Neutral Citation No:[2004] EWHC 1750 (TCC) 
Claim No: HT 02 72
 
IN THE HIGH COURT OF JUSTICE
QUEENS BENCH DIVISION
TECHNOLOGY & CONSTRUCTION COURT

Before :

BEFORE HIS HONOUR JUDGE TOULMIN CMG QC

Royal Courts of Justice
Strand, London, WC2A 2LL

Date:21 July 2004

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Between :

	MIRANT-ASIA PACIFIC LTD & ANOR     	Claimant	
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	OAPIL & ANOR     	Defendant	

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Mr Andrew White QC and Mr James Howells 
(instructed by Masons, Solicitors) for the Claimant
Mr Andrew Bartlett QC, Mr Ian Wright and Mr Ben Quiney
(instructed by Beale & Co.) for the Defendant

Hearing dates :      
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Judgment

JUDGE TOULMIN :

1.	These proceedings concern claims for breaches of contract in relation to the construction of a two x 660 MW coal-fired power station at Sual in Pangasinan Province in the Philippines.  There is no doubt that in about May 1997 following the completion of work to construct the reinforced concrete pad foundations for the Unit 1 Boiler House complex (“the boiler house”) and during the construction of the superstructure, two of the boiler house foundations designated as G2 and G5 were subject to settlements of 46mm for G2 and 66mm for G5, far above what was permitted under the contract.

2.	The power station consists of two steam boilers located in separate boiler houses.  The boiler houses are identical.  There was no problem in Boiler House No.2.  The settlements to the central pad foundations in the No.1 Boiler House required extensive investigation as to their cause and substantial remedial works.  The claimant’s claim that, as a result of the failure, they suffered loss and damage in the sum of US$62,537,326 plus interest and Philippines VAT.

3.	The claims in this litigation were brought by the first claimant, Mirant Asia-Pacific Construction (Hong Kong) Ltd., the successor to CEPAS (and referred to either as “Mirant” or “CEPAS”) acting on its own behalf and/or on behalf of the second claimant, Sual Construction Corporation (SCC) against Ove Arup & Partners International Ltd. (“OAPIL”) and Ove Arup & Partners (Hong Kong) Ltd. (“OAPHK”).  Where there is no need to differentiate between the two entities, I refer to the defendants as “Arup”.

4.	The claimant’s claim that the failure of the two foundations was caused by the negligence and/or breach of duty of OAPIL and/OAPHK in

 “12.1	failing to provide a design for the G2 and G5 foundations that was suitable for the ground conditions;

 12.2	failing to appreciate that the ground conditions in which those foundations were to be situated did not satisfy the design assumption that had been made …and

 12.3	causing or permitting the G2 and G5 foundations to be constructed in ground conditions which were inadequate and which did not satisfy the said assumption that had been made.”

5.	This trial follows a trial of preliminary issues and deals with the remaining issues of liability leaving questions of quantum to be dealt with, if necessary, at a later date.

6.	On 11th June 2003 I gave judgment on the preliminary issues.  My findings were appealed and on 2nd December 2003, in the course of this trial, the Court of Appeal gave judgment.

7.	The parties are agreed that as a result of the preliminary proceedings, both at first instance and on appeal, the following issues have already been decided.
	
A)	the agreement for design was made on 29th May 1995 between CEPAS and OAPIL and OAPHK as pleaded in paragraph 23 of the Particulars of Claim.

B)	A separate agreement was made for supervision of the Ground Investigation	on 15th or 16th March 1996 between CEPAS and OAPIL on the terms of the written proposal dated 8th March 1996 which was countersigned by Mr Elliott, then managing director of CEPAS and SCC.

C)	Under the March 1996 agreement for the supervision of the Ground Investigation, OAPIL was under an obligation to provide an engineer for the supervision of the site investigation who was also competent to fulfil the requirements of a site foundation engineer in such matters as approving ground conditions for foundations.  OAPIL’s obligation under the agreement was not to provide an engineer who would fulfil the requirements of a site foundation engineer in such matters as approving ground conditions for formations.

D)	the March 1996 agreement for the supervision of the ground investigation incorporated RevB (15.11.95) of the FIDIC terms including the conditions of particular application.

E)	the claimant’s letter dated 2nd May 2001 was a formal claim within the meaning of the FIDIC terms.

	In addition the parties have agreed that:

F)	OAPIL and OAPHK owed to CEPAS a contractual duty of due care and skill in the performance of the design agreement.

G)	OAPIL owed to CEPAS a contractual duty of care and skill in the performance of the March 1996 agreement for the supervision of the ground investigation.

8.	The parties have very helpfully, largely agreed which are the key issues that I now have to decide.  These issues are split into sub-issues.  While it is convenient to deal with the issues and sub-issues in detail later, at this stage it is useful to have the main issues in mind when considering the evidence.

9.	The issues are:

1.	whether, as Arup contend, there was a variation to the March 1996 agreement for supervision of the Ground Investigation whereby OAPIL agreed with CEPAS that its engineer could inspect and, if appropriate, approve specific formations subject to notice being given to OAPIL by CEPAS, alternatively subject to notice being procured by CEPAS from NSBC (the contractors) that a specific formation was ready for inspection and approval?

2.	whether Arup owed a duty of care to CEPAS and/or SCC in tort to exercise due care and skill in the design of the foundations and/or the approval of formations.  If so, what was the scope of that duty and to whom was that obligation owed?

3.	did Arup, (i.e OAPIL and OAPHK) exercise due care and skill in

	a)	the design of the Unit 1 boiler foundations and
b)	the verification of the assumption (i.e. the design        parameter) upon which the design was based? 

4.	Did Arup exercise due care and skill in the specification and supervision of the 1996 ground investigation?

5.	Did Arup exercise due care and skill in

a)	the inspection and approval of the G5 formation prior to blinding, and

b)	the failure to inspect and approve the G2 formation for blinding?

6.	What was/were the cause or causes of settlement at the G2 and G5 boiler foundations?  Was the G5 formation level (and G2) lowered after Arup’s inspection and approval on 23rd July 1996?

7.	Is one or more of the claims barred under the Limitation Act 1980?

THE PARTIES

10.	The first claimant (CEPAS) and the second claimant (SCC) are members of the same group of companies.  In 1995 CEPAS was known as CEPAS Slipform Power System Ltd., and SCC was known as SUAL Slipform Construction Corporation.  Since then the companies have undergone various changes of name.  In about July 1997 a division of Southern Corporation (a U.S. Corporation) acquired CEPAS and SCC.

11.	The project to build the power station was subject to complicated contractual arrangements.  The design, procurement, construction and commissioning of the power station was undertaken by an international consortium including CEPAS, SCC, and various Alsthom companies referred to hereafter as Alsthom or GECA.

12.	The employer for the building of the power station was the Pangasinan Electric Corporation referred to as Pangasinan or PEC.

13.	The contractual provisions were divided into two parts,
a)	a supply contract with PEC which involved, amongst others, CEPAS, (but not SCC) and was responsible for the supply of all equipment procured outside the Philippines.

b)	a construction contract to erect the plant and do all other work within the Philippines necessary to bring the plant into full commercial use.  SCC was incorporated on the 21st December 1994 to be a member of this consortium.  The precise relationship of CEPAS and SCC will be considered later.

14.	Ove Arup & Partners International Ltd. is incorporated in the United Kingdom and carries on business throughout the world as consulting engineers.  OAPHK is the separate but related Hong Kong company. When there is no need to differentiate between them, the companies in the group are referred to as Arup.

15.	Arup entered into its contractual arrangements with CEPAS and not with SCC (see above).

16.	It is convenient at this stage to identify key Arup staff.  Mr Roberts was the senior Arup executive in overall charge of the project. He gave evidence at the earlier hearing but not at the most recent hearing.  Mr Higson was the Project Manager, resident in Hong Kong. He gave evidence at the most recent hearing.  Dr Oldroyd held the title of Associate within Arup.  He was a qualified civil engineer based in London as the lead engineer with responsibility for the design of the boiler units. He also gave evidence at the most recent hearing.  He reported to Mr Fox, the Deputy Project Manager based in London, and through him to Mr Higson. Mr Fox did not give evidence.  Mr Hontucan, also based in London, was primarily responsible for the design of the boiler foundations and reported to Dr Oldroyd. He gave evidence at the recent hearing.

17.	There were a number of highly qualified geologists who were employed by Arup.  Although they were required to undertake specific tasks, they felt themselves to be more like a college of professionals than simply a group of employees and they appear to have had a degree of autonomy as to how they approached their professional tasks. Dr Littlechild, Dr Redding, Mr Pascall, Mr Manning and Mr Bowden all gave evidence at the recent hearing.

18.	They were headed on this project by Dr Littlechild who was second in charge of Arup’s geo-technical group of about 100 staff in Hong Kong.  He was employed by Arup for more than 27 years until he retired in 1999.

19.	Dr Redding was a principal geologist with Arup who retired from the London Office in 1999 also after 27 years service.

20.	Mr Pascall is of a similar seniority and experience to Dr Redding with a very wide range of experience.  He had a desk next to Dr Redding in the London office.  He gave the impression of being very much his own man and not interested in overall management and on occasions it appeared that he could be difficult to manage.  

21.	Mr Manning is a geologist who graduated from university in 1987.  Mr Bowden, also a geologist, joined Arup in 1989.  He had the title of Associate and was of similar rank within Arup to Dr Oldroyd.

22.	Mr Asim Gaba was originally the team leader for the project.  From November 1995, Mr Nyambayo was the lead geo-technical engineer on the project.  Neither Mr Gaba nor Mr Nyambayo gave evidence.  
THE SITE
23.	Sual Power Station in the Philippines is a coal-fired thermal power plant located on Banguyao Point which is at the end of a hilly peninsula.  In order to build the plant, a large section of the hill had to be removed.

24.	The two boiler houses powering the plant were in all material respects identical.  It is only in connection with the movement of the central pad foundations at Unit 1 that this case is concerned. 

25.	Unit 1 boiler house is a very large steel frame structure.  It is approximately 40m x 50m in area and 75m high.  The main structure comprises six main columns which support the superstructure.  These columns are designed to be supported by six concrete pad foundations.  It is with the foundations at F8 that this case is primarily concerned.  The Alsthom equivalent reference is G2 and G5.  The Arup references are G6.1 and G9.4.

26.	The foundations at F7 (D2 and D5) and F8 are the primary foundations for supporting the load of the boiler.  

27.	The Unit 1 boiler house and the turbine hall to the north were constructed on the site of a small hill which needed to be removed before work on building the plant could begin.  The platform of the boiler house was created by the removal of 20 metres of overburden.

28.	There are at least two geological faults in the vicinity of the two boiler houses.  One is to be found to the west of the Unit 1 boiler house and runs in a north-west/south-east direction.  The other fault runs in an east-west direction close to or under the Unit 1 boiler house.  The claimant says it is in the vicinity of the foundations known as G2 and G5 (‘the Redding fault’).  This fault was identified by Dr Redding, the Arup geologist, when he visited the site in September 1995.

29.	The four foundations supporting the load of the Unit 1 boiler were agreed by Dr Oldroyd, Arup’s lead engineer, and by Mr Higson, Arup’s Project Manager, as being some of the highest loaded foundations in the plant.  The dimensions of the G2 and G5 foundations were 5m x 3.6m and 1.5m deep.  

DESIGN STAGES
30.	One issue which is followed through in this dispute is the relationship between the work which Arup contracted to carry out as part of the design contract and the work on the ground investigation which needed to be carried out separately but which would provide information on which the design would be based.

31.	Attached to Arup’s proposal for detailed design and site investigation dated 1st September 1995 is a chart, which after the concept design stage has four stages in the design process:

STAGE I
32.	Identification and interpretation of appropriate preliminary site investigation data and compile a preliminary design basis statement.
STAGE II
33.	Preliminary design based on the concept design and the parameters identified at Stage I.
STAGE III
34.	Identification of final design parameters based on new site investigation data and compilation of final design basis statement.
STAGE IV
35.	Finalise detailed design by upgrading preliminary design.

36.	At Stage I someone has sketched in a broken line with the words ‘schedule new SI’ (site investigation).  Concurrent with Stage II is ‘supervise new site investigation’.  This is in a box with a dark background and is not included in the initial contract.  The new site investigations lead to ‘interpretation of data from new site investigation’.  This information is fed into Stage III “identification of final design parameters”.

37.	This appears to reflect Arup’s general understanding of the design stages and how they relate to the investigations referred to as site investigations (SI) or ground investigations (GI).  I take it to be illustrative of a normally accepted  relationship between the design obligations and the separate SI or GI investigations.

38.	As I understand it, the duty under the design agreement is to carry out the design.  In order to achieve this, it may be necessary to have further information about the ground conditions.  If this is the case, the designer will advise the client that more information is to be obtained.  The client may enter into a separate agreement with the designer to provide or supervise the further investigations or instruct a third party to carry out the task.  There is a clear distinction between the separate ground investigation and the verification of the design assumptions, which is an integral part of the designer’s duty. The ground investigation itself is not within the normal contractual requirements of the original design contract.

THE STRENGTH OF THE ROCK
39.	In the course of this judgment I shall be referring to the strength and composition of the rock. There are a number of methods of assessing these factors. The Tomlinson chart arrives at a presumed allowable bearing pressure by taking categories of strong, moderately strong, moderately weak, weak and very weak rock and also taking into account discontinuity spacing in millimetres to arrive at the presumed allowable bearing pressure.

40.	An alternative categorisation is to categorise rock from weak to strong in six grades indicating the effect in each case of striking the rock with a geological hammer.  Grade I is described as ‘fresh’.  The rock is not broken easily by a geological hammer.  Grade II is ‘slightly decomposed’.  The rock makes a ringing sound when struck by a geological hammer.  Whereas Grade I shows no signs of decomposition, Grade II shows fresh rock stained (i.e. signs of decomposition) near joint surfaces.  Neither Grade I nor Grade II can be broken easily by a geological hammer.

41.	Grades III and IV rock show much greater signs of decomposition.  Grade III (moderately decomposed) is completely stained throughout.  Grade IV (highly decomposed) does not slake when immersed in water but is completely discoloured compared with fresh rock.  Both grades make a dull sound when struck by a geological hammer.  Grade III is easily broken by a geological hammer.  Grade IV can even be broken by hand into smaller pieces.

42.	Grade V is completely decomposed rock and Grade VI is residual soil.  It is this categorisation which is normally used by the geologists in this case.

43.	Hong Kong Geoguide 3 has eight categories ranging from extremely weak to very weak, weak, moderately weak, moderately strong, strong, very strong and extremely strong.  Discontinuity spacing is grouped by British Standard BS 5930 from ‘very widely spaced’ to ‘extremely closely spaced’.

44.	Finally, a rating, which is widely used, is the RMR (rock mass) rating, as Professor Hudson explained in his evidence.  This has five principal parameters, strength of intact rock material, core quality, spacing of joints, condition of joints and ground water.  It has a rating adjustment for joint orientations.  This information produces a rating from 100 downwards of which 81-100 is classified as Class I (very good rock); 61-80 is Class II (good rock); 41-60 Class III (fair rock), 21-40 Class IV (poor rock) and 20 or below class V (very poor rock).  A further table gives a comparison between rock strengths, grade of weathering and RMR strength values.

45.	This rating was originally developed in tunnelling work and was later extended to other situations.  RMR is an empirical system.  Judgment is required to operate the table on the basis of which the bearing capacity of the ground can be assessed.

46.	In relation to displacements estimated on the basis of rock mass, there are references to CHILE material and DIANE material.  As I understand it from Professor Hudson’s evidence, CHILE material is continuous and homogeneous, CHILE material is also isotropic in that if I squeeze it one way, it is no different in its behaviour than if I squeeze it in another direction.  It is linearly elastic in that it stretches in a roughly linear fashion.

47.	An example of CHILE material would be an ordinary rubber ball.  If two slits are cut in it, the rubber ball is turned into DIANE material.  It is no longer homogenous because it has the slits and it splits.  It is anistropic because although if I hold it together and squeeze it, the ball will behave as before, if I pull it apart, it will disintegrate.  These are circumstances which may affect the bearing pressure of the rock and this concept explains in particular why fractured rock is so much less predictable than un-fractured rock.  Professor Hudson said that these considerations  were taken into account in his RMR calculation.

THE WITNESSES AND DOCUMENTS
48.	In their final submissions there were complaints from both parties that the other had not called essential witnesses.  In some cases I was asked to draw inferences that one or other witness was not called by a party because he would have given evidence which was unhelpful to that party.  My approach, as I have explained to the parties, is not to draw any such general inferences.  I shall consider the evidence which has been put before me and decide the issues on that evidence.  Where witnesses have not given evidence, I shall, of course, be free to draw inferences in the context of the surrounding circumstances.  Equally I will, of course, also have regard to the onus of proof in areas where there are gaps in the evidence.  As in my previous judgment, I bear in mind that most of the events took place 7-8 years ago and that the problems occurred in April 1997, nearly two years after the design contract was agreed.

49.	Criticisms were also made by the parties concerning the other’s expert evidence.  I shall deal with those matters in due course.

50.	I should note that each side also makes serious and justified criticisms about the other’s documentary evidence.  The records produced by SCC were minimal.  There should have been available to the court daily or weekly schedules from the contractors, which would have been relevant particularly in the period from June 1996.  

51.	It is equally a matter of criticism that although Arup was notified of problems in the boiler area in late April 1997, few documents were available to show what mapping and other work Mr Manning, Mr Pascal or Mr Quiambao undertook on site.  I was told that the notebooks which contained the contemporaneous evidence had been destroyed but I was given no convincing explanation as to why this had happened nor was convincing evidence given as to what the notebooks contained.

THE FACTS
52.	Arup’s involvement in the project started when Mr Elliott, as the managing director of CEPAS, approached Arup to see whether Arup would be interested in becoming involved as consulting engineers in the project to build the power station at Sual. Mr Elliott gave evidence at the earlier hearing only.

53.	In April 1994 OAPHK made a Design Services Proposal to CEPA.  The proposal started by recalling that Ove Arup had already been the civil engineering consultant for five power station projects in the Philippines at Manila and Pagbilao.  Arup proposed to provide similar engineering services on this project.

54.	The original detailed proposal for design services was submitted behind a covering letter from Mr Ayres, a senior director of the Hong Kong Arup company, himself resident in Hong Kong. (He is also a director of OAPIL). He did not give evidence.  The letter was addressed to Mr Elliott at CEPA.

55.	In November 1994 Arup made a proposal that they would provide a Seismic Design Statement for the project.  By a letter dated 5th December 1994 on CEPAS notepaper, Mr Elliott agreed that Arup should proceed with the study.

56.	The study was completed and on 21st February 1995 an invoice was sent by Arup to CEPAS.  The assessment undertaken at this stage included seismological data, a summary of the geology of the site and soil profiles and site response calculations.

57.	There followed discussions which led to the design contract which was made on 29th May 1995 when Mr Elliott countersigned the letter from Mr Ayres dated 23rd May 1995.  

58.	As I held at paragraph 251 of my previous judgment, the terms of the Letter of Intent comprised the offer Revision C which sets out the scope of the works, the design principles, staffing and a basis for fees. On 11th/12th May 1995 a work programme had also been agreed.  It was also agreed that the provision of technical and site supervision would be undertaken by a joint team.

59.	The letter dated 23rd May 1995 needs to be quoted extensively.
			‘Dear Sirs,

			Sual Power Station

Following our recent meeting, we would like to confirm the agreement reached on the following principles relating to our appointment as civil engineering designers on the Sual project.

1)	the work scope will be as detailed in our previous offer (Rev.C 11/4/95) with the following changes.  The following packages are excluded from the design scope.

Landscaping, Steelwork, Fabrication, Drawings.

                                   The following work packages are included but deemed to be                           
based extensively  on schemes developed for Pagbilao …

2)	Concept Design will be undertaken by the Arup team based in the Hopewell Centre.  Preliminary and detailed design will be undertaken from a project office established in Tileman House, Putney.

3)	the fee for concept, preliminary and detailed design of the defined scope of the works is to be £3.75 million.

4)	the cost of the design services will neutrally funded …

5)	payment of sterling fees… (not relevant)

6)	the provision of technical site supervision and quality control by Arup/CEPA Slipform shall be based on the formation of a joint team.  The detailed arrangements and associated fee are to be the subject of discussion and agreement at a later stage…”

60.	By the terms of the Letter of Intent dated 23rd May 1995, incorporating the terms of the Revision C proposal of 11th April 1995, Arup agreed to undertake the preliminary and detailed design of the plant including the boiler house foundations.  The Revision C proposal identified Phase 1 as concept design including preparation of schedules of leading quantities to + 10%. Phase 2 is set out as ‘preliminary and detailed engineering, including preparation of steelwork fabrication drawings and integral temporary works design plus contingency on accuracy of estimating design costs at 10%’. At that stage what was described, as ‘Total Design Cost’ was £3.67m.  Phase 3 is identified as technical site supervision, which was under the terms of the Letter of Intent to be the subject of further negotiation.  

61.	Phase I was to be carried out by Arup from Hong Kong.  Phase II was to be carried out by Arup from London.  Dr Oldroyd was placed in charge of design for the boiler house area.  Mr Higson was formally designated as Project Manager.

62.	By 20th April 1995 some preliminary work had been carried out and two faults across the site had been identified by aerial photography.  Dr Redding recommended prudently that a resistivity survey should be carried out in order to define the position of the faults more precisely.

63.	In early May 1995, Arup engaged Geomatrix Consultants Inc. (Geomatrix) to undertake a surface fault rupture assessment to investigate whether or not there were active faults on site.

64.	On 15th May 1995 Mr Bowden, a senior Arup geologist who was employed to carry out preliminary geological mapping and evaluation of information obtained from digging trenches on site, expressed criticism of the work which Geomatrix was carrying out on site and anticipated that their report would not be satisfactory.  He told Dr Littlechild, the very senior Arup geotechnical engineer, that it may be necessary to do a more detailed site investigation.

65.	The Geomatrix report is dated 24th May 1995.  The report concluded “based on the available information, it is not possible to conclusively demonstrate there are no Quaternary active faults at the proposed site for the Sual Power Station. However, no evidence indicating the presence of faults having geologically recent… surface fault ruptures was observed and the available information suggests that there is little or no potential for surface fault rupture at the site during the design life of the proposed facility.”

66.	This report, which Arup did not regard as wholly reliable, was based on a review of existing data including aerial reconnaissance, interpretation of aerial photographs, site mapping and structural geology.

67.	By June 1995 Arup had decided that a further and more detailed site investigation was required in order to assess the soil properties including load-bearing capacity.

