the welds, rejection of the shipments, and requirement of enhanced testing were all improper and in breach of the parties’ contract . . .

 10.   All of the above reasons as to why Fluor utilised Dr Jan Ibsoe and TWI after June 2009 make clear that Fluor’s dominant purpose in doing so was to directly aid Fluor in its contemplated legal action to recover the extraordinary costs it was incurring in re-testing and re-welding the MPs and TPs . . . .

     . . .

  14.  GGOWL’s allegation that many of the documents at issue related to the preparation of Engineering Criticality Assessments (“ECA”) misses the point. While GGOWL may wish to characterise the ECAs as having been prepared so as to “persuade GGOWL that defects/indications [in the welds] were tolerable“, the dominant purpose of all such documents was, in fact, to establish in the contemplated litigation that Fluor had fully complied with the Contract’s requirement that each of the MPs and TPs meet the required design life requirement of at least 25 years, thereby further discrediting GGOWL’s argument that enhanced testing and remediation was necessary. While GGOWL may not believe that this issue is relevant to the advancement of Fluor’s claim, the proper consideration under a litigation privilege analysis  . . . is the purpose that the person who directed the creation of the document had in mind  - not what his adversary subsequently claims it to be.”

“Because the decision we made to proceed and GGOWL’s response left no doubt that the Weld Dispute (as it had become to be known) would now be resolved in litigation, we continued with the retention of TWI and Jan Ibsoe for that purpose and put them under the direction of our in-house and outside counsel.”

                                                                       (My emphasis)

“To that end, the claimant then directed first TWI, and later Jan Ibsoe to perform certain tasks and prepare reports to be utilised for the dominant purpose of substantiating the legal claims that the claimant was then contemplating against ZPMC . . .  Regardless of the fact that the Claimant’s litigation against ZPMC did not ultimately materialise and Fluor instead pursued arbitration against Gabbard, the fact remains that the draft reports now being sought by the respondent were prepared in contemplation of litigation and are accordingly subject to the protections of the litigation privilege . . .  The Welding Institute’s role changed such that by mid-June 2009, as detailed above, it was actively engaged in providing the claimant with technical substantiation for its then contemplated claims against ZPMC.  Additionally, the Respondent’s characterisation of TWI and Ibsoe as “technical advisers” rather than “experts” is both incorrect and immaterial. The critical point is at the time they prepared their reports, regardless of the label the respondent ascribed to them, such reports were prepared for the dominant purpose of substantiating claimant’s legal claims which at first contemplated by ZPMC but were later re-directed to Gabbard once Fluor determined that the NCRs were not justified.”

“The Tribunal is of the view that the Claimant’s assertion of privilege over the documents created on and after 1 October 2009 is made out. . . . The dominant purpose of the subsequent creation of documents was litigation. Although the Claimant may possibly have provided documents to the Respondent in an effort to seek the Respondent’s acceptance of its position, this was an ancillary aim and not the dominant purpose of the creation of the documents.”

                                                                       (My emphasis)

“A     Structural integrity was not necessary to prove Fluor’s case against GGOWL in the arbitration.  What happened is there was a notice of counterclaim in July, I believe it is 2011, and later a notice of a counterclaim not specified, and then finally a counterclaim.  And I do recall a great concern about getting ambushed in the arbitration because all of the allegations of the counterclaim had been made right before the arbitration on the claim.

There were two problems, I guess. One is ambush and the other is splitting a case in the arbitration and having the counterclaim go later.

  Q    But it was part of its case, Fluor’s case, in support of the claim, that the work of testing and repair was not technically necessary because the MPs and TPs were structurally sound without being repaired. Do you remember that?

 A     No.”

"If the Court concludes that the documents that came into existence after 1 October 2009 were created for the dominant purpose of pursuing litigation against GGOWL, does this mean that no costs are recoverable at all in respect of the relevant reports and legal assistance or, alternatively, is Fluor entitled to recover only a proportion. If the latter, what is the appropriate approach?"

“there undoubtedly is sufficient material for the Court to be able to reach a view as to what costs ought to be wholly recoverable/unrecoverable and, as Fluor has sought to do, to make an appropriate apportionment where there are costs that were incurred for multiple purposes and so may only be recoverable in part”.

(1)         TWI’s invoices 23199, 23431 and 23812, which total £203,490 cover the period from July 2009 to 10 October 2009.  Although there is a slight overlap beyond 1 October 2009, each of these invoices is described as being in respect of work in connection with “Engineering Critical Assessment of Monopiles” and so I consider that the sums claimed in these invoices should be recovered in full. 

(2)         The next three invoices, 24222, 24835 and 25824 cover the period 11 October 2009 to July 2010. Again, in these invoices the work is described as “Engineering Critical Assessment of Monopiles” but the work was carried out well after the decision had been taken to install the unrepaired piles in the sea bed.  In these circumstances, whilst I am not prepared to go behind Fluor’s assertion that the dominant purpose for these reports was the pursuit of litigation, I consider that in respect of this work I should allow 40%.  These invoices total £97,610 and so I allow £39,044.

(3)         The remaining invoices for the period up to the end of February 2011 (including Invoice 27062) amount to £244,705.  In each of these invoices the work is described as “Expert witness work”, which corresponds with the intention advanced by Fluor before the Tribunal - and the Tribunal’s finding - that the dominant purpose for which these reports were prepared was the pursuit of litigation.  However, from the descriptions of the work it is clear that matters such as “FE (Finite Element) analysis”, “fracture toughness testing” and “finalising TWI ECA report” concerned the ECA.  In these circumstances, I consider that Fluor is entitled to recover 40% of the value of these invoices, namely £97,882.

(4)         For the next period, from March 2011 to October 2011, the invoices (excluding Invoice 27062) total £102,440.  The descriptions of work for all these invoices include references to the ECA (or work related to it).  I am prepared to allow 40% of this sum, namely £40,976.

(5)         For the period November 2011 to November 2012, only £51,401 is claimed - in respect of invoices 1997 and 3601. Both of these invoices refer to expert witness work and, from the description in the former, almost exclusively so.  I propose to allow 25% of this sum, which is £12,850.

(6)         For the final period, from December 2012 to May 2013, Fluor claims £256,477, but here all sums are claimed under the heading “Counterclaim”.   Two of the invoices for this period, invoices 4392 and 4521, contain references to the ECA. The third invoice, 4851, for £91,151, appears to relate exclusively to expert witness work.  Excluding this invoice leaves £165,326, of which I consider that Fluor is entitled to recover 25%, namely £41,331.  I do not consider that because the work was incurred in the course of the Counterclaim that necessarily precludes recovery if it was, in fact, work done in connection with the ECA.

(7)         Accordingly, I consider that the total amount to which Fluor is entitled in respect of the costs of TWI is £435,573.

(1)         There are numerous invoices covering the period from January 2010 to March 2013.  The work has been divided into three periods: January 2010 to February 2011, March 2011 to November 2012 and December 2012 to May 2013 (this last period being attributed solely to the counterclaim).  During the first period about 80% of the value of the work is claimed.  For the second period it is about 75% and for the third period 100% is claimed.

(2)         The descriptions of the work are fairly technical, but for the first two periods most of them contain references to the ECA or to activities such as load/stress monitoring and witnessing offshore testing.  The load/stress monitoring was of significance in the context of the ECA because, according to Mr den Dekker, it revealed that the loads transmitted through the TP were much less than had been assumed in Ramboll’s design.

(3)         I consider that it is neither realistic nor feasible to carry out an invoice by invoice analysis of the work done by Dr Ibsoe.  Whilst I suspect that of the work described in some invoices during the first two periods more than 40% may have been attributable to the ECA, this is not sufficiently self-evident for me to go behind (even if I were otherwise minded to do so) Fluor’s assertion before the Tribunal that the dominant purpose of this work was the pursuit of litigation.  I am not prepared to be guided by Mr Ross’s assessment as to how the work should be treated (although I have taken it into account), and since Fluor has not called Dr Ibsoe to say what he did I can only approach the claim on a fairly broad brush basis.

(4)         During the first two periods I am prepared to allow 40% of the sums invoiced, namely US$ 282,598, €3,779, US$ 2,215,274 and £6,816.

(5)         For the third period, which is the work done in relation to the counterclaim, the descriptions of the work are more difficult to evaluate: Mr Ross has simply allocated 100% of the costs to the counterclaim. There are no references to the ECA, although some of the work described appears to be ECA related.  I consider that the great majority of this work was done in Dr Ibsoe’s capacity as an expert, so I am prepared to allow 20% only, namely US$ 278,142.

(6)         This produces the following amounts:

€3,779,

US$ 2,776,014

£6,816.

(1)         Lateral Wave Ltd was retained in September 2011 to carry out offshore testing of the more severe defects identified by GGOWL’s inspectors.  Although the description of the work in the invoices does not mention the ECA, it seems to me that its work concerned the integrity of the MPs and is therefore relevant to the ECA.