68.	On 13th June 1995, Arup set out in a paper entitled “Sual Power Station Foundation Design” what further information was, in its view, still required in order to enable it develop a detailed design.

69.	On the basis of the borehole records produced to date, it was envisaged that the foundation design would require developing for a variety of ground conditions including:
i)	rock formations capable of providing allowable bearing pressures in the order of 5,000KPa.
ii)	natural weathered rock and soils or alluvial material giving allowable bearing pressures of 150/500 KPa
iii)	reclaimed or filled areas formed of suitable material.
70.	It went on: 
(a)	“Further detailed on-shore and off-shore geotechnical site investigations are required in conjunction with material testing to assess soil properties including bearing capacities, potential for liquefaction, settlements and differential settlement…

71.	(b)	“Wherever possible, all major structures will be founded directly on to rock formations of high bearing capacity resulting in minimum settlements.  Where the rock strata is relatively shallow or construction is located in cut, this will be achieved using reinforced concrete pad or beam footings.  If the rock strata is at greater depth and overlain by unsuitable founding material, reinforced concrete bored piles will be considered bearing on or into the rock…
72.	(c) 	Relating to re-claimed land it said “In some areas, structures or station facilities will be constructed on reclaimed material. The properties of the reclaim material including soil strength, bearing capacity, compressibility, moisture susceptibility and liquefaction potential will be evaluated by site investigation and appropriate in situ and laboratory soil tests.  Major structures will generally be founded on piles to limit settlements, but for secondary structures, ground improvement and consolidation will be considered as well as appropriate raft foundations designed to accommodate anticipated settlements.”
73.	The work of detailed ground investigation in the area of Boiler Unit 1 could not be carried out immediately because, as Dr Oldroyd said clearly in oral evidence, it was sited beneath the hill that was to be removed in the course of the site preparation works.
74.	An Arup meeting of 30th June 1995 identified a trial pit, TP1, which needed to be dug next to Boiler Unit 1 to find out where the moderately weathered rock was situated.
75.	On 12th July 1995, at a meeting at Arup’s Offices in Hong Kong to review the concept of the project, the question ‘what bearing capacity can we assume for the rock?’ was raised specifically in relation to the Turbine Hall which was adjacent to the boiler house.  Dr Littlechild advised that the bearing capacity was in the range of 3MPa (shallow rock) to 10MPa (slightly fractured).          
76.	On 14th July 1995 at a very high level internal Arup meeting to review what might be required as further site investigation, the approach to the location of boreholes for the preliminary site investigation was explained.  The purpose was to try to establish the overall site topography, particularly in relation to the rock profile over the land based site and shore line areas.
77.	At the meeting, Mr Fox, ‘voiced concern that no bore holes or trial pits had been carried out in the power block area’.  It was pointed out that trial pits which could only be dug to five metres below ground level had been carried out at Boiler Units 1 and 2.  Dr Oldroyd expected that after the hill was removed, strong rock would be found at the formation level of the boiler house. This was a general expectation which he continued to have and may have influenced his later conduct.
78.	After these two meetings, Dr Oldroyd also reached the conclusion that the rock beneath the boiler house had an expected bearing capacity of between 3 MPa and 5MPa.  He concluded that the four main foundations for the Unit 1 boiler house should be concrete pad foundations.
79. 	There were two internal Arup meetings on 7th and 8th August 1995.  Those present expressed concern at the adequacy of the existing information as a basis on which Arup would prepare its design. 
80.	As a consequence, on 11th August 1995, Arup prepared a document entitled ‘Quantification of Geo-technical Inputs required by the Project Team’ at the detailed  Design Stage.  In it, Arup envisaged that there would be a detailed site investigation reviewing all the geological information and calculations to assess the bearing capacity of the relevant ground. In particular, the report noted in relation to the boilers, that the boilers were to be constructed on shallow foundations on the rock.  “It is therefore important to assess the bearing capacity of the rock head.”
81.	Dr Redding was asked to review the existing data and to provide a geological overview that would assist in planning further site investigation work.  He wrote a comprehensive report dated 17th August 1995 for Dr Asim Gaba who was then in charge of Arup’s geological team on site.  
82.	The report ended: “in summary and not wishing to be overly critical, it is evident that for a project of this size and importance, more attention should be being paid to basic and fundamental geological issues”.  
83.	Earlier he analysed the onshore bedrock. He said that excavation of the rock by heavy mechanical earth-moving plant was likely to be straightforward because of the extent of fracturing.  He noted that excavation of less fractured and less altered rock might well necessitate blasting.
84.	In the report, Dr Redding gave a word of warning that ‘the variable and often low strength of the rock, even at considerable depth, may cause foundation problems for heavily loaded structures.  Digging deeper in an attempt to expose better quality rock will generally not be a viable solution.’  
85.	There is no dispute that the Boiler Houses 1 and 2 are heavily loaded structures. This assessment, which was accepted by Arup’s expert Dr Endicott, encapsulates the assessment of the ground on which the boiler was to be designed.
86.	Dr Redding’s proposals for further investigation did not at this stage include bore holes.  He said “since the bore holes that have so far been drilled have highlighted what can best be described as a consistent variability rock material, there seems little point in drilling more exploratory holes to try and better characterise the rock.  Further investigation should, therefore, be aimed at better defining those rock characteristics that will have a direct bearing on the particular construction….”
87.	He went on to set out what in his opinion should be done.
	“Since the earthworks and foundation excavation work has already started on site and the rock has been exposed in a number of places, it would seem sensible to use these exposures to gain a better picture of the specific character and the variability of the rock across the site.  This would best be done by careful engineering – geological mapping of rock exposures, recording dip and direction of joints and faults and noting areas of brecciation and serpentinisation.  This would be combined with feature-mapping in non-excavated areas.  The aim would be to piece together this geological map information, and with the existing bore holes, to progressively build up a more global picture of the geology of the site.  However, this would need to be done both systematically and conscientiously if it is to be of any use in predicting rock conditions in other, as yet undeveloped, parts of the site.
In particular, there needs to be a more systematic approach to basic rock description and to the measurement of rock strength since the latter is likely to be a key parameter influencing various aspects of the design and construction.  A portable Point-Load test machine, on site, would be the most effective way of accurately measuring rock strength.”
88.	Put shortly, Dr Redding was recommending a ground investigation by accurate and detailed mapping as his preferred way forward.  He amplified his views in oral evidence.  He envisaged recording on a map the variations in rock strength in the area in question, marking the orientation and dip of the discontinuities, and the nature and extent of weathering or alteration of the rock.  The rock strength would be assessed by a point load machine.
89.	I should interpolate that the point load test is a test done in a laboratory on a sample in order to assess the strength of a small rock piece.  It is described in the Report as the most effective way of measuring accurately what can be carried out with a geological hammer.  
90.	This approach is criticised by Mirant which says that boreholes were necessary once the hill was removed to understand the ground conditions at depth.  Mirant argues in addition that even if one accepts Dr Redding’s approach, the later mapping and verification by Mr Manning and Mr Pascall fell far short of what Dr Redding envisaged.       
91.	There seems to have been a difference of approach between Dr Redding and Mr Roberts.  Mr Roberts did not give evidence in this part of the trial but the note of a meeting on 14th August 1995 (at which Dr Redding was not present), speaks for itself.  Mr Roberts said that not only was there no need to do laboratory tests on the rock cores to calibrate the rock strength against the visual description (presumably using bore holes to obtain the rock cores) but he was also of the opinion that no further site investigation was required in areas where buildings were to be founded on rock other than by monitoring and confirming the rock head level after the contractors had done the work of preparing the site.
92.	The debate was clearly a continuing one because, in a fax to Mr Higson on 23rd August 1995, Dr Asim Gaba suggested a limited use of bore holes. ‘Our view is to have a few reliable well supervised marine and land-based bore holes in favour of many unreliable ones.  These would calibrate the off-shore geophysical work and the on-shore rotary percussive probing.  In this way we can maximise the benefit whilst minimising the cost.’
93.	On 25th August 1995, Dr Littlechild gave his response to Dr Redding’s memorandum.  He had worked in Hong Kong and the Philippines since 1978.   He said at Paragraph 4 ‘Foundations: we have to agree an allowable bearing pressure which should be done on the basis of visual inspection and simple index tests… I would expect 3MPa on moderately weathered rock given that I tested 10MPa on moderately weathered granodiorite,’ and
“8.	Sadly it will not be possible to get higher quality bore holes with this client as we have already spelt out. We can, however, improve on the logging.”
94.	Dr Redding was nominated by Arup to act as the main advisor on geology and interpretation of ground investigation information and he went to Sual on 13th September 1995.  His visit lasted until 20th September 1995.
95.	His initial impression, recorded in a daily site note, was that ‘despite much rock exposed and current widespread drilling and blasting activities, there is little fresh rock anywhere.  Rock is generally moderately to highly weathered and moderately closely to very closely fractured’.  I was told that it was evidence of weakness to have moderately closely to very closely fractured rock.
96.	In the course of his visit, Dr Redding observed the fault, which was orientated east-west.  Although there is some doubt as to precisely where the fault ran, in the crucial December 1995 and January 1996 memoranda Dr Redding worked on the basis that the fault ran under or was adjacent to G2 and G5.  This fault, discovered by Dr Redding, was referred to in the trial by the shorthand description ‘the Redding fault’.
97.	In October 1995 the position of the chimney located to the south of the boiler house was changed because Arup discovered poor ground at the anticipated site.  As a result of this, the position of Boiler Units 1 & 2 were also changed. On 16th October 1995 the Civil Works Project Design Basis (first issue) noted at paragraph 3.3 that the foundations were to be completed after a Site Investigation.
98.	Arup’s detailed proposals for further ground investigations went through various drafts between September 1995 and December 1995.  The purpose of the proposals was to set out the further ground investigations which needed to be undertaken and interpreted by Arup before Arup could move to Stages 3 and 4 of the design process, namely the identification of final design parameters based on new site investigation data and compilation of the final design basis statement.
99.	It is clear that Arup was becoming worried about the cost against its own budget.  In a memorandum from Mr Fox at this time, he said that there was a deficit of 974 man hours against target.  The minutes of a meeting on 24th November 1995 between Mr Fox, Dr Redding, Dr Asim Gaba and Mr Nyambayo now Arup’s chief geotechnical engineer on the project, made it clear that the proposed scope of the ground investigation represented a compromise.  The technical ground investigation proposed in October 1995 was to be amended to reflect the compromise (by deleting the reference to percussive probe holes).
100.	It is clear that Dr Redding became concerned at the progress of discussions about the scope of the ground investigations.  Dr Asim Gaba said as much in a memorandum to Mr Fox dated 28th November 1995.  The current position was set out at the end of the memorandum.
“Your current view regarding this matter is that when GI commences on site (possibly next week) John Redding should make a visual assessment of conditions at the site in areas of current and proposed temporary and permanent cut slopes and make appropriate recommendations based on his observations for further work necessary for the assessment of slope instability.  You currently believe that there would be no difficulty in persuading CEPA to carry out additional surveys and put down additional bore holes, as appropriate, to provide the necessary information to enable slope stability  assessments to be carried out at the site.”
101.	The final version of the ground investigation proposal was dated 21st December 1995.  It was prepared by Dr Redding and Mr Nyambayo, was checked by Mr Fox and was then approved by Mr Higson on 5th January 1996.  The paper reviewed the existing data.
102.	It said in relation to the existing boreholes:-
“While useful in providing an overall impression of the soil and rock conditions on the site, these bore holes are of limited value for foundation design purposes since they are not located with respect to specific structures.  The bore holes indicate a variable rock head level beneath the site but they do not provide sufficient information on this variability in critical areas where rock will provide the founding stratum.”
	“The bore holes were also drilled prior to any site preparation earthworks so foundation conditions in reclamation areas are, therefore, not adequately defined.”
103.	The proposal went on, “The bore holes are also of limited value in assessing soil stability and consolidation behaviour under static and earthquake loading, and for accurately assessing the quality of the rock for both foundation loading and suitability for use in construction.”
104.	The Proposal noted under the heading ‘Geology’, that all the various rock types have experienced  “a considerable degree of weathering and alteration, which has extended down from the surface to varying depths… All grades of weathering, from completely weathered residual soil to very strong un-weathered fresh rock, are present and have been encountered in boreholes and during the site preparation earthworks.”
105.	The Proposal went on at paragraph 4.1 to list the requirements for geo-technical information for on-shore areas (including areas of reclamation).  These included 
-	“depths to rock (i.e. founding stratum) for heavily loaded structures in those areas where rock is not exposed at formation level;
-	strength and consolidation characteristics of natural soils and fill materials in reclamation areas where heavy surface loads and structures are to be placed”.
106.	Under the heading of ‘Proposed Ground Investigation Methodology’, for on-shore areas, the Proposal recommended Rotary Percussive Probing, Geotechnical Bore holes, and surface mapping and trial/observation pitting.  It said that ‘where bedrock is exposed at formation level, surface mapping will provide the most suitable means of assessing foundation conditions for particular structures’.  The report also noted that mapping may need to be supplemented by trial pitting in areas of thin soil cover.
107.	The Proposal recommended (4.3.3) that Arup ‘would provide full-time supervision by an experienced engineering geologist for all of the ground investigation work…He will also undertake engineering – geological mapping of exposed formation areas to correlate with the trial pits and boreholes and take samples of different rock types for assessment of aggregate suitability.’
108.	The details of the proposed ground investigation for the main power plant were set out in paragraph 5.1.1.  This paragraph went through various changes.  In its final form it said:
“The ground investigation around the chimney area of the power plant has recently been completed…  In the remaining areas to the North, South and West of the power plant where rock is at shallow depth mainly in areas of thick soil cover, five trial pits and two probe holes are proposed.”
109.	The September 1995 version was different in that it included limited boreholes.
“The ground investigation around the chimney area of the power plant was recently completed.  The investigation comprised limited bore holes and extensive probing.  In the remaining areas to the North, South and West of the power plant rock is taken at shallow depth.  In these areas five trial pits and two probe holes are proposed.”
It then added “The geology in the remaining area consists of fill overlying thick deposits of marine deposits and residual soil.  Three boreholes will be used to confirm foundations.”
110.	It is common ground that no boreholes were undertaken.  None of the proposed probe holes was located at the site of the Unit 1 boiler house.  Only one trial pit was located adjacent to G2 but in the event was not excavated in that position.
111.	The claimants say that the reference to bore holes confirms their contention that boreholes at or immediately adjacent to the site of the boiler house should have been undertaken in order to verify the ground conditions once the hill had been removed.
112.	Dr Redding was working at the time with another geotechnical engineer, Andrew Talbot.  Mr Talbot was about to leave the employment of Arup.  Mr Talbot wrote a letter dated 20th December 1995 to Mr Nyambayo ‘with modifications by John Redding’.  The purpose of the letter was to summarise the existing information in relation to the area at and around the proposed power block and to make recommendations.  The subject was described as ‘Sual Power Station – Design Parameters for Boiler Foundations’. It was a heavily qualified letter, which could be said to approximate to a preliminary design basis statement.  
113.	It started by emphasising that any projection of ground conditions from existing bore hole data was rather uncertain. ‘The best that can be done is a rather generalised interpretation based on all available information.’  Dr Redding had known that this was the position since his memorandum of 17th August 1995.
114.	The letter demonstrated that Arup knew that the nearest borehole to the site of the boiler house foundations was at BH10 more than 100 m away from G2.  This borehole showed very poor rock.  This borehole was even further away from G5.  Dr Redding accepted in evidence that the information from that borehole was used by Mr Talbot as the primary source in producing the recommendations in the memorandum.  
115.	The letter noted that there had been no standard penetration tests at borehole BH10 at the intended formation level.
116.	The letter identified the two faults and entered the caveat that ‘the proximity of these faults may have implications for the relative strength of the rock mass as seen in BH10 and BH9 and at the footing locations.  It would therefore be more appropriate to use the lower bound values for strength and modules given above.’
117.	The letter concluded that ‘taking all these factors into account, an appropriate maximum allowable bearing value for all four footings would be 800kN/m2 or 0.8 KPa. There is a later manuscript amendment by Dr Redding altering the figure to 3KPa in circumstances, which I shall describe.

118.	Dr Redding confirmed in evidence that the fault which he had identified was in the area of the proposed boiler house.  Also in oral evidence, Dr Redding confirmed, what was evident from the heavily qualified letter, that the content of the letter and the recommendations were to enable the design to be progressed in its preliminary form.

119.	Dr Redding said in evidence that he received the response from Dr Littlechild, Mr Higson and Mr Fox that the allowable bearing pressure specified in the 20th December 1995 letter was too low.  Dr Littlechild said in evidence that, while he thought it was significantly too low, he did not remember receiving a copy of the memorandum or making the comment to Dr Redding.  I was not impressed with Dr Littlechild’s recollection on this and other matters and prefer Dr Redding’s evidence.  Dr Littlechild had been to the site and his view would have been persuasive particularly since this was intended to be only a preliminary view.  

120.	On 29th December 1995, Mr Higson sent an e-mail response to Mr Fox concerning the high cost of the ground investigations proposed by Sampaguita, and the need for further savings to be made.  He indicated that Mr Elliott was unlikely to agree easily to the scope of works which was being proposed.  The letter does not go so far as to indicate that Mr Elliott would be obstructive to any investigation which could be justified.  Mr Elliot indicated that Arup needed to be able to say that they had reviewed the scope of the investigations and identified possible savings whenever they could. I regard Mr Elliott’s approach as a businesslike but reasonable one.

121.	The post-script to the e-mail suggested a review of the number of probe holes and trial pits under lightly loaded structures such as the gas area, transformers etc. giving the impression that a “look-see” and a quick heel test by an engineer might be sufficient.  

122.	On 3rd January 1996 Mr Nyambayo added his comments on the scope of the proposed ground investigation. He resisted any attempt to cut it back further noting that the present scope itself represented a compromise.  In relation to the quality of the rock which had an obvious bearing on the allowable bearing value, he warned: ‘John (Redding) has emphasised that the rock at Sual is highly fractured and altered hence due caution should be exercised when predicting its competency’.  

123.	This view was incorporated later into Arup’s advice to Mr Southey at CEPAS on 5th August 1996 which was that whilst Arup would continue to keep the scope of the Ground Investigation under continuous review it did not recommend any reductions in scope at that stage.  It regarded probe holes as the most efficient way forward enabling the use of boreholes to be restricted.

124.	On 4th January 1996 Dr Redding issued a new version of the 20th December 1995 letter.  There were a number of changes from the earlier letter.  The crucial change was in the last paragraph which now read ‘taking all the known ground condition factors into account, an appropriate maximum allowable bearing value for all footings would be 300K/N/M2 (3MPa).’ Arup contended in closing speeches that this was a conservative value and that if Arup had done no further work “it would not have mattered because a conservative value was chosen”. It would however have been prudent to check the geology to see that it had not changed once the hill had been taken away.

125.	The revised estimated weight bearing capacity thus showed a 375% increase from the previous figure of 0.8MPa.  On one view the lower bearing pressure would itself have been too low for the type of footing being considered for the boiler house.

126.	In his witness statement, Dr Oldroyd says that the effect of the change was that the dimensions of the foundations were 3 to 4 times smaller than they would have been if the maximum allowable bearing value for the ground at the foundation had been only 0.8Mpa. This enabled a considerable construction cost saving to be achieved.  

127.	There is no allegation that Dr Redding’s revised estimate was negligent. In my view it was not negligent but it had to be understood in the context that it was a preliminary assumption which was to be subject to a detailed process of verification. It was important to emphasise, as Dr Redding did in both the original and revised memorandum, and again in oral evidence, that the estimate was intended to enable the design to be progressed in its preliminary form.  

128.	Dr Redding said clearly in oral evidence that he had been surprised to discover that, his preliminary design assumptions were used for the final design. I accept his evidence.  His was intended to be a working assumption which would need to be verified before work on the final design was complete.  The verification process could have been expected to provide the design team in London with an assessment either confirming the design assumption or indicating the changed assumption that the designers would need to take into account.  In his oral evidence Dr Endicott agreed that a degree of reassessment was required as the design went on.

129.	Dr Oldroyd in London did not wait for any confirmation of the crucial assumption as to the maximum load bearing stress before starting the detailed design of the boiler unit.  

130.	In his witness statement, Dr Oldroyd said that Arup commenced the detailed design of the foundations in about January 1996 and that he supplied Mr Hontucan with the design criteria including:

“a)	a maximum bearing stress (assumed safe bearing capacity) of the ground of 3,000kN/m2 or 3MPa (taken from John Redding’s memorandum of 4 January 1996) …”

131.	He said later in his statement
“53	I was not concerned with the issue of allowable settlement of the foundations in preparing the design of the dimensions of the foundations as this was a matter which should have been taken into account by the geotechnical teams when providing the assumed bearing stress figure for our design.”

132.	In his witness statement, Mr Hontucan made it clear that he was involved in the detailed design of the boiler house foundation in January 1996.  He confirmed that the design team’s remit was to design the foundations within the maximum bearing stress figure, which he was given.  As he said at paragraph 28 of his witness statement ‘I was not concerned with this particular issue as I assumed that the Arup Geotechnical team had satisfied themselves that the actual stress bearing capacity of the ground under the F8 foundations was equal to or more than the assumed maximum bearing stress used in the design of the foundations’.

133.	There was already a gap in Arup’s chain.  Dr Redding made what he intended to be a highly provisional assessment which had been implemented by the design team as a firm assessment. Dr Oldroyd’s witness statement (para 41) made it clear that it was for the Geotechnical team to undertake particular studies.  He would wait until they responded with the relevant information and until he received further information he would proceed on the basis of the existing assumption.

134.	Arup has emphasised in its submissions that CEPAS (Mr Elliott) instructed Arup to proceed with the detailed design at a time when not all the information was available.  It appears from Mr Hontucan’s evidence that Arup’s design team was willing to implement the instruction to proceed with the detailed design because it thought that Arup’s geological team had made a firm assessment.

135.	On 6th February 1996, as he said at paragraph 54 of his statement, Dr Oldroyd prepared a draft of the Boiler and Milling House Design basis.  The draft was passed to CEPAS for review.

136.	Under paragraph 6.1 (titled ‘Geotechnical’) Dr Oldroyd said:

“the boiler house and milling house are assumed to be founded on rock.  This has an assumed safe bearing property capacity of 3MN/m³.  Further GI (ground investigation) work is intended to confirm the value (sic) at an early stage of the design and to establish that the foundations will be founded on consistent material.”

	He made it clear that the figure was taken from Dr Redding’s memorandum of 4th January 1996.

137.	Dr Oldroyd explained in his statement that he understood that it was intended that Dr Redding’s assessment should be confirmed by further ground investigation work.  He said that there was also to be surface mapping and visual inspection by the Arup geologist on site who was supervising the ground investigation.  It is apparent that Arup agreed to proceed with the detailed design leaving the load bearing assumption (which Dr Littlechild thought was conservative) to be verified later.

138.	Dr Oldroyd said that the final draft design for the plant was not issued until 2nd October 1996.  On this basis he said that there was ample time to change the key assumptions if they were not borne out by the further investigations.  He noted, however, that the design for the boiler foundations was finalised in about mid-1996 (after he had ceased to have any day to day involvement in the project).  

139.	The design process was effectively completed with the issue of the first construction drawings of the Unit 1 boiler foundations.  I conclude that in practice if changes were to be made in the design of the boiler foundations the information needed to be available by, at the latest, mid-June 1996.  This was before Mr Pascall’s visit to Sual in late July 1996 on which much evidence has been given.

140.	In January 1996 Arup was expecting to be involved on site in two separate capacities.  It was expecting to supervise the ground investigations.  In respect of this a contract was being negotiated which was finalised with Mr Elliott on 15th or 16th March 1996.  Secondly, it was expecting that the person who was supervising the ground investigations would also be involved in surface mapping and visual inspection to verify important assumptions relating to the geology which needed to be established for the detailed design and in particular confirming or otherwise the assumption that the safe bearing capacity of the four footings supporting the boiler house was 3MPa.

141.	Whilst work was progressing towards the detailed design of the plant, discussions were taking place as to Arup’s involvement in the supervision of the ground investigation works.  NSBC, who were employed by SCC as contractors, were on 5th February 1996 instructed to proceed with the work, which had been specified by Arup. Drilling of boreholes on site commenced on about 6th February 1996.  NSBC employed Geotechnics to carry out the work.  

142.	On 22nd February 1996 Arup issued its proposal for the supervision of the ground investigation entitled ‘Civil Engineering Works – a Proposal for Ground Investigation’.  Mr Manning worked with Dr Redding on the project.  It was envisaged that Dr Redding would continue as the lead geotechnical engineer and that Mr Manning would remain on site until a more junior replacement was thoroughly familiar with the task and the equipment in use.  Mr Elliott was unhappy with this because, not altogether surprisingly, he wanted one engineer to supervise the ground investigation throughout.

143.	On 8th March 1996, Arup reviewed its earlier proposal.  It was this later proposal which Mr Elliott initialled as approved on 15th or 16th March 1996.  Under this separate agreement between OAPIL and CEPAS, OAPIL agreed that the client would be responsible for carrying out the ground investigation but that Arup would provide an engineer to supervise the ground investigation.  This engineer was to be someone who was qualified to fulfil the requirements of a site foundation engineer in approving ground conditions for foundations.  This agreement included the FIDIC Form conditions of particular application including the limitation on OAPIL of £4,000,000 in respect of liabilities arising under this agreement.

144.	In late March or early April 1996, Dr Redding, with the assistance of Mr Manning, prepared a comprehensive briefing note.  The note included the assumption that the load bearing value of 3MPa applied, taking known ground conditions into account.  It was made clear that there was a degree of uncertainty in the ground conditions which were known to be variable.

145.	At a meeting on 12th April 1996, between CEPAS and NSBC, they discussed the progress of the ground investigation and the need for the formations to be checked.  Item 3.3 of the Minutes stated that “NSBC stated that they will commence blinding on a part-time basis as of April 15th and on a full-time basis as of May 1st … R. Higson (Ove Arup) advised that their geologist will be on site as of April 15th to inspect excavations prior to blinding and to witness boreholes.”

146.	Mr Manning arrived on site on 13th or 14th April 1996.  He explained in oral evidence how he had been briefed for about a week in the design office in London and had then flown to Hong Kong and had a further briefing from Mr Higson who accompanied him to Sual.  He started work immediately and remained on site from 13th April 1996 to 28th June 1996.  

147.	Mr Manning said in his second statement that the purpose of his visit to Sual was the general one of gaining a fuller understanding of the ground conditions.  He does not mention the review of the design assumption as being a specific task.  He said in evidence that he undertook the mapping of excavations when he was asked to – no doubt as part of his duty to supervise the ground investigation.  

148.	As a result of his participation in the preparation of the briefing pack Mr Manning was aware of Arup’s concern about the current state of information.  Under the heading ‘background information’ the briefing pack emphasised ‘The proposed GI works form the main (design) ground investigation and as such the information will be critical to the foundation design for the various components of the power station.’ 

149.	The importance of further investigations was emphasised in the briefing note.  ‘The main power plant, because of its high loading, has purposely been located on rock.  However, the quality of the rock is very variable due to faulting, fracturing, deep weathering and alteration.  The rock quality at formation level and each foundation formation will be an important factor since much of the rock will now be exposed. Rock quality can best be assessed by dual visual inspection combined with some shallow pit probing.’  

150.	The note went on to give guidance under the heading ‘Primary Supervision Dates’.  It noted that ‘Arup’s supervisor will be expected to prepare a daily site progress report and preliminary logs for bore holes and probe holes, also schedules of proposed lab tests and lists of completed tests.  Since these data will be used for on-going design work and may be critical to the final location of certain structures, it is very important that all of the logging of information arising from the investigation is kept up to date and communicated to the design team.’

151.	‘In addition to supervising the bore holes and probe holes, mapping and recording of ground conditions in foundation pits and trenches will need to be undertaken, together with more general surface mapping in exposed rock areas.’

152.	It follows from this that Mr Manning and Arup knew that the existing information on ground conditions was unreliable and needed to be subjected to a detailed and careful verification process, the results of which were communicated to the design team. They also knew that there was a particular concern that the quality of rock was variable under the main power plant including the boiler house.

153.	Mr Manning said in his statement that, based on what he had been told, and on his previous experience, he was aware that considerable variations in weathering (and therefore rock strength) could occur over very short distances and that these changes could expect to be most pronounced in fault fracture zones where the increased density of fracturing would enable ground water and therefore weathering to permeate to a greater depth.  He said that whenever he was examining bore hole samples, trial pits and excavations, he was always on the lookout to identify localised zones of deeper or more intense weathering.

154.	There is no doubt that Mr Manning was well qualified for the task.  At the outset he devised and implemented a new bore hole numbering system.

155.	I accept that there were problems with NSBC’s work.  Work on the ground investigation was very slow.  Aspects of the plant layout had not been finalised.  This delayed progress.  Mr Manning expressed concern (which I accept) at the ability or lack of ability of those carrying out the work to perform all the work that had been proposed.  One of Mr Manning’s responsibilities on site was to decide the location of bore holes and trial pits in conjunction with the Sampaguita surveyors.  Some trial pits were moved due to obstructions.     

156.	Mr Manning had a particular expertise in mapping by aerial photography and he took many photographs including photographs of formation blinding in the area of Boiler Unit 1.

157.	In Arup’s technical specification, a trial pit was to be carried out adjacent to G2.  This trial pit had been identified by Mr Elliott as one of the priority areas (see the fax from Mr Manning to Mr Higson of 15 April 1996).  In fact this trial pit was moved some 30 metres away from its proposed location and there was therefore no ground investigation work underneath or immediately adjacent to Boiler Unit 1.

158.	In May 1996 work began on excavating the formations of the turbine hall and the boiler house. It is clear from Mr Manning’s site record that  the formations for G2 and G5 were excavated on 23 May 1996.  This is clear from daily inspection reports which appeared from 17th May 1996.

159.	The foundations, which had been approved after blinding by Mr Manning, had been constructed to the wrong orientation and depth by the contractors.  The formations had to be removed and reconstructed.

160.	Mr Manning said in cross examination that he was not aware that the excavation and blinding of G2 and G5 had taken place in May 1996 while he was on site.  He said that he had not done any mapping in the plant area. ‘By the time I had arrived, the hill had moved down.  Most of the exposures were covered by a thin veneer of gravel so it was not feasible to be doing mapping in the plant area.’ This was unfortunate in view of the tentative nature of the load bearing assumptions and the detailed mapping which Dr Redding had prescribed.

161.	It is apparent that the system for approving the ground investigation was not going smoothly.  On 28th May 1996 in an Arup Site Visit Report, Mr Manning wrote a summary of progress as of 28th May 1996.  Although four rigs had been mobilised, only two were in action.  These two rigs suffered from mechanical breakdown and were idle for about 30%-35% of the time.  Progress was extremely slow.  The bore hole logs showed a large amount of conflicting information. The Report noted that in a number of areas, including the boiler area, formations had been blinded and that “in most cases there has been no approval before blinding”. The Report indicated the clear need for quality assurance procedures on site.

162.	The evidence of the lack of quality work by the contractors, which I accept, is relevant when considering the utility of the option of further bore holes.  It is also relevant to note that Arup had agreed to design a safe plant and was bound to take the problems of poor and conflicting information, and doubtful quality of work into account when preparing a design for the plant which provided for a safe load bearing.

163.	The problem of the quality of work of the contractor was underlined in a note from CEPAS to NSBC dated 4th June 1996, which noted that G2 and G5 had been excavated to 1.0 PD, higher than the –1.3 MPD advised by Mr Eller’s fax of 17th May 1996.  NSBC was told not to use backfill to achieve the required level.

164.	On 10th June 1996, trial pit TP4 was excavated at a point 35 metres South-East of foundation G5 and South of G2.  The log is difficult to read but appears to record the following:

				“0.0 – 0.2	grey, sandy, fine - … gravel
	0.2 – 1.6	moderately strong – strong, extremely close to medium fractured, grade III BASALT.   Discoloured brown along all fractures.  Broken pieces.  No soil matrix.  North face predominantly fractured.  South face is predominently very closely fractured.  The rock was reasonably easy to rep/excavate due to the large amount of fracturing.”

165.	There is a dispute between the experts Dr Hencher and Dr Endicott as to whether this information by itself should have put Arup on specific enquiry that the assumption that had been made about the allowable bearing pressure in the boiler house should have been reconsidered.  Dr Hencher said that the assumption should have been reconsidered.

166.	On 11th June 1996 Mr Higson made a site visit.  It appears from Arup’s note of the meeting that the systems operating on site were not efficient and that even Mr Manning’s role was not clear.

167.	The note says ‘Turbine Hall and boiler foundations have been blinded (specific bases not recorded during site visit) Note: formations have currently been approved prior to blinding and some are at wrong level.’  ‘There are a number of blinded formations which appear to be “shattered”, “damaged” rock either as a result of subsequent blasting and excavation or because they were never prepared adequately.  One specific formation appears to have been blinded on “rock fill” as a result of over excavation.’

168.	‘It is apparent that currently there is a lack of comprehensive and effective QA (quality assurance) procedures.  Formations are being blinded without approval and it would appear that in some areas formations are damaged or inadequately prepared.’

169.	In relation to Mr Manning’s role, Note 8 observed: “currently there is no engineer from CEPAS or Arups charged with approving formations.  Jason Manning’s specific role is to monitor/record the GI but will advise where possible on rock formations.  CEPAS to advise when other site engineering will be provided.’

170.	Mr Higson said in oral evidence that his understanding was that Mr Manning would undertake the approval process if a formation was ready for blinding.

171.	On 11th June 1996 there was a meeting between CEPAS and Arup. Mr Gildersleve, who had the status of CEPAS Project Engineer, but who performed the function of site supervisor, produced his handwritten note of the meeting. The note registered Arup’s concern at the fractured rock formation and that some formations that had been ‘overdug’ and had been backfilled with rock.  It made it clear that approval of formations would be sought from Arup prior to blinding being placed. ‘Jason (Manning) can witness rock formations’.  He noted ‘Bunker Bay, Boiler, Turbine, Major Columns are vital to be checked prior to blinding as stability is paramount’.
	In his note of the meeting Mr Higson remarked on the need for an engineer to be present on site.
172.	At a meeting in Hong Kong on the following day, the 19th June 1996, attended by Mr Elliott, Mr Gildersleve and Mr Higson (amongst others) Arup’s note starts with the following:

	“1.	boiler foundation medium foot alternative plug/club foot to be developed on 4.5m diameter, 6.5m deep base.  Detailed design will need to be reviewed on site when assessment of rock formation integrity possible, particularly unit 1 where some excavation has already been undertaken.”        

173.	When asked about this in cross-examination, Mr Higson’s answers were rather vague.  He said that he did not instruct Mr Manning (who was not at the meeting) specifically to undertake this task.  There is no reference to any specific requirement on Mr Manning to verify the assumptions that had been made for the design of the foundations of the boiler house.

174.     Mr Manning’s tour of duty ended on 26th June 1996 although he retained an interest in the project.  It seems clear that the project lacked direction.  There was no NSBC site manager on site. NSBC’s work was subject to serious criticism.  Arup’s role, as it was understood by the participants, related to supervision of the ground investigation and approval of formations.  SCC had no manager on site until Mr Smith arrived in August 1996.

175.	In the summer of 1996, there were serious labour problems because the contractor Sampaguita’s employees had not been paid.

176	After he left site, Mr Manning completed his Bedrock Profile Plan   on 18th July 1996 showing the location of grade III rock or better. The Bedrock Profile Plan did not provide any information about the nature of the ground in the area of the boiler house.  It is said that Mr Manning recorded many observations in field notebooks, which are no longer in existence.  I find this paucity of such contemporary evidence surprising since, less than a year later, the movement in the boiler plant had occurred and Arup was investigating its cause.  I am unable to make any positive finding as to the precise nature and extent of Mr Manning’s observations. Further, little or nothing can be deduced from surrounding documents. I conclude on the balance of probability that Mr Manning did not carry out any more detailed mapping than is disclosed in the documents before me.

177.	If the mapping exercise had been given the importance envisaged by Dr Redding there would have been retained in Arup’s archives in London a mapping plan from Mr Manning and/or Mr Pascall showing the ground at and surrounding the No. 1 Boiler with an assessment advising whether any change in the design of the boiler house was required.

178.	Mr Manning was succeeded on site by Mr Pascall.  He is a very senior Arup geologist who was aged 48 in 1996.  He agreed that he was reluctant to go to Sual.  He said in evidence that it was not so much that he felt that supervising the remaining ground investigation work would not be the best use of his time, but rather that he did not expect anything to happen.  He had clearly heard a good deal about the progress of the project since he sat next to Dr Redding in the office in London.

179.	It was intended that Mr Pascall should fly out to the site and arrive on site on 6th July 1996.  He would finish his tour of duty on 9th August 1996 by which time the ground investigation was expected to have been completed.

180.	It might appear from the date of 26th June 1996 on a handwritten memorandum from Mr Bowden to Mr Pascall that he was asked directly to verify Dr Redding’s assumption of the load bearing capacity of 3MPa on site but it is clear from the receipt stamp that the date of the memorandum is in fact 26th June 1997 not 1996.  It is clear that this was not a task which Mr Pascall was asked specifically to undertake.

181.	By 28th June 1996, it appears from the CEPAS monthly progress report for June 1996 that all the drawings for foundations for the boiler area, other than ‘medium foot’ foundations had been issued together with reinforcement details.  CEPAS had commented on these drawings.  Their comments had been actioned and the drawings had been re-issued.

182.	There had been design problems in the boiler area but these were said to have been resolved.  The Monthly Progress Report noted that formation level approval had been sought in the boiler and turbine areas, but in many cases the areas had been blinded out preventing proper inspection.  In some areas it was said that excavation had not been carried out to the required levels and backfilling   had not been approved prior to blinding.

183.	In his written statement, Mr Pascall said that he was asked to go to site to replace Jason Manning to supervise the ongoing ground investigation.  He repeated this in oral evidence.  He said that he did not receive a copy of the memorandum of 26th June 1996 from Mr Fox to Dr Redding setting out various other tasks which Mr Fox thought might make the assignment rather more palatable to Mr Pascall. He is not on the distribution list.  He said in oral evidence that it was likely that he may have seen it. Clearly it did not make an impact or form part of his brief.  The tasks set out in the letter were:

•	Monitoring and surveying earthworks
•	Approval of foundations (prior to blinding)
•	Advice on proximity of blasting
•	Surveying deep rock for significant failure planes
•	Redesign of foundations to suit ground.
             These tasks would have been important in confirming the design.

184.	Mr Pascall does not appear to have taken any relevant briefing documents with him.  He met Mr Manning in Hong Kong at a short meeting of half an hour.  It was not a briefing meeting.  He travelled from Hong Kong to the site with Mr Higson.  They discussed a number of issues on the flight and in particular Mr Higson’s concerns about the contractor.
185.	Mr Pascall was not asked in the course of these discussions to verify the basic design assumption on which the foundations for the boiler house had been designed.  He had not been told anything about the bearing capacity for the formations of the boiler house. On one view this does not seem surprising.  Much of the excavation work had been carried out.  Mr Manning had been charged with the task of mapping.  There was no apparent reason for Mr Pascall to focus on the verification of the basic design assumption.  It was in some respects too late for that since the design of the boiler unit had already been completed.  This should have been a specific task which had already been undertaken, at the latest during the time Mr Manning was on site. And yet, reading the memorandum of 26th June 1996 it appears that at least Mr Fox at Arup had lingering concerns about the quality of the ground on which the boiler unit was to be erected.

186.	It is clear from the Civil Design Work Monthly Progress Report for June 1996 that Arup still had serious concerns about the quality of work and level of supervision. “Formation level approvals have been sought in these areas (including the boiler and the bunker bay), however in many cases these have been blinded out preventing proper inspection.  In some areas excavation had not been carried out to the required levels and back filling has not been approved prior to blinding”. It is also noteworthy that this Report dated 28 June 1996 makes no mention of the need for any verification of the design assumptions in the boiler area.  The section headed ‘Boiler’ is written on the assumption that the drawings are final drawings sent out for comment to the contractors.

187.	There was a site inspection by Arup on 5th July 1996.  This was undertaken by Mr Higson and Mr Pascall who walked over the site.  Mr Pascall said in his witness statement that he was not supplied with any information about the assumed bearing pressure of the foundations until he inspected the formation at G2 and G5 on 23rd July 1996.  He was not aware that he was expected specifically to check the quality of the rock in the Boiler Unit 1 area, although, as he said in oral evidence, in a general way he would assess the quality of the rock as a part of noting what was going on on-site.  Unfortunately, like Mr Manning, he has been unable to provide the court with any of the contemporaneous notes which he says that he made and which were recorded in his notebooks.  Those notebooks he said, were destroyed a long time ago.

188.	Mr Pascall saw his task as replacing Mr Manning.  As well as supervising the ongoing ground investigation, he said that he continued with the mapping on site.  In his oral evidence, he described this task.  This involved assessing the strength of the rock and the alteration which occurred in the hydrothermal environment on the sea bed and which weakens the rock.  The wall chart in the site office seems to show excavations at G2 and G5 on the 15th July 1996 soon after Mr Pascall arrived on site.

189.	On 5th July 1996 an earthworks specification had been agreed with the Contractor.  Clause 2.3.5 provided that “All formations are to be approved by CEPAS before blinding.  Where the material exposed at formation is not approved, the Contractor shall excavate and make good …”  It is important to note that the overall responsibility to approve blinding was, as one would expect, on CEPAS and not on Arup (or SCC the on-shore part of claimant’s consortium).  

190.	On the 16th July 1996 CEPAS (Mr Eller) endorsed his comments on a drawing of the 21st February 1996 for the Boiler Unit 1 foundation plan which he faxed to Arup.  He stressed in an endorsement on this drawing: 

“5 Bases to be founded on un-fractured rock.  All formations to be approved by CEPAS and where necessary brought to level and consolidated using mass concrete as directed by CEPAS.”

191.	On the 23rd July 1996 Mr Pascall was sent a copy of an email of the 4th July 1996 from Dr Oldroyd giving bearing capacities for the boiler and the bunker bay.  The information for the boiler was:-

		“Parameter bases E.W.S are generally 1000 KN/m2.  

		Internal bases except the big ones 200 KN/m2.

		Big bases 3000 KN/m2.”

192.	In oral evidence Mr Pascall said that he may not have received the email on that day, but that he was told on the telephone by Mr Higson what the bearing pressures were before he returned to the boiler house area in the afternoon. This was confirmed by Mr Higson. 

193.	In his oral evidence Mr Higson said that Mr Pascall had requested the information because it was required if Arup was required to approve formations.  Mr Pascall explained that the detailed design had been issued around this time, and he was requesting clarification on what the bearing pressures were for the detailed design that had been issued.  

194.	I conclude that this was precisely the exercise which he undertook on the afternoon of the 23rd July 1996.  It was essentially different in character to the task which Dr Redding had expected to be undertaken before the detailed design stage (or at the latest in the verification of the completed detailed design). It was not based on detailed geological mapping required to verify a preliminary design assumption.

195.	This conclusion is borne out by Mr Pascall’s daily site record of the 23rd July 1996 – “confirmed bearing pressures for Boiler Unit foundation as 3MPa large pads 2MPa other internal pads and 1MPa perimeter foundations.  G9.4(G5) had approved for blinding PM”. 

196.	I must now consider the wider question of what Mr Pascall did on site on the 23rd July 1996. It has implications for other aspects of the case, and in particular whether blinding occurred after that date. It is again unfortunate that no detailed contemporaneous records are available.  

197.	The daily site record of the 23rd July 1996 provides the only contemporaneous record.  It notes that:-

“GPI stopped all work in the afternoon as they still had not been paid by NSBC!”  

“Preparation for blasting at N end of chimney (query can’t read).

Blasting at 1600 hours 

Blinding of [G5] pad at 11.30 (see comments below)

Rock removed from seal weir and pump house excavations.”

198.	In the engineer’s section of the record, before the passage to which I have already referred, Mr Pascall said that blasting had been raised as an issue by GECA.  It was said that no concreting work could be done until the blasting was complete.  Mr Pascall pointed out that this was not strictly correct since they could start, but if it affected permanent works, it was to be done at their risk.  There was then a detailed note about the afternoon blasting.  This is the note which must be taken to record the important points which Mr Pascall wished to note.  

199.	On the 1st May 1997 Mr Nyambayo sent a fax to Mr Pascall telling him that “we have a problem with one of the main foundations to Boiler Unit 1 which were blinded during your stint on site”.  Mr Nyambayo referred to the daily site record and noted that it was not clear whether Mr Pascall approved the quality of the formation, blinding concrete or both.  

200.	Mr Nyambayo noted that:

“The material exposed at formation as viewed on the edges of blinding appears to be highly fractured and weathered basalt possibly Grade III/IV. The formation on the western footing is weaker and on some sections sandy gravel up to 300mm thick underlay the blinding.”