(2)         However, Mr Traves, of Lateral Wave Ltd, acted as an expert in the arbitration.  He was also a co-author of a report on NDT that was relied on by Fluor at the liability hearing.

(3)         In respect of the period up to the end of November 2012, Mr Ross has identified three invoices which he has excluded in their entirety, on the ground that these related exclusively to work as an expert in the arbitration.  These total £85,588.  I agree that the fees for this work should be excluded in their entirety.

(4)         As to the rest of the fees of Lateral Wave Ltd during this period, namely £415,933, I consider that 35% can properly be attributed to the ECA.  I therefore allow £145,927.

(5)         In respect of the period from December 2012 through to May 2013, the descriptions of the work in the invoices suggest that Mr Traves was acting almost exclusively as an expert in the arbitration, and I therefore exclude these fees.

(1)         In his witness statement Mr Bruno said that Mr Ted Hamre was retained in April 2012 “as a consultant and potential expert witness” in the pending arbitration to advise in connection with GGOWL’s proposed extraction of weld samples from one or more TPs.  He was instructed by Fluor to act as an expert in metallurgy and he attended expert meetings in connection with the Counterclaim in December 2012 and in January and February 2013.

(2)         The invoices produced by Acuren Group refer simply to “Services provided by Hamre as Senior Consultant Engineer” and, for the period 16 April to 26 September 2012 as an “Expert Witness Engineer”.

(3)         Upon the very limited material available I agree with Mr Ross’s assessment of CA $7,259 in respect of the work done up to 26 September 2012.  In relation to the period 30 October 2012 to April 2013, I am not persuaded that Mr Hamre played any significant role in relation to the ECA.  I therefore exclude his fees for this period in their entirety.  Thus the sum that I allow is CA $ 7,259.

(1)         Although Mr Ginzel was retained in May 2011, Fluor does not seek to recover any of his fees incurred prior to December 2012.  It seems that he then acted as an expert witness in relation to the counterclaim.  The descriptions of his work in the invoices refer only to activities consistent with the role of an expert.

(2)         Mr Bruno’s witness statement does not suggest that Mr Ginzel played any relevant role in relation to the ECA, and so I exclude his fees in their entirety.

(1)         This is the firm where Mr Ross was employed at the time when he was acting as quantum expert in the arbitration and in the Counterclaim.  The fees claimed are, therefore, solely in relation to quantum expert witness work.  They have nothing whatever to do with the ECA.

(2)         The fees claimed relate entirely to the Counterclaim so in my judgment they are irrecoverable.

(1)         Fees are claimed in respect of work done by various other experts, namely Professor Sorensen, Professor Metrikine, RHMA and Mr Harvey.

(2)         All of these fees relate solely to the Counterclaim so in my judgment they are irrecoverable.

(1)         For the period up to the end of February 2011 MDMC charged $1,787,853 by way of fees.  Mr Ross described MDMC’s invoices as “quite detailed and contain descriptive information with respect to the work performed by each individual in increments of as little as 1/10 of an hour” (see Mr Ross’s report dated 10 April 2017, paragraph 32.56).   He went through these invoices to identify work related to the ECA, and to issues such as structural integrity, offshore testing and offshore load/stress monitoring.

(2)         In relation to this period Mr Ross concluded that $155,979 was attributable to these issues and has included this figure in his assessment of quantum.  This seems to me to be reasonable and I do not see any justification for making any further reduction.

(3)         For the period 1 March 2011 to 31 October 2012 MDMC charged $4,930,356 by way of fees, of which Fluor has claimed $986,070 as being attributable to the ECA.  Mr Ross’s assessment is that $342,596 should be included in his assessment of quantum, or about 7% of the total fees charged.

(4)         Whilst I accept that Mr Ross appears to have done an analysis which will have stripped out expert witness work, I consider that the sums at which he has arrived must be further reduced to reflect the fact that some of the work done in this period was in respect of the Counterclaim and therefore irrecoverable.  Doing the best I can to reflect this, I propose to reduce the sum claimed in respect of MDMC’s fees for this period to $250,000.

(5)         Thus the figure to which I consider that Fluor is entitled in respect of MDMC’s fees is US$405,979.

(1)         For the period up to the end of February 2011 Hogan Lovells charged £1,106,580 by way of fees.  Mr Ross has scrutinised their narratives in their fee notes for this period and as concluded that a total of £85,033 represents time spent with technical experts and on technical issues.  Of this, he has deducted 50% to reflect the possibility that the work did not relate to the ECA, leaving a claim of £42,516 for this period.  For this initial period I see no reason to doubt this estimate and I accept it.