201.	In conclusion, he said:

	“I shall ring you to discuss this further.  In particular, I will be interested to know how the formation was prepared and what you think could be causing the settlement.”

202.	Mr Pascall replied on the same day.  He did not consult any records before writing and said that this was the first occasion on which he had had reason to consider what he had done on the 23rd July 1996.  This provides considerably more margin for error in recollection than if he had been able to consult contemporary notes as one would have expected him to be able to do.  

203.	Mr Pascall said that Arup had not approved any concrete work on site during his time there.  Excavation from the general formation had been by machine and hand.  No rock breakers were available on site, and this was delaying the concreting of the basement slab in the central control building.  He also said that the rock at G5 was weaker than that in the footings to the north “but was assessed by hitting with a hammer to be (Grade) III”. There is of course no note of this.  

204.	Mr Pascall said that Sampaguita………(NSBC) had started blinding the footing before it had been inspected, and that this had affected the southwest corner of the footing.  This is confirmed by the hand written note of the 18th July 1996 from Mr Pascall to Mr Higson: 

“For the east-west excavation steeper cut slopes are being achieved, but are liable to ravel and I don’t think we can justify having high level foundations above the 45° line ….”  

Mr Pascall went on to say that there was material on the footprint so he stopped the work and made them clean up the base.  

205.	He went on in his reply to Mr Nyambayo:

“After the site formation only hard out-crops of basalt could actually be seen in the formation and to the east of the boiler house a fill platform had been laid as part of the fabrication area for the tower crane.  Excavations to the west were at the cooling water intake and the silos.  The strike of the rocks is E-W to the plant grid with a dip of 85° to the south.  The nearest excavations to the boiler house show highly fractured rock but not badly weathered.  Nearly all the rock on site is highly fractured.”

206.	This recollection was given just over nine months after Mr Pascall’s visit.  His further recollections are set out in his witness statement signed on the 10th October 2003, over seven years after the event, and in his evidence in court.  

207.	The account of the 23 July 1996 in his witness statement says that the blinding had taken place in the northwest corner (not the south-west). He was able to step down into the excavation without difficulty, an estimated step of not more than 200 to 300mm.  He observed loose fragments of rock and told the workmen to remove them.  He returned to the site office and telephoned Hong Kong to find out the allowable bearing pressures of the foundations.  It is not clear why he did this since he had not been given the task of verifying the design assumptions given for the detailed designs of the foundations.  

208.	In the afternoon he looked again at the G5 formation.  He made a visual inspection of the rock at formation level.  He could not assess the joint spacing at the sides of the excavation.  He saw no obvious evidence of over-blasting.  He checked the quality of the rock by using a geological hammer.  From the tone of the hammer the rock was variable at formation level across the whole area of the formation.  

209.	In his witness statement he said that he assessed the quality of the rock in G5 not as Grade III overall but as Grade III over most of the area but Grade IV/V on the north-east and south-west areas. He was unable to remember and did not make a note of the extent of the areas, which he judged to be of lesser quality rock.  Overall, he confirmed that he judged the rock to be adequate to sustain the 3MPa allowable bearing pressure for design.  

210.	In oral evidence he said that in the morning he checked the bearing pressures but did not map the foundations at G5.  He saw blinding in progress at G5 on his way back to the hut along the site road.  The blinding had started.  It was suggested to him that the step down was 300mm (1¼ inch) at one end and 600mm (2½ inch) at the other.  Mr Pascall said it was 300 to 400mm at the most overall.  He instructed NSBC to remove the blinding and to clean the footings before he carried out his inspection.  Mr Pascall said that in his witness statement he had guessed the dimensions of G5.  

211.	Mr Pascall walked back to G5 at about 2 p.m. before blasting took place on the chimney hill.  He tested with his hammer and noted that the rock was noticeably weaker in the G5 area attributed to the fact that the rock had been altered by hydrothermal activity.  He found poorer rock in the northeast and southwest areas but he could not remember the extent of the area.  There was harder rock in the centre.  He said that he did not assess or measure or even look at the joint spacing or discontinuities at G5.  

212.	Mr Pascall was asked if he was aware that there was concern that there may be a geological fault running through the boiler house.  He answered he did not know.  He offered the comment that “it would have been an unlikely area for a fault”. None of this evidence is consistent with Mr Pascall undertaking a detailed verification whether by mapping or otherwise to confirm or modify Dr Reading’s preliminary design assumptions.  

213.	Much of this evidence fits in with Mr Pascall’s account given much nearer the time.  I am satisfied that the exercise which he was undertaking was a form of verification that the ground would sustain the bearing pressures that he had been given by Dr Oldroyd on the basis that the geological team had already reached a firm assessment.  It was clearly not the type of systematic verification contemplated by Dr Redding in January 1996.  It amounted to using a hammer and taking a view on the basis of his great experience, but it was not a detailed examination.  The conclusion was set out in the contemporaneous site note.  

214.	In the absence of any contemporaneous records I am not prepared to accept Mr Pascall’s evidence that he could remember that at G5 the blinding was only to a depth of 300 to 400mm.  

215.	The findings of Mr Pascall are also relevant as a starting point in relation Arup’s allegation that the ground conditions changed between those seen by Mr Pascall on the 23rd July 1996 and the 1st May 1997 by which time the unacceptable settlement had occurred.  

216.	 Mr Pascall said that the ground at G2 was also different when he inspected it. He may well have been mistaken when he said that the formation at G2 was incomplete.  The Claimant says that the preparation of the formations took place in the second week in July.  The F & V wall chart shows that the excavations took place on 15th July 1996.  On the basis of either evidence the formations were complete by 23rd July 1996.

217.	I find that Mr Pascall is an excellent geologist who found himself, rather against his will, in Sual with a very ill defined role which did not include a specific task of verifying the load bearing capacities of the rock in the boiler area.  If he had by chance found evidence in the course of his cursory examination, which was inconsistent with the bearing capacities which he had been given by Dr Oldroyd, he would no doubt have recorded it in the site report, or raised the problem in a document which would have been retained and to which my attention would have been drawn.  Clearly, whatever he did, it did not put him on enquiry that Arup was taking a serious risk in designing the boiler house on this site.  Short of this he would not have any incentive to flag up problems to the design team in London (or to his superiors) at a time when Arup had already completed the detailed design and he had not been given the specific task of verifying the design assumptions.  

218.	I am not prepared to make other positive findings on the basis of a recollection many years later of events which he had no cause to remember until over nine months after they had happened, and which had no particular significance at the time.  

219.	It is important to consider the further contemporaneous evidence in order to have a full picture.  On the 24th July 1996 Typhoon Gloria hit Sual.  This caused extensive flooding.  All the formations which were open had to be pumped out.  A Site Minute of the 30th July 1996 from Mr Pascall said that excavations were still flooded after Typhoon Gloria as of the 29th July 1996. The question was raised at one stage as to whether sludge was present under G2 and G5 and whether this was relevant to the issues in this case.  After further consideration, Dr Endicott agreed that this was not a relevant factor. 

220.	There were heavy showers after the Typhoon which no doubt delayed the clearing up process.  Although assessment of all the trial pits was hampered by the amount of water, Mr Pascall was able to obtain some comfort from the findings concerning Trial Pit 21.  The pit was close to the end of the hill.  The purpose of excavating it was to find the boundary between the hard rock and the soft rock.  Mr Pascall concluded that the soft rock was to the south, away from the boiler house.  This, of course, still left the question of the fractured rock which had been commented on consistently by Mr Redding and others.  

221.	Mr Pascall was becoming increasingly frustrated at being on site with nothing to do since nothing was happening.  It may be for this reason that there are no site records at all for the period from the 2nd to the 6th August 1996, the date on which he left the site. He may or may not have been aware of the blinding at the G5 foundation on 6th August 1996.  

222.	On the 5th August 1996 Mr Pascall noted that Mr Grant Smith had arrived on site to act as site manager.  Mr Smith remained on site until after the excessive movement under the boiler house had been noted in the following year.  It was unfortunate that he did not give evidence.  He might well have been able to provide decisive evidence as to what happened on site in the period from August 1996 to May 1997 and therefore whether there was rubble, fill and soil beneath the formations and whether damage was caused to the rock by blasting.

223.	Also on the 5th August 1996 Mr Higson wrote to Mr Elliott to say that Arup had been monitoring work in the power block area, and emphasised that: 

“The heavy fracturing of rock will require some site modification of the planned excavations to ensure adequate formation of the primary foundations.”  

224.	On the 6th, 7th and 8th August 1996 the daily site report records that blinding took place at F8 but does not record whether the foundation was G2 or G5.  The daily accomplishment report shows blinding of G2 and G5 on 9th August 1996.  The site office record shows for G2 “mass concrete and fill” on that date.

225.	Mr Pascall’s note on trial pits led to concern about the water levels on the ground.  On the 9th August 1996 Mr Nyambayo said: 

“In theory ground water levels at shallow depths would be significant in the design of structures like shallow foundations.”

226.	On the 20th August 1996 Dr Oldroyd added his concern about the material on which the structures were being designed.  Dr Oldroyd was shown a photograph of blinding in the bunker bay.  He said: 

“I have raised this with CEPAS and expressed my concern as our designs have been made on the assumption that founding material was rock and not loose material”.  

227.	On 8th August 1996, Mr Quiambao had replaced Mr Pascall as Arup’s representative on site. He was based in Manila and attended the site from time to time.  He appears from records charging out his time to have been a reasonably regular visitor between 9th August and 30th August 1996.  Thereafter some time is charged until 22nd September 1996.  Mr Hontucan visited the site between 23rd and 26th September 1996.

228.	Mr Nyambayo replied to Dr Oldroyd’s letter of 20th August 1996 on the following day.  He said that the bunker bay area had not been blinded but portions of the blinded area had been disturbed by blasting.  He said that the disturbed portions would be cut back to intact rock.

229.	Other parts of the Sual site continued to be excavated by blasting.  It appears from F & V records that work was taking place on site to fix the rebars at Boiler Unit 1.  There is a reference on the 19th August 1996, item 3, to “Boiler Unit 1 installation and fixing of rebars for pad foundations”.  This would only occur when the blasting had been completed.
          
230.	At a site meeting on the 20th and 22nd August 1996 the contractors were told that  blasting work should not be done within a radius of 25m of any foundation construction.  The same note requested the consortium to note that all areas should be reviewed after blasting had been completed and prior to commencement of the foundation work.  Arup emphasised its concern about loose material being present under the blinding.  

231.	On the 26th August 1996 Mr Smith gave instructions that the blasting should be done in a sequential manner enabling areas to be opened up for concreting.  It noted that excavation was continuing in the power block area after blasting.  

232.	Work was clearly continuing in the area of Boiler Unit 1.  A meeting with Mr Garing, NSBC’s Project Manager, noted that some pads had blinding of between 400-500mm.  The F5 pads had blinding of about 300mm.  Mr Garing is said to have concluded that this over cut in some areas of the boiler was probably due to the drilling of the final holes too deeply before blasting for the final elevation.  

233.	Just as in the earlier part of the case where the absence of important documents has been noted, in this period the records of the claimants are also far less than complete.  The parties pieced together the story as best they could. Mirant says that the documents which are available are sufficient to show the work which took place at Boiler Unit 1. Arup says that the records are vague, incomplete and unreliable.  They say that they demonstrate reliably only the poor quality of the contractors.  For example, the formwork for the structure had to be erected at least three times.  They say that there was ample scope for work to have taken place between July 1996 and 23 January 1997 which was not recorded in F & V’s records. 

234.	When he gave evidence Mr Jamieson of Frank and Vargesson (F and V) had to concede that the F and V records were not entirely reliable.  Nevertheless from various documents it is possible to build up a picture of what went on in the boiler house area at Sual.  

235.	There was clearly a widely recognised problem over loose rock.  For example, the Arup daily site record of the 27th or 29th August 1996 referred to areas in the Boiler Unit 1 area which had been blasted but not excavated 

“These areas are being prepared for blinding but have loose rock beneath. (Grant Smith) said he is aware of this”.

236.	The F & V records supported by a photograph show that by 27th August 1996                      the reinforcing cages had been installed on site.  This would follow on from blinding in the first week of August 1996.            

237.	On the 29th August 1996 Mr Quiambao reported to Mr Higson that drilling of blast holes and blinding of footings had taken place.  He reported to Mr Higson that he had pointed out to Mr Smith that these areas contained loose rock.  

238.	Between the 12th and 27th August 1996 F and V documents record the fixing of re-enforcement bars at G2 and G5.  They were not fixed in the correct sequence and had to be dismantled on about the 2nd September 1996 in order to permit the fixing of holding down bolts.  This is one of a number of examples of poor work by the contractors.  

239.	On the 4th September 1996 further excavations took place at the F8 foundations for working space and stub settings.  The settings were blinded on the 9th September 1996 using 2.57m³ of concrete.  

240.	Between the 10th and 24th September 1996 the holding down bolts were installed at G2 and G5.  A note of the 17th September 1996 which came from documents in Mr Jamieson’s possession provided a further illustration of the problems on site.  It was addressed to Mr Eller.  It referred to the contractors’ “over measure and over dig”.  

241.	Part of the problem was that the contractors were paid sums, which were based on the amount of blinding which they had done or which they claimed to have done.  The contractors were claiming payment for blinding in the boiler area of 400-500mm thickness in some parts.  Mr Jamieson explained that the usual thickness was 50mm thick.  In relation to the boiler area the contractors claimed for 10 tonnes of rebars (reinforcing steel bars within reinforced concrete) where no work had been done.  It was noted: 

“Rebars subsequently fixed in boiler area subsequently removed and rebar in CEB blown up in recent blasting.”  

242.	On the 24th September 1996 the holding down bolts were checked and the shoring work was commenced.  The daily monitoring report for that day records: 

“Blasting today at boiler U-1 (cable ducts) … item 4 unit.  Fixing of shoring jacks and checking the centre line of anchor bolts at PAD F8 … blasting at cable ducts …”  

243.	Mr Hontucan, the Arup engineer involved in designing the boiler foundations, visited Sual between the 23rd – 26th September 1996.  His manuscript notes for 23rd September 1996 recorded:

                       “Boiler 1 Anchor bolt setting out for bases F8 progressing.  Excavation                        
                        progressing on both PAD bases.”

This note was confirmed by a photograph.  In the front of the photograph, G2 is shown with the holding bolts hanging down and the steel frame resting on the blinding.

244.	In a note dated the 2nd October 1996 GEC Alsthom blamed the ruling that no concrete could be cast within a 25m radius of blast extremities as a reason why the boiler foundations were behind schedule.  

245.	The Boiler and Milling House Design basis which had been previously issued by Arup in February 1996 after review by CEPAS was reissued.  It repeats the February 1996 wording.  The design assumes that the foundations are on rock with a safe bearing capacity of 3M/NM2.   It still notes that ground investigation is intended to confirm this value at an early stage.

246.	The notes of the weekly consortium meeting (not involving Arup) said that an inspection of F8 bolts was delayed until all blasting operations in the area of the boiler unit had been completed.  The daily monitoring report for the 10th October 1996 did not refer to any blasting having taken place.  (It was scheduled in the blasting schedule for 4.30 p.m.)  The F & V report for the 12th October 1996 noted “blasting today” but did not specify the area on site where this took place. For the boiler unit it referred specifically to the fixing of structural form work at PAD F8 and installation of rebars at PAD footings. It is unlikely, therefore, that the reference to blasting referred to the boiler area although the blasting schedule recorded blasting as taking place in Boiler Unit 1. 

247.	Arup was concerned at the lack of proper site supervision and drafted an agreement that Arup would provide a design co-ordination engineer, a foundation engineer and a document controller to assist CEPAS.  

248.	The NSBC daily reports for the 18th and 19th October 1996 record that the fabricating/installation of the structural framework took place.  The contractor’s boiler record seems to show that structural excavation of Boiler Unit 1 took place between the 1st and 15th October 1996.  The volume of metres³ cut appears to have been 260.  

249.	A note from Mr Grant Smith to Sual’s office in Hong Kong dated the 23rd October 1996,  written in preparation for Brown and Root’s inspection visit on site, said that “blasting in the power block area is still ongoing.  Completion is expected towards the end of November 1996.  The percentage of blasting is at present approximately 95% for Unit 1 (and 75% for Unit 2)”  I deduce from this that some small amount work on the formations remained to be undertaken after 23rd October 1996.  This note is consistent with Arup’s note that “Primary excavation and foundation complete, except where GECA services data o/s”.

250.	Brown and Root’s reports provide a series of snap shots of the performance and progress of the project.  The report to the end of August 1996 was published on the 6th November 1996.  The August report gives a picture of activity behind schedule and poor management both by the contractors and SSCC.  It noted:

	“SSCC staffing has and continues to be behind requirements.”

251.	The September 1996 Report No. 9, published on the 14th November 1996, is scathing.  

	“The construction progress on the project during the last quarter was minimal.  The blasting and rock removal scheduled to be complete was not finished.  The current schedule progress indicates many civil activities are behind the Revision C of the Strategy Programme and could start to impact the mechanical and electrical construction.  The current civil sub-contractor (NSBC) has not been performing well and the power block foundation scope of work is being awarded to another sub-contractor.  The lack of progress of the current contractor (SSCC) and the time involved in the mobilisation of a new civil sub-contractor will delay the civil works installation.  In addition to the lost progress, SSCC was not prepared with equipment procedures, supervision or equipment to place permanent foundations.”

252.	Report No. 10 for the period ending 31st October 1996 was written on the 19th December 1996.  It continues to express concern about delays and, although improvements have been made, the SSCC quality assurance and quality control progress on site is still in the process of development.  

253.	An F and V record for the blasting of Boiler Unit 1 shows the progress to the 31st October 1996. For F8 a total control volume (M3) of 1.80, actual on site measurement of 19.28, giving a difference of 17.48.  This difference (which is mirrored in the records for a number of the other foundations) is explained by Mr Smith as follows:-

	“The reason for the difference is fragmentation of the rock during blasting operations”.  

This record and reason is repeated in the cumulative record of blinding progress for Boiler Unit 1 to the 15th November 1996.  

254.	Between the 1st November 1996 and the 20th November 1996 NSBC checked the levels of the holding bolts and discovered discrepancies between the actual levels and the design figures and started to rectify the discrepancies.  

255.	On about the 20th November 1996 the structural form work was removed and the anchor bolts (holding down bolts) were re-aligned.  

256.	Between the 23rd November 1996 and mid-December 1996 the structural form work was found to have been erected incorrectly and had to be dismantled.  Thereafter the holding down bolts had to be re-established.  

257.	On about the 23rd January 1997 the structural concrete was poured into G2 and G5. On 24th January 1997 the structural formwork for Pad F8 was dismantled. There is no evidence of further work being carried out in the Boiler Unit until after 2nd April 1997, the date on which the foundations were handed over for steel erection.  

258.	An Arup memorandum of the 17th February 1997 noted a variation in figures for excavation of the Boiler Unit where F and V exceeded Arup’s figures by 6,968m³.  The comment is “This unit is founded on rock hence no temporary excavation measured.”  The expression ‘founded on rock’, I take to mean rock of Grade I or Grade II. If one takes into account the areas of Grade III and Grade IV rock and the fractures this is a misleading characterisation of the quality of the rock.

259.	Between the 18th and 23rd January 1997 Brown and Root visited the Sual site in preparation for Project Report No. 12 which was produced on the 26th March 1997.  It gave a snapshot of activity on site at a time when the excavations on the Boiler Unit 1 had been completed, and the concrete and supports were in place prior to building the Boiler House structure.  

260.	Under the heading “Engineering” it sounded a note of caution.  

	“Brown and Root has yet to receive any information or basis for evaluating the allowable limits of rock blasting in the proximity of placed concrete.”

261.	It noted that: 

“Significant problems have been encountered with the concrete batch plants and rock crusher.  Equipment failure has restricted the rate of concrete placement.  Equipment vendor representatives were called in to evaluate the problems and provide solutions …”

262.	It noted that the Consortium Project Quality Manager had not yet arrived on site, and that quality control was sub-contracted and those involved were working to procedures from SSCC dated the 12th April 1992 apparently carried over from a previous project.  

263.	The report concluded on this issue:

	“An overall review of the entire quality programme by the Consortium is recommended at the earliest possible opportunity”.

The report also noted that:

	“Boiler foundation drawings appear to be complete; the foundation installation is in progress.”

264.	The report was particularly concerned about Project Management. There had been difficulties in recruiting suitable staff.  

	“In Brown and Root’s opinion the SSCC staffing effort has lagged (behind) the requirements of the civil works for many months and has hampered the progress of the civil works.  SSCC reported that field supervision has been hired from the US and should be on site in late January …”

265.	Under the heading “Construction” it noted that “during the past period the construction has progressed mostly in the power block area” and that “certain boiler foundations are available for concrete placement awaiting final inspection and approval …”  

SETTLEMENT AT G2 AND G5
266.	The foundations of the Boiler Unit were handed over for steel erection on 2nd April 1997.  It appears that a potential problem of movement at G2 and G5 was first noticed on the 13th April 1997.  On the 17th April 1997 Mr Adam of Alsthom sent a fax saying that they had stopped the erection of the steel structure.  He described the problem as a “going down of 10mm on plinth G2 and 20mm on G5”.

267.	At a meeting on the 19th April 1997 Arup said that they did not believe, based on a visual inspection, that movement had occurred.  There were no signs of cracking or movement although there were signs of earth shrinkage that might have been caused by heavy rains over the 12/13th April 1997.  It was agreed that Alsthom would recommend erection of steel work above the 30mm level, and that the steel work would be monitored for movement.  

268.	An exploratory investigation around the foundations was carried out on the 28th April 1997.  The report of the findings by Mr Rose, the acting consortium site manager, writing on Alsthom notepaper said:

	“There was evidence of loose and fractured rock which is out with specification and cracking of what appeared to be F8 foundation blinding.”

269.	The claimants’ expert, Dr Hencher, said that this could be consistent with blasting damage or excavation damage.  

270.	Mr Nyambayo’s report was headed by a sketch delineating the areas, which he was describing:

	AB (Area going east-west from the blinding to halfway along F8) is described as “AB – Friable/highly fractured rock (particle size up to cobble size …) with a matrix of sandy gravel.  Signs of blast shattering?  Can pick out material with a geological pick.  A pick layer - 50 to 75mm in contrast with blinding more of sandy gravel with some clay.  (Possibly highly weathered basalt).

		BB  (The next section moving west from AB)

	“This localised section highly decomposed Grade IV/V rock, stiff to very stiff as indicated by effort required to pick out the material.  Would describe it as greyish brown sandy clay of low plasticity.  Fissure planes discoloured reddish brown.  Exposure currently 0.6m deep.”

“- Is high degree of weathering evident of formation deterioration prior to blinding due to rain or was it already weathered?”

		“CD – as BB …”

	“DE  - not cleared out properly and unable clearly to see and log the exposure.  Nevertheless would appear to be similar to AB.”

271.	Under “other observations” was noted:

	“Formation appears to have deteriorated after rain and was not properly cleared out after blinding.”

272.	Mr Nyambayo logged information from trial pits.  On the north face of G2 he noted:

	“Extremely closely fissured and fractured rock greyish brown with some zones of 0.15m joint spacing.  Fresh fissured nosed (open) suggest blasting effects or probably opened up by trial pitting.”

273.	On the western side of G2 he noted:

“Extremely closely fissured and fractured greyish brown rock.  Reddish fissure plains and zones of fresh shattered rock.  Grade III  basalt.  

274	Mr Rose’s hopes, as acting site manager, expressed in his memorandum of the 23rd April 1997 were not fulfilled.  He reported to Mr Smith that daily monitoring would indicate a settlement “up to and including today’s result of a maximum of 15mm at location No. 3 on gridline G2 and 12mm at location No. 3 at gridline G5.” GECA said that it wished to conduct its own investigation.

275.	It was on the 1st May 1997 that Mr Nyambayo sent the fax to Mr Pascall asking him for his recollection of the time when he was on site to which I have already referred.  (see para 199 ff  above).

276.	Arup clearly needed to make their own investigation as to the causes of the failure.  Mr Nyambayo noticed that the trial pits had been excavated at G2 and G5.  He said that:

	“The material exposed at formation as viewed on the edges of blinding appears to be highly fractured and weathered basalt possibly Grade III/IV. The formation on the western footing is weaker and on some sections sandy gravel up to 300mm thick underlay the blinding.”

277.	Mr Pascall replied immediately but without consulting any notes. He said in oral evidence that he had no occasion to recall his time on site since he left in August 1996.  

278.	On the 8th May 1997 Mr Hall, the Consortium Project Director of Alsthom wrote to Mr Eller advising the claimants:

	       “
•	The maximum allowable design deviation between consecutive boiler foundations is 10mm 
•	The attached graphs detailing settlement trends indicate that the foundations G5 and G2 have average settlements of 37.0mm and 26.0mm respectively, albeit the associated base plates have been re-levelled to within 5mm of the required elevation putting the boiler structure in a safe state of stability.  
•	The maximum acceptable settlement for continued boiler erection is 25mm (the present settlement exceeds this)

Analysis of the above data proves that the application of increasing loads results in an ongoing trend of settlement with no apparent levelling off in the rate.  Based on this we have concluded that any additional loading will result in settlement breaching further conditions.  In consideration of this the boiler erection is stopped completely from 7th May 1997 until SSCC correct this problem.”

279.	On the 15th May 1997 Mr Hawkins, a chartered geologist and chartered engineer, was instructed by GECA to conduct an independent analysis of the problem, and to advise on the most appropriate solution.  He replaced Mr Wigginton of Mouchel who had visited the site and prepared a preliminary report.  

280.	In the course of his investigation Mr Hawkins was empowered to carry out any necessary site investigation work.  It was made clear to him that he was instructed by the consortium team and should provide the advice to Mr Hall.  Mr Hall had told him not to get involved in the solution of the problem.  He was required to communicate only through CEPAS.  He did not supply his notes to Arup and Arup did not supply its notes to him.  He found this lack of co-operation unhelpful to his efforts.  

281.	Mr Hawkins arrived on site on the 19th May 1997.  

282.	On the 21st May 1997 he sent Mr Hall the result of his initial inspection.  He explained the expectation 

“The area where boiler 1 is constructed appears to have been 20m below ground level prior to site formation.  As such, rock would generally be expected in the absence of geological faults. Decomposition of the rock is unlikely, although not impossible.  Inspection of deep excavations elsewhere on site revealed strong slightly weathered basalt at current ground level in most areas; with soil made ground being seen at locations of former valley and coastline.”

283.	It appears that on the basis of loading tables which had been supplied, the actual maximum pressure of the ground from the load at G5 could have been as low as 60KPa if the mass concrete acted as a spread foundation.  

284.	Mr Hawkins noted in the letter that there was considerable initial settlement.  This occurred under a stress of less than 80KPa, probably of the order of 25KPa.  

285.	During the period between the 2nd and 5th May 1997 8mm of settlement had occurred during a period when rainwater flowed into the ground under the foundation through the trial pit which had to be excavated adjacent to the mass concrete blinding.  Thereafter there was significant settlement during and subsequent to the jacking operation.  After that, the rate of settlement decreased in the manner expected for the ground on reaching equilibrium under the applied load, with the load actually decreasing as the deformation of the structure spread the load into adjacent columns.  

286.	Mr Hawkins’ initial conclusion was that:

	“The ground is behaving neither like a sound rock nor a fractured rock would.  It is essential that the nature of the ground below the foundation is known before any decision on the ability of the ground to support the structure under either static or combined static and dynamic load is made.”

287.	He went on to say that: “We anticipate the foundation rests on very weak materials”.

288.	Finally, he recommended that a trial pit was put down to the underside of the mass concrete blinding, and that at least one hole was cored through the main concrete as close to G2 and G5 as possible in order to determine the nature of the ground.  

289.	Mr Hawkins worked on the project with Mr Daudigny, a structural engineer who worked for a subsidiary of Alsthom.  By the 23rd May 1997 Mr Daudigny was writing to Alsthom’s assistant construction manager that he and Mr Hawkins, 

“We now surely know that both foundations G2 and G5 from Boiler Unit 1 are bearing on a weak soil that is not hard basaltic rock or weathered fractured rock … 

The present problem comes from a design which assumed 3MPa soil bearing capacity, and that has not been modified (to more likely 0.3MPa) when opening pits on July 1996 for the concerned G2-G5 foundations.”

	It referred to the settlement (of 6 and 4cm) as “important settlements”.

290.	A number of causes are set out.  The authors of the letter say that they are unable to reach a final conclusion on the causes or to be able to design a solution without investigation of the soils.  

291.	They set out the possibilities as 

		“(a)	A localised pocket of weak soil on site;

(b)	The influence of mining in the neighbouring area in  very fractured rock which could not support the vibrations; 

(c)	The influence of neighbouring investigations which were much deeper;

		(d)	Heavy rains and excavations;

(e)	Lack of compacting the filling in the area of the foundations.”

292.	During June 1997 the parties conducted a meeting to try to find the most

            appropriate solution to the problem of inadequate foundations under Boiler

            Unit 1. The parties agreed by 28th June 1997 that it would be necessary to 

            dismantle much of the steel work.

293.	On the 11th July 1997 Arup issued to CEPAS its interim report on the boiler foundations to be used for insurance purposes.  It noted that the rock beneath G2 and G5 was Grade III/IV.  It concluded that in undisturbed conditions the rock would be marginal in terms of sustaining the required bearing pressure.  However, it said that there was evidence of the rock having been damaged by blasting and that this had resulted in weaker material than was required.  It said that there was also evidence of a local geological feature which ran under G5.

294.	Also, on 11th July 1997 Mr Higson set out his understanding of the chain of reporting which Arup regards as important when considering Arup’s potential liability for economic loss.  He wrote, “Arup are employed by CEPAS and as such must report and correspond through the CEPAS channel.  Our current  contact is based on site staff reporting to Grant Smith and in HK we report to Rick Eller.” 

295.	On the 12th June 1997 a new trial pit was excavated on the east side of G2.  The pit was left open for several days and Mr Hawkins investigated it on several occasions.  It extended down to about 150mm below the level of the blinding.  He observed that at the base of the pit a small amount of strong jointed rock was visible, but the ground was generally very weak, with highly decomposed basic rock which he was able to excavate with his fingers.  

296.	He said (paragraph 24 of his written statement):

	“I went down into the trial pit and excavated in one location to 750 millimetres below the base of the blinding using a spade …  I could say that the ground was soft enough to be excavated to an even greater depth using a spade only.  It certainly did not consist of sound rock.  It consisted of completely decomposed Grade V rock (a friable silt) and there was a band of clay in the base of the pit although … there were also some blocks of strong rock.”

297.	Mr Hawkins set out his preliminary conclusions in a letter to Alsthom dated the 14th June 1997.  These preliminary conclusions formed the basis of his report in August 1997.

298.	The summary of the 17 page final report (page 2) said that:

	“The Boilers were to be built on sound basaltic bedrock, approximately 20m below original ground level on a rocky headland which had been levelled for construction.  Possible reasons for the settlement were proposed.  The most likely were that the foundations rest on naturally shattered and completely weathered material located on a geological fault, there is a different geological stratum at shallow depth below the foundation (this stratum being highly compressible) or the foundation rests on backfill to an excavation (i.e. on compressible made ground).  Ground investigation could not confirm which of these or if there was another cause in the available time.”

299.	Mr Hawkins noted that the data provided by CEPAS as a result of probe holes demonstrated that 

“At one location fragments of wood were  found at 2.40m depth suggesting in-filled ground and poor control on site.” (Page 8).

300.	From the investigation of the foundation of G2 (Page 9) he noted:

“Drilling from the level of the underside of the foundation to a depth of 1.0m below this took 10 minutes which does not compare favourably with the four hours taken to drill 2.0m in basalt to the west of Boiler No. 2 using the same equipment.”

301.	Further he noted (Page 10):  

	“The trial pit excavated by the eastern side of the G2 foundation was easily excavated to a depth of 0.5m below the level of the mass concrete which underlies the structural foundation.  At this level there is a layer of very weak friable highly to complete weathered material.  There is also a clay pocket extending to a depth of 0.36m below the mass concrete …

	On completion of the boreholes at G2 a hole was cored adjacent to G5.  Although most of the recovered material was shattered basalt, core recoveries were low and sand was recovered from 3.00 to 3.65m depth.”

302.	Under “Reasons for settlement” Mr Hawkins set out the possibilities as: 

“a)	The foundations rest on naturally shattered and completely weathered material located on a geological fault.

b)	There is a different geological stratum at shallow depth below the foundation; this stratum being highly compressible.

c)	The rock below the foundation has been shattered, lifted and left in a loose state by blasting.

d)	The foundation rests on backfill to an excavation (i.e. on compressible made ground).

e)	During installation of the steel structure, tightening of the bolts linking the column to the foundation resulted in the column lifting and/or tilting allowing debris to fall or flow into the void created; this debris then compressed as load was applied.  

f)	Ground stress resulting from the crane rail may have caused the foundations to settle or tilt. 

g)	The ground below the foundation may contain air-filled or water-filled voids which are closing under the weight of the structure.” (Page 12)

303.	Of these possibilities Mr Hawkins said at Page 12 that a), c) and d) in combination were the most likely, although he said that faces of excavations in line with G2 and G5 did not show displacement of strata compatible with faulting, although a narrow vertical zone of heavily shattered rock was visible.  

304.	In his witness statement Mr Hawkins said that b), e), f) and g) were easily eliminated.  He commented on the other alternatives.  He felt from the rock recovered from Borehole 10 and his examination of the pit next to G2 that the weathered material was the most likely cause and in any event a substantial cause of the settlement.  This would explain why Boiler Unit 2 foundations which were on different ground to Boiler Unit 1 and rested partly on intact rock, did not settle.  

305.	Mr Hawkins said that since he was not permitted to examine the material beneath the foundations except to a shallow depth, he was unable to say whether backfill was a factor or not.  On the basis of what he was able to see he could find no evidence of rock backfill which could have produced the level of settlement at G2 and G5.  

306.	He felt that blast damage could have been a major contributory factor if it occurred.  He felt that given the appearance of the rock in the trial pit next to G2 which could have been excavated by hand, he would have been very surprised to see any blasting in these areas following completion of the site formation works, because the rock was not strong enough to require blasting.  

307.	On the incomplete information before him, he thought that the cause of the movement had to be a combination of weathered material and blasting.  

308.	Since it was dealt with in the evidence, I should refer to a meeting on the 25th June 1997 at which Mr Hawkins was present as was Mr Bowden, Dr Littlechild and Mr Evans of Arup.  Mr Bowden was not an impressive witness.  At the meeting on the 25th June 1997 he made a presentation in which he said that from his observation of the trench it was clear to him that there was no geological structure (fault or otherwise) that passed from the area of the eastern into the western tower blocks that could have caused the settlements at G2 and G5.  He said in his witness statement that since his view was not refuted at the meeting, Mr Hawkins must be taken to have accepted it.  I do not accept this inference or that Mr Hawkins’ silence detracts from his own evidence. In addition I do not accept Mr Bowden’s theory as being in any way definitive.  

309.	Mr Hawkins’ note shows that he was on site from 6 am on the 24th June 1997 continuously until after 2 pm on the 25th June 1997 and that at the time of the meeting he had been working continuously for 38 hours.  I readily accept that his silence did not indicate agreement to the conclusions which Mr Bowden expressed at the meeting.  

310.	In any event Dr Redding later expressed concern (see his email of the 23rd September 1997 to Mr Bowden) that Arup’s report on the boiler foundations made no mention of faulting having been identified in the boiler area and asked “Is this merely an oversight?”  

311.	In the course of the investigation two further matters are recorded which Arup say indicate poor site management.  First in early September 1997, on the excavation of six small footings at G2 and G5 Mr Nyambayo recovered a detonator cord at a depth of 1m below the blinding level of the pad footings.  He noted that:

“The material underlying the blinding layer of these previous footings comprised very highly to completely decomposed very weak BASALT rock the top 300mm in contact with the blinding appeared to be made ground as evidenced by wood, PVC piping, cement sacks and pieces of wire embedded in the matrix.”

312.	Mr McManus referred to this and another find in his email of the 6th September 1997.  He said:

	“As an example of a major item omitted in the [Arup] report was the explosives we found under G5.  We found additional explosives east of G2 this week at about 2m below where it should have been.  I want this in the report as facts and prefer that we refrain from speculating without evidence on the surface work done prior to SSCC or OAP presence on site.”

313.	Mr Nyambayo recorded that a further explosive was found on the 17th November 1997.  He wrote to Mr Higson:

	“Rock Grade III tending towards Grade IV in some area … another explosive at this location”.

314.	Before turning to Arup’s report which went through a number of drafts and was finally issued on the 29th December 1997 I should complete the history to that date.  

315.	On the 13th June 1997 Mr Elliott resigned from CEPAS and SCC on the takeover of the companies by Southern.  Mr McManus took over as chief executive.  He was on site at Sual from the 17th June 1997.  

316.	On the 12th August 1997 SCC terminated NSBC’s contract because of, so he claimed, poor progress and lack of dedication.  

THE ARUP REPORT
317.	The Arup Report, finally published on the 29th December 1997, went through a number of different versions.  The emails disclosed by Arup highlight concerns about their own position.  Dr Littlechild, the very experienced Arup geologist was very concerned about the fault which had been found by Dr Redding.  In an email of the 16th September 1997 to Mr Fox in London, he asked whether they could find a way of setting it aside, presumably because he was concerned that it had not been sufficiently taken into account in assessing the load bearing capacity of the ground at Boiler Unit 1.  

318.	On the 23rd September 1997, Dr Redding wrote to Mr Bowden to ask who had recommended an allowable bearing pressure for design of 3MPa forgetting that it was his own initial recommendation.  In the same email he criticised the current draft of the report for failing to mention the fault having been identified in the boiler area.  He said in evidence that the fact that there was a fault adjacent to G2 and G5 should have been taken into account.  Mr Bowden replied by email on the 24th September 1997 that it was Arup’s intention to report the fault but to say that it was not thought to be significant to the foundation design of the boilers.  

319.	Mr Higson’s email of the 25th September 1997 suggest that Dr Redding’s memorandum was not seen by Mr Nyambayo, Mr Bowden or Dr Littlechild.  

320.	Also on the 25th September 1997, Mr Higson wrote to Dr Redding referring to Mr Bowden’s proposal to report the fault but to say that it was of no significance as a “sleight of hand”. After much prevarication Dr Littlechild finally agreed in oral evidence that the expression “sleight of hand” was an attempt to set on one side, when the failure investigation report was issued to the client, the fault which Dr Redding had identified.  

321.	This episode detracts from the impression that Arup was trying to produce a balanced report rather than one which would exonerate their design from blame.

322.	Dr Redding said in evidence that the fault was identified in the final report.  He eliminated it as a possible cause of the movement because it would not have caused the failure that occurred at G2 and G5.  He said that the quality of the rock was not significantly degraded on that fault, and that the width of degradation of the rock was not of significant thickness.  

323.	On the 27th November 1997 Mr Higson, in an email to Mr Nyambayo, recommended further trial pits and ground monitoring to support the conclusions which Arup was reaching on the causes of the settlement.  

324.	The conclusion of the Arup Report is set out on page 1-0458.  

	“Formations for the original G2 and G5 footings comprised fresh/moderately to completely decomposed Grade III/IV rock with open fractures caused by blast damage.  The highly weathered and blast damaged rock was the primary cause of the settlement of the pad foundations.”

325.	The Report noted that there were limited records of formation preparation, blinding or foundation construction prior to February 1997.  

	“The bulk excavation of the Sual site was undertaken without engineering supervision and no records of either the blasting or progress exist.  Unexploded charges found in Unit 1 boiler area, one below a boiler foundation and the other in the SSC sump excavation, provide evidence of poor blasting control and demonstrate the possibility that rock below the formation level may have been damaged by blasting.  Where the original rock had been Grade II or better, this had resulted in the rock being fractured and in joints being opened.  Where the rock had been Grade III/IV or worse the structure and integrity of the rock had been severely damaged, resulting in severely weakened material.”  

326.	The factual cause of the damage remains somewhat difficult to              discern from Arup’s Report. It is clear that they did not have the               opportunity to analyse the F & V Records or Mr Jamieson’s                evidence in the way that has been possible in this Court.  

327	The very process of investigation has made the task of reaching conclusions on the cause of the damage a more complicated one. Mr Bowden said in re-examination that because Arup had used rock breakers to break the ground around the foundations it was difficult to tell later whether the damage was caused by blasting or by the rock breakers. Mr Higson agreed in cross-examination that it was difficult to tell whether or not there was damage caused by blasting.

328.	Arup’s expert, Dr Endicott, had to concede in cross examination that               there was no evidence of blast damage at G2 and none on three sides              of  G5 although there was some evidence of cracks and open joints at                a trial pit on the fourth side.  Even here he qualified his answer by                 saying that it might be a local feature, although the associated                 question of the presence of loose debris required further analysis.

329.	Arup’s case in the end is that it is extremely difficult to reach a conclusion as to the failure of G2 and G5 but because the contractors have  (they say) a proven record of incompetence, the cause must be               blasting. They say that the conditions had changed dramatically from              those found by Mr Pascall and that this must have been caused by the incompetence of the contractors.

THE EXPERTS

330.	Each side made criticisms of the other experts’ qualifications.  Mirant called Dr Hencher as its chief geological expert.  His great strength is as an academic geologist who has acted in recent years as a consultant.  He has little relevant experience as a project manager, as a geologist working on site assessing allowable bearing pressures or as a working structural design engineer.  He was therefore not in the best position to comment on the performance of Mr Higson, Dr Redding, Dr Oldroyd or the Arup working geologists who visited Sual.  He had supervised only one ground investigation for a major project, a reservoir.  He had not inspected formations for a pad foundation in order to give ground approval.  

331.	In recent times he has done a great deal of consulting work in Hong Kong.  His key experience has been as an expert witness in legal or arbitral proceedings.  His overall evidence was subject to serious criticisms by Arup, which are set out in detail in the closing submissions. However, while his lack of direct experience may have been a handicap on the practical issues on which he was asked to give his opinion, he is well qualified to give his opinion on the purely geological questions.  

332.	Professor Hudson was an impressive witness. He gave evidence that the settlement at G2 and G5 was explicable by the presence of poorer rock in the layers of the foliation of the rock around and beneath G2 and G5.  He felt that this was consistent with the mapping and logging by Arup’s engineers in 1997, and also with Mr Pascall’s observations in July 1996.  

333.	Dr Endicott, the expert called by Arup has been a practicing geotechnical engineer for much of his professional life.  He has direct knowledge and experience of working on and administering civil engineering projects.  Although in recent years he has had a more supervisory role, he said in evidence, and I accept, that it has always been his practice to visit sites for which he had a responsibility.  He has had experience of working with a wide variety of geologists in Hong Kong and other Asian countries, but he has not worked in the Philippines.  He has recently converted to being an expert witness and has worked on this case and another case on which he has been retained by Arup as an expert.  

334.	There were certain practical problems with his expert evidence.  I take into account the fact that his style of answer in cross-examination was much criticised by Mirant.  He was clearly unused to being cross-examined as an expert witness.  

335.	He was skilfully cross-examined by Mr White (as Dr Hencher was by Mr Bartlett). I have to consider his answers, taking into account his changes of view when his opinions were challenged.  I have no doubt that he was doing his best at all times to answer questions as directly and honestly as he could.  I have also no doubt that he was prepared to listen to alternative theories which were being put to him, to consider them seriously and if appropriate to modify his own opinions as a result.  

336.	There is no doubt that on the issue of a cause or causes of the settlement Dr Endicott produced a number of different theories.  His first view was that it was caused by damage to the rock by blasting.  His second theory, set out in the re-amended defence of the 30th July 2003 was that, in the alternative, it was caused by the presence of loose rock fragments and/or decompressed rock and/or construction debris that had been carried onto and deposited in the foundations to G2 and G5 during Typhoon Gloria which commenced on or about 24th July 1996.  Although he added that run-off material was deposited at some other date, in cross-examination he said that run-off material was unlikely to have been a significant cause of the settlement.  

337.	In his report in October 2003, Dr Endicott said that the cause of the settlement was the presence of a substantial layer of sludge.  He did not persist in this view at the trial.  

338.	In his evidence at the trial, he concluded that the cause of the failure at G5 was the presence of a layer of blast damage rock or rock fill.  In relation to G2 he said that the presence of a layer of ground beneath the blinding which he believed to be soil fill had caused the problem.  

339.	His final conclusion, after putting forward the possibility that there had been digging out of rock beneath G5 and replacing it with fill, a theory which he later declared to be unlikely, is that the boreholes which were evidence of in situ ground and what was seen in 1997 is what would have been observed if a borehole had been sunk at the same place in 1996.  

340.	Despite the reservations in Dr Endicott’s evidence, I am unable to say, as I am invited to do by Mirant, that in the event of conflict of opinion between him and Dr Hencher I should inevitably prefer Dr Henscher’s evidence.  