(2)         For the period 1 March 2011 to 30 November 2012 Hogan Lovells charged £3,866,004 by way of fees, of which Mr Ross has identified some £351,452 as being attributable to technical experts and technical issues. He has again deducted 50% to reflect possibility that the work did not relate to the ECA, leaving a claim of £175,726 for this period. 

(3)         Having looked through the narrative of the various fee notes set out in Mr Ross’s Appendix 12, I consider that this proportion is too high in the light of the position taken by Fluor in the arbitration that the dominant purpose of this work was the pursuit of litigation, rather than the development of the ECA.  I propose to apply a reduction of a further 20% and to reduce the figure to £140,581.  Thus I allow £183,097 in respect of Hogan Lovells’ fees.

“Subject to Clauses 8.7 (Rate of Progress) and 17.4 (Limitation of Liability), if the Contractor fails to comply with clause 8.2 (Time for Infrastructure Commissioning) and/or Clause 8.3 (Time for WTG Foundation Works Commissioning), the Contractor shall be liable for and shall pay every 10 Business Days or allow on demand liquidated damages to the Employer:

(i)      in respect of the Phase 1 Infrastructure Works, at the rate of 900 Pounds Sterling per MW per day in respect of the aggregate of the Rated Power Output of each WTG, in relation to which a WTG Foundation Works Commissioning Certificate should have been issued according to the Construction Programme, to the extent that power from each such WTG cannot be exported due to a failure by the Contractor to commission the Phase 1 Infrastructure Works by the Phase 1 Target Infrastructure Commissioning Date, on each day from the Phase 1 Target Infrastructure Commissioning Date up to and including the Phase 1 Infrastructure Commissioning Date;

(ii)     at the rate of . . . in relation to which the WTG Foundation Works Commissioning Certificates have not been issued, for each day from the Phase 1 Target WTG Foundation Works Commissioning Date up to and including the Phase 1 WTG Foundation Works Commissioning Date;

(iii)    in respect of the Phase 2 Infrastructure Works, at the rate of . . . in relation to which a WTG Foundation Works Commissioning Certificate should have been issued according to the Construction Programme, to the extent that power from each such WTG cannot be exported due to a failure by the Contractor to commission the Phase 2 Infrastructure Works by the Phase 2 Target Infrastructure Commissioning Date, on each day from the Phase 2 Target Infrastructure Commissioning Date up to and including the Phase 2 Infrastructure Commissioning Date; and

(iv)    at the rate of . . . in relation to which WTG Foundation Works Commissioning Certificates have not been issued, for each day from the Phase 2 Target WTG Foundation Works Commissioning Date up to and including the Phase 2 WTG Foundation Works Commissioning Date,

provided that no liquidated damages shall be payable by the Contractor to the Employer under Clause 8.8.1 (ii) and 8.8.1 (iv) in respect of any WTG following the issue of a WTG Foundation Works Commissioning Certificate in relation to that utility.”

“29.2.1   GGOWL was entitled to levy LDs under Clause 8.8 of the BoP Contract [2.2/442]. Insofar as it wished to do so, it was required to give notice as soon as reasonably practicable and not later than 21 days after becoming aware of the event or circumstance giving rise to the claim (see Clause 2.4.2 at [2.2/406]).

 29.2.2.   GGOWL did elect to levy LDs, and provided notice of its claim by correspondence within the trial bundle. The letter relevant to this claim was dated 23 July 2010 and is contained in the trial bundle at [18.13A/5087]. It notified Fluor that GGOWL was levying LDs in respect of the Phase 1 Foundation Milestone (i.e. that which Fluor alleges was delayed by ZPMC's breaches) from the date that the milestone had been missed (1 May 2010) onwards to the date of the letter (a total of 84 days). The LDs levied in respect of this milestone were notified in the sum of £14,259,483.

 29.2.3.   ZPMC is correct that LDs accrued against the Phase 1 Infrastructure Milestone prior to this (¶33 of its most recent note) but neglects to mention that GGOWL did not seek to levy them from the point that the Phase 1 [Infrastructure] Milestone was missed and instead levied LDs in respect of the Phase 1 Foundations Milestone.  At the time that it did so, only £12,696,912 of LDs had been levied (i.e. only c25% of the cap was exhausted).

 29.2.4.   So the actual position is that GGOWL did in fact levy LDs against Fluor in respect of the very milestone to which ZPMC caused delay.”