341.	Arup’s blasting expert, Mr Paine, was a balanced and fair witness.  His insuperable difficulty was that he had never been on site.  Initially, he and Mirant’s blasting expert, Mr Hagan, agreed that there was no evidence of over blasting below the required excavation at G2 and G5.  They further agreed that there was no evidence that trench blast caused hairline cracks.  They agreed that it was difficult to form opinions based on photographs of the site and reports of site investigations.  

342.	Unfortunately, Mr Paine received further documents after reaching his agreement with Mr Hagan, but he did not tell Mr Hagan that this was the case and did not, as he should have done even as a matter of courtesy, discuss matters with him.  He identified five crucial pieces of evidence:

a)	The fax from Dr Littlechild to Duncan Nicholson in London on the 20th June 1997;

		b)	The misfired explosive to the southwest corner of G5; 
		c)	The misfired explosive east of the G2 boiler;
d)	An assessment of Frank & Vargesson reports and the reference to fragmentation of the rock during blasting;

		e)	The report of Mr Nyambayo of the 5th September 1997.  

343.	I can deduce from Mr Paine’s evidence on its own that there was over blasting on the site as a whole, but I am not persuaded that his evidence demonstrates that there was blast damage at G2 and G5.  

344.	Mr Paine’s concluded view was that he had insufficient information available to make an informed decision on the mode of failure on the joint structures.  This included an inability to reach a conclusion on whether the damage was caused by blasting or by mechanical means.  

345.	In re-examination he said that, as an expert, he would have expected to have been given much more information even in Third World countries where documentation is less full than in a country like Australia.  Mr Paine now lives permanently in Australia.  

346.	This brief résumé of impressions of the evidence of the experts is, of course, relevant to my consideration of their opinions in particular relating to the cause of the settlement at the G2 andG5 boiler foundations.

THE ISSUES
347.	I now deal with the issues which are agreed by the parties to be the key issues.  I take into account the sub-issues into which the parties have broken down a number of the issues without necessarily dealing with each of the questions which they have raised in their final submissions.  

THE FIRST ISSUE
348.	The first issue does not seem to me to be any longer relevant to the issues which I have to decide.  It is whether there was a variation to the March 1996 agreement for supervision of the Ground Investigation whereby OAPIL agreed with CEPAS that its engineer could inspect, and if appropriate, approve specific formations subject to notice being given to OAPIL by CEPAS, alternatively subject to notice being procured by CEPAS from NSBC (the contractors) that a specific formation was ready for inspection and approval?  

349.	From its final submission it appears that the claimant does not regard this issue as relevant and does not invite me to make any findings on it. In my view this issue has ceased to have any particular relevance but if pressed to answer I would agree with Arup that the answer is “Yes”.  

THE SECOND ISSUE
350.	The second issue is whether Arup owed a duty of care to CEPAS and/or SCC in tort to exercise due care and skill in the design of the foundations and/or the approval of the formations.  If so, I must consider what was the scope of that duty and to whom was that obligation owed?  

351.	It is convenient for completeness  to deal with the issues in both contract and tort. 

1.	Did Arup owe a duty of care to CEPAS in contract in relation to the design of the foundations?

2.	Did Arup owe a duty of care to CEPAS in tort in relation to the design of the foundations?

3.	Did Arup owe a duty of care to SCC in contract in relation to the design of the foundations?

4.	Did Arup owe a duty of care to SCC in tort in relation to the design of the foundations?

5-8.	These are similar questions in relation to the approval of the formations.

352.	It is necessary to consider these questions in relation both to the general duty and liability for economic loss alleged to have been caused to CEPAS and SCC.

353.	Two questions can be disposed of immediately.  It is agreed that Arup did not owe a duty to SCC in contract.  The answer to question 3 and the equivalent question for the approval of the foundations is therefore also “No”.  

354.	It is also already decided that the design agreement was made in May 1995 and did not incorporate FIDIC terms.  The approval of the formations is governed by the site services agreement, and incorporates the FIDIC terms including the cap on Arup’s liability of £4m.

355.	Within these issues the parties have addressed the question of what is involved in the design obligation and whether it included verification, I deal with this later as a separate discrete issue.  

356.	It is not disputed that both agreements incorporate the implied terms that Arup would exercise the skill and care to be expected of a reasonably competent engineer in respect of the services for which they were contracted.  

357.	It is also clear that in law, although the extent of the duty is disputed, Arup owed concurrent general duties of care in contact and tort – see the speech of Lord Goff in Henderson v. Merrett Syndicates [1995] 2AC 145 at page 190:

“It is difficult to see why concurrent remedies in tort and contract, if available against the medical profession, should not be available against members of other professions whatever form the relevant damage may take.”

THE CONTENTIONS OF THE PARTIES

358.	The debate on duty of care centred on whether Arup’s duty of care extended to its liability to either CEPAS or SCC for economic loss which they can establish that they suffered as a result of Arup’s breach of duty. 

359.	Mirant says that Arup owed CEPAS a duty in contract and tort not to cause it economic loss.  

360.	Mirant also says that the relationship between SCC and Arup was sufficiently proximate for Arup to owe SCC a duty of care not to cause it economic loss by its negligence in undertaking its professional services.  It contends that the delays to the construction and the remedial works were a direct and foreseeable economic consequence of Arup’s failure to produce designs with the necessary care and skill.  Mirant relies on the guidelines set out by Neill LJ in James McNaughton Paper Group Limited v. Hicks Anderson & Co. [1991] 2 QB 113 in support of this claim.

361.	Arup rejects the claims of both CEPAS and SCC.  It argues as a matter of law that in the absence of a specific contractual term a designer is in the same position as a contractor and is not liable for economic loss. It cites the proposition set out by HH Judge Humphrey LLoyd QC in Payne v. Setchell [2002] BLR at 508 as follows:-

	“A designer is not liable in negligence to the client or subsequent purchaser for the cost of putting right a flaw in a design that the designer has produced that has not caused physical injury or damage just as a contractor is not liable.”  
		
362.	Arup rejects the claim of SCC on the further legal ground that under the contract the parties considered the distribution of risk and the wishes of the parties should be respected – see Purchas LJ in Pacific Associates v. Baxter [1990] 1 QB 993 at 1010, approved by the House of Lords in White v Jones [1995] 2 AC 257 see the speeches of Lords Browne-Wilkinson and Mustill at pages 274 and 279 respectively.

363	Arup contends that there was nothing in its relationship with SCC on which a duty of care could be based.  In the absence of an assumption of responsibility for such loss, pure economic loss is irrecoverable in tort.  Arup cites in support of this proposition the later judgment by Sir Brian Neill in BCCI v. Price Waterhouse No2 [1998] PNLR 564 CA.

THE LAW
364.	The starting point of the discussion of duty of care and the law of concurrent liabilities in contract and tort for economic loss is the speech of Lord Goff of Chieveley in Henderson v. Merritt Syndicates [1995] 2 AC 145 to which I have already referred.

365.	At page 180 Lord Goff said that the principle underlying Hedley Byrne v. Heller [1964] AC 464 rested on a relationship between the parties which may be general or specific to the particular transaction.  Lord Goff took the analogy of an ordinary building contract where the owner contracts with the main contractor and the main contractor sub-contracts with the sub-contractors or suppliers for the performance of work or the supply of materials subject to the terms of the sub-contract.  At page 195 Lord Goff said:

	“If the sub-contracted work or materials do not, in the result, conform to the required standard, it will not ordinarily be open to the building owner to sue the sub-contractor or supplier direct under the Hedley Byrne principle, claiming damages for him on the basis that he has been negligent in relation to the performance of his function.  For there is generally no assumption of responsibility by the sub-contractor or supplier direct to the building owner, the parties having so structured their relationship that it is inconsistent with any assumption of responsibility.”

366.	Before returning to Henderson, it is necessary to follow through the principles starting with some earlier decisions. In Caparo v. Dickman [1990] 2 AC 604 the House of Lords had considered the application of the principles in Hedley Byrne as it had been developed in subsequent authorities.

367.	At page 617 Lord Bridge of Harwich said:

	“What emerges is that, in addition to the foreseeability of damage, necessary ingredients in any situation giving rise to a duty of care are that there should exist between the party owing the duty and the party to whom it is owed a relationship characterised by law as one of “proximity” or “neighbourhood” and that the situation should be one in which the court considers it fair, just and reasonable that the law should impose a duty of a given scope upon the one party for the benefit of the other.  But it is implicit in the passages referred to that the concepts of proximity and fairness embodied in these additional ingredients are not susceptible of any such precise definition as would be necessary to give them utility as practical tests but amount in effect to little more than convenient labels to attach to the features of different specific situations which, on a detailed examination of all the circumstances, the law recognises pragmatically as giving rise to a duty of care of a given scope.”

368.	Lord Roskill agreed.  He said at page 628:

“It has now to be accepted that there is no simple formula or touchstone to which recourse can be had in order to provide in every case a ready answer to the question whether, given certain facts, the law will or will not impose liability for negligence or in cases where such liability can be shown to exist, determine the extent of such liability.”

369.	Lord Oliver observed at page 637:

	“In a situation ‘equivalent to contract’ it must be expected that an objective test will be applied when asking whether, in a particular case, responsibility should be held to have been assumed.”

370.	In Murphy v. Brentwood DC [1991] 2 AC at 480 the House of Lords confined liability for economic loss to a contractual duty which defines the parties’ relationships and should be respected  (see White v. Jones [1995] 2AC 257) or to a special relationship of proximity introducing the Hedley Byrne principle of reliance.  The principle is conveniently expressed by Lord Bridge of Harwich at page 475 that:

	“These economic losses are recoverable if they flow from breach of a relevant contractual duty but here again in the absence of a special relationship of proximity they are not recoverable in tort.”

371.	Lord Bridge takes up the question of a special relationship at page 480:

	“The House has already held in D & F Estates that a builder in the absence of any contractual duty or of a special relationship of proximity introducing the Hedley Byrne principle of reliance owes no duty of care in tort in respect of the quality of his work.  As I pointed out in D & F Estates to hold that the builder owed such a duty of care to any person acquiring an interest in the product of the builder’s work, would be to impose on him the obligations of an indefinitely transmissible warranty of quality.  

372.	In McNaughton v. Hicks Anderson & Co. [1991] 2 QB 113 Neill LJ referred to the analysis of the relationship in tort between the maker of the statement or giver of advice and the recipient who acts upon it which, if they exist, may give rise to the necessary relationship for a Hedley Byrne reliance to exist.  The analysis by Lord Oliver in Caparo v. Dickman at page 629 identifies four features which will be present:

“1.	The advice is required for a purpose whether particularly specified or generally described which is made known either actually or inferentially to the advisor at the time when the advice is given; 

2.	The advisor knows actually or inferentially that his advice will be communicated to the advisee, either specifically or as a member of an ascertainable class in order that it should be used by the advisee for the purpose;

3.	It is known actually or inferentially that the advice so communicated is likely to be acted upon by the advisee for that purpose without independent inquiry;

		4.	It is so acted on by the advisee to his detriment.”

373.	For the purpose of that case Neill LJ identified the following considerations (relied on by Mirant):

		1.	The purpose for which the statement was made;

		2.	The purpose which the statement was communicated;

3.	The relationship between the advisor, the advisee and any relevant third party;

		4.	The size of the class to which the advisee belongs;

		5.	The state of knowledge of the advisor and

		6.	Reliance by the advisee.  

374.	Arup relies on the approach of Sir Brian Neill (as he had by then become) in the later case of BCCI v. Waterhouse and Others [1998] PNLR 564 CA.  He refers in that case to the various tests which the courts use in deciding whether or not there is sufficient proximity in the relationship to establish an independent liability in tort under the Hedley Byrne principle.  The threefold test (one of the three applied at different times) asks the questions:

1.	Was it reasonably foreseeable that the plaintiff would suffer the kind of damage which occurred?  

		2.	Was there sufficient proximity between the parties?

3.	Was it just and reasonable that the defendant should owe a duty of care of the scope asserted by the plaintiff?  

375.	At page 587 Sir Brian Neill identified the following questions:

“a)	What is the precise relationship between advisor and advisee?  There may be an important difference between the cases where the advisor and advisee are acting at arms length and where they are acting on the same side of the fence;

b)	What are the precise circumstances in which the advice or information or other material came into existence?  Any contract or other relationship with a third party may be relevant.  

c)	What are the precise circumstances in which the advice was communicated?  What reliance was it reasonably anticipated should be placed upon the advice?  

d)	Where there other advisors on whom the advisee would or could rely?  

e)	Was there any opportunity given to the advisor to issue a disclaimer?

376.	Whilst these questions are of considerable assistance in pointing the way to an answer to the problem in this case I do not understand Sir Brian Neill to be suggesting that if they are answered directly they provide a complete and conclusive answer to the problem.  

377.	In Bellefield Computer Services v. Turner [2000] BLR 97 Schiemann LJ analysed the speeches in Murphy v. Brentwood and noted that:

“4.	The decision is clear authority for the proposition that … the law imposes upon the person primarily responsible for placing on the market a defective building no liability to a remote purchaser for expenditure in making good defects which, ex hypothesi have injured nobody.”

378.	In Samuel Payne v. John Setchell Limited [2002] BLR 489 Arup relies on the passage at pages 507-8 of the very careful judgment of His Honour Judge LLoyd QC, part of which I have already quoted.

“For the purposes of liability in negligence in particular, the relevant question is not who should be responsible but rather who took the relevant decision and thus failed to exercise the requisite care?  Whoever took the decision is in law likely to owe some duty of care to avoid causing loss.  In my judgment, Murphy and DOE v. Bates [1991] 1 AC 499, establish that as a matter of policy, any person undertaking work or services in the course of a construction process is ordinarily liable only for physical injury or for property damage other than to the building itself but is not liable for other losses – i.e. economic loss.  If any liability for such economic loss is to arise, it must be for other reasons e.g. as a result of advice or statements made upon which reliability is placed in circumstances which create a relationship where there is in law to be an assumption of the responsibility for loss i.e. within the principle of Hedley Byrne v. Heller ..”  This passage follows the passages in Murphy which I have cited.

379.	I consider later whether I am able to agree with HH Judge LLoyd QC’s holding that as a matter of general principle those providing services in the construction industry are not liable for economic loss. 

380.	In relation to the claims by CEPAS and SCC against Arup I must ask the following questions:

		a)	What is the precise nature of the contract; (if any)
		b)	Does it include claims for economic loss?
c)	Was there a special relationship of proximity from which if the contract is silent on the subject it can be inferred that Arup agreed to be liable for economic loss?  I must apply an objective test to decide whether responsibility for economic loss can be assumed.  The answer will be the same as far as CEPAS is concerned in contract and tort.

d)	In the absence of a contract between SCC and Arup I must ask the question of whether there is a relationship of proximity or neighbourhood between the parties followed by the further question of whether it is fair that this should extend to economic loss in the exceptional circumstances of this case.  

381.	The work on the Sual project was the subject of a very carefully constructed network of contracts, which separated on-shore works from off-shore works.  The purpose of the separation was to take advantage of the Philippines tax regime.  In his witness statement and oral evidence Mr Metcalfe explained the position and the basic distinction that was also made by other witnesses in the recent hearing and in the previous preliminary hearing between on-shore and off-shore activities.  

382.	Both the supply (off-shore) and construction (on-shore) contracts were made in July 1995 between Pangasinan Electrical Corporation (PEC) on the one hand and, for the off-shore works CEPAS and GECA, and for the on-shore works SSCC (SCC from 1997) and GECA.  The Alsthom companies were, GEC Alsthom Power and GEC Alsthom Stein for off-shore activities, and GEC Alsthom Electrics and GEC Alsthom Turbine for on-shore works.

383.	The Tripartite agreement between PEC, CEPAS, SCC, and the GECA companies, made in advance of these separate agreements on about the 9th January 1995, included provisions which would have enabled the on-shore consortium to claim against the off-shore consortium (see clauses 2.3, 3, 4 and 9 of the Tripartite agreement).  Under the Deed of Guarantee dated the 12th July 1995 CEPAS guaranteed to discharge the liabilities of SCC under the construction contract.  It also guaranteed the liabilities of SCC under the Tripartite agreement.  

384.	The building contractors, New Sampaguita Construction (NSBC), contracted with SCC as did Geotechnic Philippines Inc.  who were contracted to carry out the ground investigation.  Arup UK and Arup Hong Kong were contracted with CEPAS to carry out the civil design off-shore.  Arup was also contracted with the off-shore consortium to carry out the supervision of the ground investigation from its places of establishment offshore in London and Hong Kong.  

385.	There seems to be no dispute that Arup owes a concurrent duty of care to CEPAS in contract and tort.  Arup agreed and owed a duty to CEPAS to exercise the reasonable care and skill to be expected of consulting engineers in carrying out the design work under the design contract.  OAPIL agreed to and owed a duty to CEPAS to exercise the skill and care of experienced engineers to specify and supervise the ground investigation works.  These obligations arose under the respective contracts and in tort.  

386.	Does this contractual liability in relation to CEPAS extend to economic loss?  Do such losses flow from a breach of contractual duty?  Is there a special relationship between Arup and CEPAS, which requires the imposition of such a duty?  

387.	In Henderson v. Merrett [1995] 2 AC 145 the plaintiffs, who were underwriting members at Lloyds (Names) went into underwriting agency agreements.  In at least one group of actions, Gooda Walker, the Names alleged that the members’ agents were contractually liable for failure by the managing agents of the syndicate of which the Names were members to exercise reasonable care and skill in relation to such underwriting.  The claims were framed both in contract and tort, and the House of Lords held that the names were entitled to pursue their remedy in contract and tort.  

388.	Lord Goff of Chieveley at pages 180 and 181 set out the approach to be taken:

	“The principle rests upon the relationship between the parties which may be general or specific to the particular transaction and which may or may not be contractual in nature.”

389.	Referring to the concept of “special skills” he said that “it must be construed broadly” and that “the principle extends beyond the provision of information and advice to include other services”.  

390.	He went on:
	“In particular, as cases concerning the solicitor and client demonstrate, where the plaintiff entrusts the defendant with the conduct of his affairs, in general or in particular, he may be held to have relied on the defendant to exercise due skill and care in such conduct.”

391.	At page 181 Lord Goff went on to say that in a situation of “contract” or  “equivalent to contract” it must be expected that an objective test will be applied in asking the questions whether in a particular case responsibility should be held to have been assumed by the defendant to the plaintiff.

392.	Lord Goff went on:
	“In addition, the concept provides its own explanation why there is no problem in cases of this kind about liability for pure economic loss; for if a person assumes responsibility to another for personal services there is no reason why he should not be liable in damages to that other in respect of economic loss which flows from the negligent performance for such services.  It follows that once the case is identified as falling within the Hedley Byrne principle there should be no need to embark on any further enquiry whether it is fair and reasonable to impose liability for economic loss …”

393.	Lord Goff noted that the principle had been expressly applied to a number of different categories of person who performed services of a professional or quasi-professional nature including bankers, solicitors, surveyors, valuers and accountants.  

394.	Lord Goff, towards the end of the passage which I have just quoted, noted that the assumption of responsibility may be negatived by an appropriate disclaimer.  

395.	Applying an objective test and bearing in mind the questions raised by Sir Brian Neill in both the cited judgments, I conclude that in relation to CEPAS, Arup assumed a responsibility for economic loss following the reasoning derived from Lord Goff’s judgment.  In so far as I need to do so I respectfully disagree with the judgment of HH Judge LLoyd QC in Payne v Setchell where he places a designer in the same position as a contractor.  It seems to me that where the designer performs services of a professional or quasi-professional nature it is in the same position as bankers, solicitors, surveyors, valuers and accountants.

396.	Arup assumed responsibility to CEPAS for design services and there is no reason why it should not be liable in damages for any economic loss which flows from the negligent performance of such services.

397. 	It is not part of the reasoning of my finding, but in relation to the distinction between builder and designer it is right to note that a builder warrants that its works will be fit for the purpose, see Young and Martins v. McManus Childs [1968] 9 BLR 7 whereas a professional advisor warrants only that he will exercise reasonable care and skill.

398.	The case in relation to SCC is put on behalf of SCC on the basis that SCC’s relationship with Arup is sufficiently proximate to come within the Hedley Byrne principle.  All the claims made against Arup are for economic loss.  The claims are for financial loss arising out of the delays caused to the construction sequence by the negligent design and also the and remedial works required in respect of the failure of  the G2 and G5 foundations.  

399.	The claimant contends that SCC was in a relationship with Arup akin to contract.  The case is put as follows:

1.	The contractual chain was not directed to regulating risk between the various contracting parties but for a wholly different reason. The split between on-shore and offshore companies was solely to make the tax position as efficient as possible (see Mr Metcalfe’s written statement) namely to mitigate a liability for Philippine taxes. 

2.	It is implicit in Mr Metcalfe’s evidence that, had it not been for tax considerations, Arup would have been employed by the on-shore consortium.  

3.	The design for the foundations of the Unit 1 boiler had no purpose save for the construction of those foundations by SCC.  In evidence Mr Higson confirmed that both CEPAS and SCC were relying on Arup to perform its services competently.  

4.	Apart from corporate tax affairs, reflected in the contractual arrangements, the relationship between SCC and Arup was much more fluid.  

a)	The evidence from people who worked for Arup (including Mr Hontucan and Dr Oldroyd) was that no distinction was made by Arup between CEPAS and SCC;

b)	Numerous documents were written by Arup which demonstrated that the name CEPAS was used indiscriminately when the actual identity to which reference was made was SCC.  Arup did not make a formal distinction between CEPAS and SCC;

c)	Although Mr Higson said that he was well aware of the distinction, he gave evidence that he knew that Mr Elliott and Mr Eller acted at different times for both CEPAS and SCC;

d)	SCC did not have a second designer to check Arup’s designs. It would be unreasonable to suggest that SCC should not have relied on Arup’s designs;

e)	SCC relied on Arup for Arup’s work in specifying the ground investigation which was intended to provide results for the completion of the design in conformity of which SCC would construct the plant; 

f)	Arup instructed SCC’s sub-contractor NSBC that formations were ready for blinding.  

400.	Arup says that there was not the required proximity between SCC and Arup.  It points to:

1.	The precise contractual relationship agreed between CEPAS and Arup which separated CEPAS from SCC.

2.	A relationship between SCC and Arup would be contrary to the arrangements set up consciously by CEPAS and SCC.

		3.	The factual circumstances negate such a relationship.

a)	There was no contract between Arup and SCC;

b)	Arup invoiced CEPAS and was paid by CEPAS. The centralised billing arrangements in operation after Southern took over in 1997 are irrelevant;

c)	At all times Arup corresponded with CEPAS unless instructed by CEPAS to correspond with SCC;

d)	Mr Elliott, as Managing Director of CEPAS, instructed Arup that they should only correspond with CEPAS;

e)	There was no line of communication between Arup and SCC. This is demonstrated by 

(i)	the fact that information went directly to Mr Elliott;
(ii)	Arup issued its drawings to CEPAS;
(iii)	if Arup was to alter its drawings it would only do so after the alteration had been approved by CEPAS.

401.	Arup also relies on the evidence of Mr Hontucan in asserting that the site agent was representing Arup’s client on site. Mirant argues that Mr Hontucan’s evidence supports its case. I am not persuaded that his evidence takes matters further.  

402.	I conclude from the evidence and the surrounding circumstances 

1.	Contractual arrangements were deliberately put in place under which Arup contracted with CEPAS and not with SCC.

2.	Arup’s invoices were invariably sent to and paid by CEPAS.

3.	The separation between CEPAS and SCC was understood by senior management at Arup and in particular Mr Higson.

4.	The contractual arrangements were adhered to in the sense that Arup communicated with CEPAS and not SCC.   If Arup wished to communicate with SCC, it did so through CEPAS.  

		5.	SCC relied on Arup’s designs in building the plant.

6.	SCC relied on Arup’s work in specifying the ground investigation.

403.	I pose the following questions:

a)	In the absence of a contractual relationship between SCC and Arup is there a sufficient relationship of proximity between the parties and

b)	Is it fair in the circumstances that liability should extend to economic loss?  I, of course, take into account again the helpful observations of Sir Brian Neill in the two cases cited to me.

404.	I conclude that where CEPAS and not SCC contracted with Arup and where the distinction between CEPAS and SCC was insisted upon by CEPAS’ Managing Director and largely adhered to by Arup and CEPAS, it is very difficult to conclude that it was the intention of the parties not only that Arup should contract with CEPAS and not SCC, but that it was intended that Arup should conduct its relationship with SCC on the basis that it would be liable to SCC for economic loss.  

405.	In the absence of any intention that there should be a direct, albeit non-contractual relationship between Arup and SCC, I conclude that there is not a sufficient relationship of proximity between the parties. I therefore find for Arup on this issue.  If I had found otherwise I should have been unable to find a distinction between the position of CEPAS and SCC in relation to the issue of economic loss, and I would have been unable in those circumstances to see any reason why liability should not extend to SCC for economic loss.

THE DESIGN CONTRACT AND THE CONTRACT FOR SUPERVISION OF THE GROUND INVESTIGATION

406.	This combines answers to questions 3 and 4 of the agreed questions.

3.	Did Arup (i.e. OAPIL and OAPHK) exercise due care and skill in a) the design of Unit 1 boiler foundations and (b) the verification of the assumption upon which the design was based.

4.	Did Arup exercise due care and skill in the specification and supervision of the 1996 ground investigation?  

407.	The allegations, set out in the Particulars of Claim are, that Arup failed to exercise due care and skill in the design of the boiler and the verification of the assumptions on which the design was made, and in the specification of the 1996 ground investigation, and in the inspection and the approval of the G5 formation prior to blinding, and the G2 formation for blinding.  

408.	These are allegations of professional negligence against Arup.  

409.	The test set out by McNair J in Bolam v. Friern Hospital Management Committee [1957] 1 WLR 582 at 586 which has been cited many times in relation to professional advice is as follows:

	“The test is the standard of the ordinary skilled man exercising and professing to have that special skill.  A man need not possess the highest expert skill; it is well established law that it is sufficient if he exercises the skill of an ordinary competent man exercising that particular art … He is not guilty of negligence if he has acted in accordance with a practice accepted as proper by a responsible body of medical men skilled in that particular art … Putting it another way round, a man is not negligent if he is acting in accordance with such a practice merely because there is a body of opinion who would take a contrary view.”

410.	I keep in mind the need to analyse the nature and extent of Arup’s retainer, and as Oliver J cautioned in Midland Bank v. Hett Stubbs & Kemp [1979] 1 Ch 384 at 403:

	“Beware of imposing … upon professional men … duties which go beyond the scope of what was requested and undertaken to do.”

411.	I also bear in mind that the opinion of an expert as to what he personally would have done in a particular circumstance provides little assistance to the court on the general question.  

412.	I should start by analysing what Arup agreed to do under the design contract and the ground investigation contract, and how the one contract relates to the other.  

413.	The letter dated the 23rd May 1995 from Mr Ayres which was countersigned by Mr Elliott for CEPAS on the 29th May 1995 set out the design services which Arup agreed to perform for CEPAS.  They were contained in a number of work packages which consisted of concept, preliminary and detailed civil engineering design for the Sual project.  It was agreed that concept design would be done in Hong Kong, and that preliminary and detailed design would be done in London.  The fee for carrying out these packages was £3.75m.

414.	The question of the provision of technical site supervision and quality control, was to be dealt with in a separate and later agreement.  

415.	On the 15th or 16th March 1996 Mr Elliott initialled an agreement in relation to the ground investigation work, setting out the work that was necessary to accomplish these tasks:

“Task 1 - a combined geophysical and hydro graphic off-shore investigation (now completed);

	Task 2 - an initial trial pit and probe investigation of critical areas such as the pump house and chimney (now completed);

	Task 3 – a borehole, probe and trial pit ground investigation of the whole site including on-shore facilities.  A limited amount of laboratory testing will be undertaken on samples recovered from the site investigation in relation to Tasks 2 and 3 of the scope.  The results will be summarised in an interpretive report containing recommended design values.  It is assumed that these reports will provide both CEPAS and GECA that all necessary information to complete the geotechnical design of the Sual power station.”

416.	Arup proposed (and CEPAS agreed) that they would provide one full-time geotechnical engineer to supervise the investigation in Task 3 to be undertaken by CEPA.  In addition to supervising the work in Task 3, the Arup engineer would have to fulfil the requirements of a site foundation engineer, so that he could approve ground conditions for foundations, confirm levels, deal with specification and placement of backfill and check slope stability for temporary works if required to do so.  There was provision for payment against the schedule of rates.  

417.	Under, the design agreement Arup agreed to design the power station.  Under the ground investigation agreement, Arup agreed to carry out certain specific tasks in supervising the investigation in Task 3, and to have a qualified engineer available to approve ground conditions if requested to do so.  

418.	In relation to the allowable bearing pressure of 3MPa for the final design CEPAS allege that Arup was negligent in that:

1.	Arup knew or ought to have known that the foundations G2 and G5 might be on ground which would not support a final bearing pressure of 3MPa. It is said that Arup should have known this as a result of information that was available to it when it prepared the Boiler Milling House Design Basis, and also as a consequence of the information derived from the ground investigation.

2.	Arup permitted foundations G2 and G5 to be constructed on the basis of a design assumption that was incorrect.

3.	Arup failed to take any or any adequate steps to satisfy themselves that the design assumption was properly verified or confirmed.

4.	Arup permitted the work of constructing the foundations to proceed without giving CEPAS/SCC any warning that the works were or may have been proceeding on the basis of an incorrect assumption. 

419.	Arup’s case is that they acted reasonably in expecting rock in the vicinity of G2 and G5 to have a bearing capacity of 3MPa. Any residual risk was taken into account in the design.  The assumptions would ordinarily have been verified on site following the exposure of the formations as part of the control of the contractor’s site operations as part of Arup’s Proposal for Technical Site Support Services but which CEPAS had failed or refused to agree.

420.	Arup claims that it is good engineering practice to proceed with foundations on the basis of assumed allowable bearing pressures and to verify the assumption by the inspection of the formations on site. Arup contends that G5 was inspected and approved by Mr Pascall in July 1996 and that this constituted sufficient confirmation of the allowable bearing pressure in the design.  

THE NATURE OF THE DESIGN OBLIGATION
421.	The design obligation of Arup is founded upon the agreement entered into by Arup on 23rd May 1995.  Under this agreement Arup were appointed as civil engineering designers on the Sual Project.  This design included the design of Boiler Unit 1.  The fee for concept, preliminary and detailed design of the works was agreed to be £3.75m.  Various packages were to be excluded from the design scope.  Concept design was to be undertaken by Arup in Hong Kong, preliminary and detailed design was to be undertaken from a project office in London.

422.	There is a suggestion by Arup that this comprised Stages I, II and IV of the process and that Stage III “identification of final design parameters based on new site investigation data and compilation of the final design basis statement” was left over for further discussion.  I do not understand this to be what was agreed.  If it had been, then there would have been no enforceable agreement in May 1995 because an integral part of the agreement to design the plant would have been left over for further negotiation.

423.	Properly analysed, Arup agreed, as civil engineering designers, to design the plant for an agreed price.  The provision of further site supervision and quality control was to be the subject of further negotiation and agreement at a later stage.  

424.	It was also clearly recognised by both parties, evident from the course of conduct, that further site investigations might be required in order to identify the final design parameters and that such investigations would be paid for under a separate contract.

425.	None of this detracts from Arup’s overriding obligation under the May 1995 contract to design the plant.  No doubt circumstances could have arisen where Arup would have said that it was unable to complete the design, arguing that its ability to design a safe plant had been frustrated by the claimants’ refusal to agree to pay for further necessary site investigations.  This did not happen in this case.

426.	Any design must depend on design assumptions.  Among the more important assumptions was the appropriate maximum allowable bearing pressure of the ground for the structures that were to be placed upon it.  This was particularly important for heavily loaded structures like the boiler house which was amongst the most heavily loaded of the structures in the plant.

427.	Arup was under an obligation to exercise due care and skill in designing such structures on ground that could bear their weight without movement above the permitted maximum set out in the contract.

428.	In order to discharge this obligation, Arup had to be satisfied that the design could be achieved on the basis of investigations carried out by it and by others. This required a verification process to confirm the preliminary design assumptions.

429.	In February 1995 Arup had undertaken a Seismic Design Statement.  Before December 1995 there had been mapping by aerial photography.  Geomatrix had undertaken a surface fault rupture assessment to investigate whether or not there were active faults on site.  Dr Redding was consistent in his opinion that further investigations needed to be carried out, aimed at defining better those rock characteristics, which had a direct bearing on the particular construction.

430.	In August 1995, Dr Redding had provided a detailed geological overview of the quality of the rock and had given a general warning of the risk that the variable and often low strength of the rock, even at considerable depth might cause problems for heavily loaded structures.  He had advised further verification by  “careful engineering – geological mapping of rock exposures, recording dip and direction of joints and faults and noting areas of brecciation and serpentinisation”.  This mapping needed to be done systematically and conscientiously.  He also said that there needed to be a more systematic approach to basic rock description and the measurement of rock strength.

431.	In September 1995, Dr Redding, having been appointed to act as the main advisor on geology, visited the site and discovered the fault which ran east- west under or adjacent to G2 and G5, and which has been called “The Redding Fault”.

432.	Between September 1995 and December 1995, Arup’s proposals for ground investigation went through a number of drafts.  Under the heading “Geology” the Report noted that the various rock types had experienced a considerable degree of weathering and alteration, which had extended down from the surface to various depths.  It gave details of a further extensive investigation for the power plant including the boiler unit.

433.	The nature and extent of the verification process must be seen in the context of the ground investigation proposal which described the rock on site as “having experienced a considerable degree of weathering and alteration which has extended down from the surface to varying depths.”

434.	The nature and extent of the verification process must also take account of Dr Redding’s opinion, expressed in his report dated 17th August 1995, that it was evident for a project of this size and importance that more attention should be paid to basic and fundamental geological issues and that the variable and often low-strength of the rock might cause foundation problems for heavily loaded structures.  The report went on “digging deeper in an attempt to expose better quality rock will generally not be a viable solution”.

435.	Whether or not Arup should have had these precise matters in mind, it is clear from the history that the verification process should have been systematic and detailed.  There were serious questions, which needed investigation before the appropriate maximum allowable bearing values could be confirmed, particularly for the heavily loaded structures.

436.	Dr Redding’s original ground investigation proposals included bore holes to confirm the foundations.  The amended proposal included the proposal that there should be five trial pits and two probe holes in the area of the power plant other than the chimney area.  This would have provided a means of verification of the design assumption since the results would no doubt have been analysed in the context of the quality of the ground, both on the surface and at depth.

437.	In Dr Redding’s earlier report of 17th August 1995, he proposed a form of investigation which did not involve trial pits or bore holes but could be carried out by Arup geologists.  This involved careful geological mapping of rock exposures, recording dip and direction of joints and faults and noting areas of brecciation and surpentinisation.

438.	It was expected that in addition to the contract for the supervision by Arup of the ground investigation which was finalised with Mr Elliott on 15th or 16th March 1996, Arup would be involved in the surface mapping and visual inspection to verify the important design assumptions.  I find that this should have been a much more systematic and detailed exercise than that undertaken by Mr Manning, although he was involved in mapping by aerial photography.  No doubt if he had been asked to undertake this task and provide a detailed report for the design team in London he would have done so. If the mapping exercise had been carried out in the manner which Dr Redding advised, there would have been a mapping plan showing a detailed investigation of the ground conditions in the area at and surrounding Boiler Unit No.1 together with a clear re-appraisal of Dr Redding’s preliminary design assumption.

439.	It is in this context of uncertainty, well known to Arup, that Mr Talbot and Mr Redding’s letter of 20th December 1995 and 4th January 1996 specifying the appropriate maximum allowable bearing value for the footings as 0.8KPa, later altered to 3KPa must be read.  The letters start by saying that the existing site investigation information is rather poor and that the best that can be done is a rather generalised interpretation.

440.	Dr  Redding’s oral evidence was that the assessment in the December/January letters was to enable the design to be progressed in its preliminary form and was never intended to be a final assessment to be used in the final design.  The source of the duty to verify this assessment was the tentative nature of the assessment itself which required verification and confirmation before Dr Redding was prepared for it to be a firm design assumption. It was only on the basis of firm design assumptions that Arup was able to discharge its contractual obligation under the design contract to provide a design which enabled the plant to be built within the tolerance of movement permitted under the contract.

441.	In their closing submissions, Mirant contend that no reasonably competent engineer would have recommended that an allowable bearing pressure should be assumed to be 3 MPa for the purpose of producing the detailed design for the G2 and G5 foundations.  They further contend that the figure should not have been based on the assumptions made at the time when the recommendations were made in early January 1996.

442.	Insofar as the suggestion is made that Dr Redding should not have altered the assumption from 0.8MPa to 3MPa and was negligent in doing so, I reject  it.  Dr Redding gave an acceptable explanation in his comprehensive report of 17 August 1995 and in later correspondence as to why the change was made and made it clear that this was only on the basis that it was a preliminary assumption for a preliminary design and was not to be used for the detailed design without further extensive verification.  The assumption was heavily qualified in the letters and I readily accept his evidence that he expected the assumption to be verified before the detailed design was finalised.  Insofar as it is relevant, I reject Dr Endicott’s opinion that Dr Redding would have been justified in adopting a finally concluded bearing value of 5MPa.

443.	I next consider the expert evidence of Dr Hencher that it was necessary to have bore holes and that visual inspection and mapping were insufficient on their own.  Dr Endicott said that it was reasonable for Dr Redding to make a design assumption of 3 MPa and to advise verification by inspection and detailed mapping.  On this issue I accept Dr Endicott’s opinion.  Both experts agree that the assumption should not have been used without detailed verification.  I reject Dr Endicott’s evidence insofar as it suggests that the verification required anything less rigorous than the detailed mapping etc., required by Dr Redding.

444.	Dr Redding had highlighted problems in the course of his reports which led him to emphasise the need for detailed mapping.  Some of the problems were as follows:

a)	there were zones of weathered rock in boreholes 9 and 10 equivalent to Class IV (poor rock).

b)	there is a reference in the letters of 20th December 1995 and 4th January 1996 to closely spaced joints and to the fact that the two faults may have implications for the frequency of discontinuities.

c)	there is a potential for the rock to have expansive clay seams.

d)	there were two fault zones adjacent to G2 and G5.

e)	brecciation and serpentinisation of rock was reported in the Redding memoranda.

f)	in his memorandum of 17th August 1995, Dr Redding had warned of the variability of the rock at depth and the possibility that this may have an impact on heavily loaded structures.

445.	Dr Oldroyd said in evidence that although he was able to proceed with the detailed design, he expected the assumptions to be verified before the boiler house was constructed.  The first draft of the Boiler and Milling House Design Basis made it clear that the bearing capacity would be verified by the ground investigation which was proposed. There was no mention of the geological verification process proposed by Dr Redding which involved detailed geological mapping. 

446.	When Mr Manning arrived on site, he understood that he should gain a fuller understanding of the ground conditions and should supervise the ground investigations.  

447.	There is no doubt that Mr Manning did influence some aspects of the ground investigation.  He reduced the number of trial pits and probe holes to be undertaken.  He chose the location of the trial pits and probe holes.  The trial pit originally to be dug adjacent to G2 was moved further away from G2.

448.	Insofar as it is relevant, I find that the ground investigation plans were not impeded by Mr Elliott.  No doubt there were discussions between Arup and Mr Elliott on scope and price but Mr Elliott did not prevent Arup from specifying the investigations which it thought were necessary to obtain the information which it required to carry out the final design.  On the contrary, Mr Elliot had instructed the trial pit adjacent to G2 to be undertaken as a matter of priority.  This had significance in the light of the variability of ground conditions and the importance of the boiler foundations.

449.	This ground investigation was separate from the verification of the design assumption proposed by Dr Redding.  No detailed geological mapping was done by Mr Manning although he did gain a fuller understanding of the ground conditions particularly by taking photographs.  The only report he produced was the Bedrock Profile Document which he completed after he left site.  This did not contain any assessments of the factors affecting the assessment of the nature and quality of the ground in the vicinity of the boiler house.  Mr Manning said in evidence that he did not undertake the mapping and visual inspection in the Unit 1 boiler area because, as he explained, most of the exposures were covered in a thin veneer of gravel.

450.	In his evidence Dr Endicott conceded that there was no evidence that Mr Manning had assessed the capacity of the rock in the boiler house or carried out the detailed geological engineering mapping envisaged by Dr Redding.  Dr Endicott also accepted that there was no evidence that Arup inspected the exposures of rock during the bulk excavation work.

451.	I conclude therefore that Mr Manning did not carry out the detailed geological assessment which was required by Dr Redding.  I conclude that had this been done, either by him or by Mr Pascall, that would have discharged Arup’s responsibility.  I do not find that Arup was negligent in failing to prescribe bore holes for the reasons which were set out by Dr Redding in his August memorandum.

452.	As far as Mr Pascall is concerned, Arup argues that he did inspect G2 and G5 formations on 23rd July 1996 and that he did discharge the responsibility to verify the design assumption that the formations were capable of bearing a pressure of 3MPa and did inspect the formations as part of his responsibility for supervising the ground investigation.

453.	Mirant claims either that Mr Pascall was negligent in verifying the design assumption or that he did not undertake a sufficiently detailed examination of G2 or G5 to fulfil the obligation upon Arup to verify the design assumption.

454.	I have already concluded that Mr Pascall was asked to go on site to supervise the ongoing ground investigation.  He did not receive a copy of Mr Fox’s memorandum to Dr Redding, setting out additional tasks which he might undertake or if he did see it he did not take any notice of it because he was not asked specifically to undertake those tasks. He was not asked to undertake a detailed mapping to verify the basic design assumptions on which the foundations of the boiler house had been designed.  Even at the site inspection with Mr Higson on 5th July 1996, early in his tour of duty he was not given any information as to the assumed bearing pressure of the foundations.

455.	What Mr Pascall was undertaking was a rough and ready exercise confirming generally that the basis for the design was correct.  It was far removed from the detailed systematic mapping which Dr Redding had envisaged and which became particularly important in view of the qualifications on the estimate of 3MPa which Dr Redding had made.  The record which Mr Pascall made of his visit and his inspection on 23rd July was cursory and reflected (as he thought) the unimportant nature of the task and his attitude to it. This was also reflected in the fact that he did not present any report to the design team and threw away any notes made on site presumably because he thought that they were of no importance.

456.	I conclude that Mr Pascall was not attempting to and did not fulfil Arup’s obligation to verify its provisional estimate of a bearing capacity of 3MPa in the course of his inspection.  In this, he was not personally acting negligently.  The task of verification which in the circumstances of this case required detailed and systematic mapping was never undertaken by Arup.  In this regard Arup was negligent.

457.	Mirant also claims that Mr Pascall was negligent in the way in which he carried out his obligation to inspect the G2 and G5 formations as part of Arup’s supervision of the 1996 ground investigation.  This obligation was linked to the design obligation in that if the detailed design assumption had already been investigated as part of the ground investigation, the obligation would have been discharged.  The nature of the verification required by Arup would have taken place against the background that the detailed and systematic geological mapping and verification had already taken place.  In these circumstances, the verification on 23rd July 1996 would have been for the purpose of discharging the continuing obligation to review design assumptions which had already been verified.

458.	I am satisfied that Mr Pascall did carry out a form of inspection of the formations at G2 and G5 on the afternoon of 23rd July 1996.  The inspection took the form of assessing the strength of the rock with a geological hammer.  Mr Pascall did not measure the discontinuity spacing of joints in the formations.  He did not compare the quality and nature of the ground with any other ground at Sual.

459.	The nature of the inspection is relevant for two separate reasons.  First it is relevant in relation to the issue of negligence, both in relation to the verification of the design assumption and to the inspection of the formation.  Secondly, it is relevant to the question of the reliability and comprehensive nature of the observations.  This in turn is relevant to the case on whether the conditions were the same or different to those found in 1997 at the time when the foundations failed.

460.	Dr Hencher has concluded that the form of inspection which Mr Pascall undertook was not competent to verify the design assumption.  He said that any reasonably competent engineer would not have relied solely on the geologists hammer but would have obtained detailed information from boreholes, would have undertaken geological mapping and assessment of rock exposures, have identified and recorded areas of weaker rock that were not capable of bearing the pressure that had been assumed for design purposes and would have reported to the designers that in places the rock was incapable of bearing the assumed pressures in order that the designers could have amended the design.  Dr Hencher’s opinion is in line with the process envisaged (apart from the boreholes) by Dr Redding in the latter part of 1995.

461.	Dr Endicott’s opinion in paragraph 32.5 of his report was that the methodology employed by Mr Pascall was a competent means of carrying out his inspection.  He had to make concessions in the course of cross-examination.  He agreed that tapping the surface of the rock with a hammer would not provide any information about the rock at depth.  Where there was room for concern about the quality of the rock at depth, additional testing and assessment needed to be carried out.

462.	Dr Endicott also agreed that in the course of making a detailed assessment, any competent engineer would have recorded and reported that he had identified ground of Grade IV and V unless it was very minor.  This he accepted was important because areas of weak rock should have been removed prior to blinding.

463.	On this issue I prefer the evidence of Dr Hencher that the process undertaken by Mr Pascall on 23rd July 1996 did not constitute verification of Dr Redding’s design assumption.  In my view, although I am prepared to accept that Arup was not negligent in insisting on boreholes, it ought to have undertaken at least the detailed mapping and other investigations envisaged by Dr Redding. The problem was that Arup never undertook the procedure of verifying the design assumption which they should have done and which was envisaged by Dr Redding.  Insofar as Arup’s verification obligations were said to have been carried out on 23rd July 1996, as Mr Higson suggested in evidence, the process was carried out for a different purpose.  In so far as it is measured against what was required to discharge the obligation to verify the preliminary design assumption, it fell far short of what was required.

464.	In relation to the site services agreement, Mr Pascall undertook the separate task of approving formations prior to blinding.  On the morning of 23rd July 1996 blinding had started.  Mr Pascall stopped the blinding until he had inspected the formation and later approved it as being ready for blinding.  In this respect, I am not satisfied that Mr Pascall was negligent in his form of inspection.  

465.	I conclude therefore that in relation to the obligation to verify the design, Arup  failed to exercise due care and skill in verifying the design assumptions in relation to the load bearing capacity of the ground at G2 and G5.  In order to discharge Arup’s duty in contract and/or tort in this regard, Arup should have mapped the formations after undertaking the investigations set out by Dr Redding in his advices in the autumn of 1995.

466.	I am not persuaded that Arup was in breach of the site Services Agreement in failing to exercise due care and skill in the inspection or approval of the formation of G5 prior to blinding or in the inspection of the formation at G2.

467.	 Arup raises the further important question that if contrary to its contention, the failure in 1997 occurred in situ ground, it is not liable to the claimants because any reasonable estimate that it would have made for the design would have been higher than the 50kN/m² bearing pressure at which the unacceptable movement occurred.  It seems to me that on the balance of probabilities if the detailed verification process had been carried out, the variability of the ground under the boiler unit would have been identified and analysed.  The mapping might well have led to further site investigations or to the boiler unit being moved to a location, which had sounder ground. 

468.	In any event I am satisfied on the balance of probabilities that the subsequent loss and damage would have been avoided.

WHAT WAS/WERE THE CAUSE OR CAUSES OF SETTLEMENT OF 
THE G2 AND G5 BOILER FOUNDATIONS? WAS THE NG5 
FORMATION LEVEL (NG2) LOWERED AFTER ARUP’S INSPECTION 
AND APPROVAL ON 23RD JULY 1996.

469.	Mirant’s case is that the settlement of the G2 and G5 foundations was caused by the poor ground that existed underneath these foundations.  The ground was in situ ground which had not been weakened by blasting or in filling between July 1996 and May 1997. Professor Hudson concluded that the magnitude of the settlement had been caused by the collapse in the structure of the rock.  The rock contained good rock but also zones of very poor rock.  He said in evidence that:
“There are zones of weak rock.  There are joints which are open and we know from the geology that this material is very degraded, and from the pictures on site you can see these good zones in the lenses and you can see the bad zones around and this is the type of geology which has this structure which can collapse.”

470.	After drawing a sketch, Professor Hudson said in evidence, using the sketch,
“This is the foundation.  Here and there is something blinding underneath.  Then I believe that there are – the type of geology that we have with the sheeted dyke and foliation and so on, then the lenses of rock, we have zones like this (indicates) going down which are extremely weak.

If you read all the geological reports about the formation of this material, you can have these types of zones there and there is evidence in various places that there is very weak ground of this type.
Now you mentioned about the DIANE nature of the rock [see para 46 above] and the discontinuities.  In a rock like this, there are these smaller fractures, so when you ask about double counting and whether these have been counted twice, the smaller fractures are in the block there, but then there are other weakness zones going through here (indicates) so the sort of thing that happens is that this gets pushed down and then this zone here and this zone here will compress.”

471.	Mirant argues that this explanation is consistent with the ground conditions observed by others and is a credible explanation which is consistent with the in situ ground rather than ground damaged by blasting. 

472.	Arup is extremely sceptical of this explanation which it says is at best theoretical and not based on the actual ground conditions.  Arup’s affirmative case is that the settlement was caused by
(i) 	further excavations at G2 and G5 by NSBC;
(ii)	blasting at G2 and/or G5 by NSBC;
(iii)	N/A
(iv)	loose or broken rock fragments under the G2 and G5 foundations;
(v)	fill under the G2 and/or G5 foundations.

473.	Arup also identifies the following additional alleged causes

(vi)	failure by CEPAS and/or NSBC to give notice to Arup prior to final blinding that G2 and/or G5 were ready for inspection;
(vii)	failure by CEPAS and SCC to provide proper and sufficient technical supervision and inspection on site whether by NSBC or others and failure to heed Arup’s warnings of the need for such supervision;
(viii)	failure by SCC (by its contractor NSBC) to carry out work to a proper standard of care and skill in relation to (i), (ii), (iv) and (v)  above;
(ix)	CEPAS and/or SCC causing or permitting the construction of the G2 and G5 foundations of unsuitable formations;
x)	failure by CEPAS and/or SCC to inform Arup and seek Arup’s approval for the final formation at G2 and G5.

474.	There is clearly a substantial difference in the way in which the parties seek to prove their case.  Mirant says that the ground conditions found around and beneath G2 and G5 foundations are on in situ ground.  They also go on to say that there is sufficient positive evidence of the activity at G2 and G5 to negative any inference that the ground was weakened by the inclusion of fill or by blast damaged rock.

475.	Arup’s case is predicated on the premise that the settlements were large and occurred at an extraordinary low load which cannot be explained by the known and observed geology on the site.  Secondly, they say that the condition of the G2 and G5 formations in 1997 was very different from those that Mr Pascall had observed in July 1996.  They go on to say that their theory is made the more plausible by the poor performance of the contractors on site and is supported by the fact that the thickness of the blinding measured in August 1996 did not correspond with the thickness of the blinding measured in 1997.  Thus it must be inferred, so they say, that the formations were altered by the contractor after July 1996.

476.	Arup also says that Mr Brice’s witness statement (albeit contradicted in his later evidence) indicated that G5 was altered after the time of Mr Pascall’s inspection, that the contractor’s records show further excavation after the 23rd July 1996, and that whereas Mr Pascall said that he did not see loose, blasted rock or fill left in situ, there are strong indications that the formation suffered from such defects at the time when they were examined in 1997.

477.	In support of the general proposition, Arup says 

			a)	the Sual site was not well regulated
b)	the work was not carried out by conscientious and reliable contracts or sub-contractors
c)	blasting and excavating was done to depths far deeper than needed and
d)	formations were comprised of rock that was blasted and not removed, fill, or other loose debris.

478.	It is convenient to deal with the background points immediately.

a)	I agree that the site was not well regulated. SCC did not have anyone on site in a supervisory capacity until Mr Grant Smith arrived in August 1996.  There were still concerns about quality control well into 1997.

b)	There were criticisms of NSBC from both Mr Brice and Mr Gildersleve.  I heard a dramatic description of how on one occasion the volatile Mr Elliott drove a bulldozer through the badly built canteen block and publicly tore up a cheque for two million Pesos that he was going to give to NSBC because of what he regarded as their poor performance.  It is not disputed that their performance was so poor that in August 1997 SCC terminated NSBC’s contract.

c)	It is well established that, on occasion, blasting and excavations were carried out to depths greater than needed.

d)	Areas of the bunker bay had been excavated too deep and photographs of the 13th June 1996 showed blinding placed on backfill.

e)	The necessary quantities of concrete were not always available and the improper use of stone backfill was noted (4th June 1996).

f)	In relation to the boiler unit, Mr Higson noted in his diary that blinding was placed on the rock fill to the wrong level and had to be taken up.

g)	The finding of the explosives and detonator cord were contained in fill in G5 excavation.  This is evidence of poor practice.

479.	I am able to accept Arup’s criticisms as part of the background evidence.  This evidence will be of particular importance if I conclude that the evidence is inconclusive in relation to the question of whether or not the cause of the movement to the G2 and G5 could have been caused by blasting or by rock fill.

480.	Mirant claimed that:

(i)	the excavations were not in ground that would support a final bearing pressure of 3KPa;

(ii)	the excavations were not in rock Grade II/III or better but much of the rock was of a lesser quality which included Grade III/IV to Grade V and Grade VI with bands of clay up to 400mm in width;

(iii)	the RMR of the rock at G2 and G5 was not 25 but 10;

(iv)	the discontinuity spacing was not  loosely spaced but extremely closely spaced rock;

(v)	from foundation level to depths of up to 8.4m a significant part of the rock mass encountered in bore holes on the whole site was rock Grade IV to VI due to weathering;

(vi)	the excavations at G5 contained up to 400mm of loose debris that had not been cleared;

(vii)	there were cracks in the rock at G2 and G5 that were up to 30mm wide.

481.	Much of Dr Endicott’s cross examination was directed to establishing that in his opinion the properties of the ground which existed in July 1996 also existed in 1997 after the settlement had occurred.

(i)	He accepted that the ground that was found to exist in 1997 would not support a bearing pressure of 3KPa. Arup point out that in the event it failed at a level which was lower than any lower bearing pressure that Arup was likely to have adopted in its design.

(ii)	Dr Endicott accepted that the ground beneath G2 and G5 as it was found to exist in 1997, was not all rock of Grade II or III or better, but a significant amount was of a lesser quality.

(iii)	He considered that the RMR of the ground between G2 and G5 in 1997 was much lower than ten.  Professor Hudson assessed the figure as at the lower end of the range from 11 to 28.  Dr Hencher arrived at a figure of between 7 and 9.

(iv)	Both Dr Endicott and Professor Hudson agreed with the assessment in 1997 of closely to extremely closely jointed discontinuity spacing with clay seams.

(v)	For G5, Dr Endicott accepted that the bore hole showed that a significant part of the rock mass was Grade IV – VI.  For G2, Dr Endicott accepted that two out of three bore hole logs showed that a significant part of the rock mass was Grade IV to VI.

(vi)	Dr Hencher felt that G5 showed in situ ground.  Professor Hudson was unable to express an opinion.  Dr Endicott concluded that this was a local feature that was restricted to the southern end of the foundations and did not extend much beneath the surface.

(vii)	Dr Endicott agreed that in 1997 there were cracks in the rock at G2 and G5 but he considered that such cracks could have been the result of construction damage which he explained meant either blasting damage or damage caused as a result of the 1997 investigations or remedial works. Professor Hudson agreed that the trial logs identified cracks.

482.	The question of whether the ground was in situ ground or ground, which had been filled by soil or boulders or had been damaged by blasting is at the heart of this part of the case.  Mirant contends that the ground had not altered from July 1996. This claim must be considered on the basis of the findings of fact which I now make.

483.	The findings are as follows:-

(i)	On 23rd May 1996 the formations for G2 and G5 were excavated.

(ii)	The formations which had been approved by Mr Manning after blinding had been constructed to the wrong orientation and depth by the contractors.  The formations had to be removed and re-constructed.

(iii)	A note on 4th June 1996 said that G2 and G5 had been excavated to a higher level than required.  NSBC was told not to use back-fill to achieve the required level.

(iv)	On 10th June 1996, trial pit TP4 was excavated at a point 35 metres south east of G5 and south of G2.  It showed very closely fractured basalt with discoloured brown along the fractures.

(v)	On 11th June 1996 Mr Higson made a site visit.  There is a note that a number of formations had been blinded but some were at the wrong level.

(vi)	A note of 11th June 1996 from Mr Gildersleve indicated that the boiler area needed to be checked prior to blinding.

(vii)	On 19th June 1996 a note of a meeting in Hong Kong indicated that ‘some excavation has already been undertaken’ at Boiler Unit 1.

(viii)	By 28th June 1996 a CEPAS monthly progress report indicated that areas in the boiler and turbine areas had been blinded but there was evidence that excavations had not been carried out to the required levels and back-filling had not been approved prior to blinding.

(ix)	The report is supported by an Arup memorandum dated 26th June 1996.

(x)	The F+V wall chart in the site office showed excavations at G2 and G5 taking place on 15th July 1996.  The F + V wall chart showed that the formations at G2 were completed by 23rd July 1996.

(xi)	Blasting took place on other parts of the site on 23rd July 1996.

(xii)	F+V records show that blinding took place at G2 and G5 on 8th and 9th August 1996. Immediately before that the F+V record for 7 and 8 August 1996 showed that loose materials were cleared out.

(xiii)	Mr Quiambao was a reasonably regular visitor to the site on behalf of Arup between 8th August 1996 and 22nd September 1996.  Mr Hontucan visited the site between 23rd and 26th September 1996.

(xiv)	Mr Quiambao did not give evidence.  Mr Hontucan did not give evidence of any further blasting having taken place.

(xv)	There is evidence that the blinded G2 and G5 formations had a reinforcement cage placed on top of them (see photograph of 27th August 1997).

(xvi)	There was evidence from NSBC that in late August 1996 blasting had been completed but that blinding was continuing in the area of Boiler Unit 1.

(xvii)	The Arup daily site record of 27th or 29th August 1996 noted a continuing general problem of loose rock in areas being prepared for blinding.

(xviii)	A note from Mr Grant Smith to Sual’s office in Hong Kong dated 23rd October 1996 indicated that blasting was 95% complete for Boiler Unit 1.

(xix)	Mr Smith explained a discrepancy in the volume of blasting in Boiler Unit 1 as being ‘fragmentation of rock during blasting operations’.

(xx)	An Arup memorandum of 17th February 1997 described ‘founded on rock’ if ‘a misleading characterisation of the quality of rock’.  If one took into account the areas of Grade III and Grade IV rock and the fractures

(xxi)	I am not prepared to accept Mr Pascall’s evidence in relation to the supposed step into the foundation at G5 in relation to Arup’s claim that G5 was lowered or blasted after 23rd July 1996.

(xxii)	I accept Mr Brice’s evidence given under cross-examination that he did not recall G2 and G5 being blasted after the 23rd July 1996.

(xxiii)  The Boiler and Milling House Design, re-issued in October 1996 still said that further GI was intended to confirm the safe bearing capacity of 3MPa although this may have been a question of poor editing.

484.	I also find as a fact that although blasting was virtually complete by 23rd July 1996 some very limited blasting in the vicinity of Boiler Unit 1 took place after that date.  There is no clear evidence which would enable me to find on the balance of probabilities that the level of the foundations was altered after Mr Pascall’s investigations in July 1996.  This conclusion was in the end endorsed by Dr Endicott in the course of his oral evidence.  I also conclude on the balance of probabilities that blasting was very substantially completed in the area of the boiler house by the 8th or 9th August and that blinding at G2 and G5 was completed at about that date.

485.	I have to weigh up all the evidence on the balance of probabilities.  I conclude on the balance of probabilities that the movement at G2 and G5 was not caused by blasting or infill.  I have considered whether, as a matter of evidence, there are any grounds for concluding that further work may have been done on the general basis that NSBC were known to have done work to a poor standard but I reject this conclusion.

486.	As far as expert opinion on these issues are concerned, I prefer the evidence of Dr Hencher and Professor Hudson.  I am satisfied that the ground at G2 and G5 was much poorer and more uncertain geologically than Arup realised.  Dr Redding was clearly concerned in the course of his investigations in 1995 that the ground might not be straightforward.  He might well have advised the use of further boreholes if the contractors had been more dependable.  As it was, he was concerned that detailed mapping should be undertaken by Arup’s highly skilled geologists.  This was never done.  It was not Mr Manning or Mr Pascall’s fault that they did not do it.  They were not asked to do it.

487.	The borehole data insofar as it existed, was not reassuring.  Dr Endicott had to accept that a significant part of the rock mass was Grade IV to VI.

488.	To this evidence I add the finding that the rock was foliated.  Mr Pascall himself identified zones of weak rock to the northeast and southwest area G5.  The mapping of the area beneath G5 by Mr Toms also showed large areas of weakness.

489.	In these circumstances, I accept Mirant’s submission that although it has to be conceded that the site records are incomplete, it is not credible that the discovery that the foundations were at the incorrect level (for the second time), the removal of the blinding, the re-excavation of the foundations and the subsequent re-blinding could have taken place without being recorded in any documents.  

490.	In these circumstances, I find for the claimants on this issue.

IS MORE THAN ONE OF THE CLAIMS UNDER BARRED UNDER 
THE 1980 LIMITATION ACT?

491.	The parties are agreed that the limitation date six years before the action was brought is 2nd March 1996.

492.	It is also agreed that a cause of action in tort accrues at the date of damage.

493.	I do not understand there to be a dispute that in the case of negligence causing economic loss, the date of damage is the date when the claimant’s economic interests were adversely affected.  Arup contend that CEPAS’ economic interests were adversely affected when NSBC proceeded to blind formations at G2 and G5 and hence proceeded to construct foundations which were bound to fail.  There is no dispute that this occurred after 2nd March 1996.

494.	There is a dispute about the significance of Dr Redding’s estimation of an allowable bearing pressure of 3MPa in his letter dated 4th January 1996.  I have already concluded that I accept Dr Redding’s own evidence that this was a heavily qualified estimation which approximated to a preliminary design basic statement which allowed the design to be progressed in a preliminary form.  It envisaged that it would be confirmed by the ground investigations or otherwise before the detailed design was finalised.  This required the preliminary estimate either to be confirmed or changed.   This would have occurred inevitably after the 2nd March 1996.  In the context of this case, this obligation existed irrespective of the obligation noted in Brickfield Properties v Newton [1971] 1WLR 862 where Sachs L.J. held that an architect’s duty in respect of design continues until the building is constructed.

495.	In these circumstances, in respect of G5 Arup claims that Mr Pascall verified the design when he visited the site on 23rd July 1996. In respect of G2 the load-bearing assumption was not confirmed before the blinding was placed in G2 in the summer of 1996, again on Arup’s case.  On Mirant’s case, these were obligations which were never completed, but any verification of the design would need to have been completed before October 1996 and preferably before June 1996, the first being the date on which the completed design was sent to the contractors, the second being the date on which the work of construction took place.

496.	The obligations under the Ground Investigation Agreement took place after 2nd March 1996.  The agreement itself was not signed until 15th March 1996.  Therefore in relation to the allegations relating to the ground Investigation Agreement, these are not affected by the period of limitation either.

CONCLUSION

I answer the questions posed in the course of this trial as follows:

497.	Issue 1 is no longer relevant, but I would conclude if necessary, that there was a variation to the March 1996 Agreement for supervision of the ground investigation whereby Arup agreed with CEPAS that its engineer could inspect and, if appropriate, approve specific formations subject to notice being given to Arup by CEPAS or alternatively subject to notice being procured by CEPAS from NSBC that a specific formation was ready for inspection and approval.  This variation occurred in the course of further discussions which took place between Mr Higson and Mr Eller in April 1996.

498.	Arup owed a duty of care to CEPAS and/or SCC to exercise due care and skill in the design of the foundations to the following extent:
	
(i)	design services included the verification of Arup’s preliminary design assumption made in early January 1996.

(ii)	Arup owed a duty to CEPAS in contract and tort not to cause economic loss to CEPAS.

(iii)	Arup did not owe a duty to SCC in tort not to cause economic loss to SCC.

499. 	Arup owed a duty of care to CEPAS not to cause economic loss in relation to services carried out in the course of approving formations.  Arup did not owe a similar duty of care not to cause economic loss to SCC.

500.	Arup did not exercise due care and skill in

	(a)	the design of the Unit 1 Boiler foundations and

(b)	the verification of the assumptions (i.e. the design parameters upon which the design was based).

501.	In this regard Arup wrongly caused or permitted foundations G2 and G5 to be constructed on the basis of an incorrect design parameter or assumption and was in breach of its duty under the Design Agreement in failing to act with due care and skill in the verification of the design assumption that the ground would support a bearing pressure of 3KPa.

502.	I reject Arup’s contention that verification was a matter of inspection under the Site Works Agreement rather than a matter for design.  It is artificial to talk of a duty on Arup to warn CEPAS or SCC that the works may be proceeding on the basis of an incorrect parameter or assumption as is alleged in paragraph 58.4 of the Particulars of Claim.  Arup was under a duty to design the plant, including the boiler house only on the basis of an accurate parameter or assumption.  If there was a risk that the parameter or assumption was not accurate, e.g. because Arup had not been permitted to carry out the ground investigation that it wished to undertake, either it would have had to treat the contract as frustrated or sought to vary the design agreement by agreeing with the claimant that the claimant would assume the whole or part of the risk of failure.

503.	In relation to the question of whether Arup exercised due care and skill in the specification and supervision of the 1996 ground investigation, I conclude that this is in the event, a subsidiary issue.  Any contractual requirement would have had to have been derived from the 1996 Site Works Agreement.  This agreement was concerned with the carrying out of the ground investigation.  It provided that ‘the client shall be responsible for carrying out the geo-technical site investigation.  The consultant shall interpret the results of the investigation as required for the civil works design but shall not be responsible for the adequacy or accuracy of such data.’

504.	Arup’s primary responsibility was for design under the design contract.  There is no doubt that it assisted CEPAS to develop a strategy for the further site investigation which it needed to undertake in order to discharge its responsibility for design.  If Arup had been unable to complete its obligation under the design contract because of the inadequate information it was under an obligation to inform CEPAS that this was the position.

505.	As a subsidiary matter, I have concluded that Arup was not negligent in failing to prescribe the verification of the design assumption relating to allowable bearing pressure by the use of further boreholes.

506.	With regard to supervision of the ground investigation, by Arup employees, I am unable to conclude that Arup was negligent.

507.	Similar issues are raised in relation to the inspection and approval of G2 and G5 prior to blinding.  I conclude that, taken in isolation, i.e. without reference to the verification of the design parameters, Mr Manning and Mr Pascall were not negligent in relation to the inspection and approval of G2 and G5 prior to blinding.  If Mr Pascall had been given the explicit task by Arup of verifying the design assumption in the context of the preliminary and qualified assessment of Dr Redding, as he should have been, and had failed to provide the detailed mapping etc. envisaged by Dr Redding, he would have been negligent.  As it was, Arup was negligent in not carrying out the detailed verification envisaged by Dr Redding before the design was completed.  Although technically the design could have been changed at any time up to October 1996, realistically any change needed to be made by  June 1996. 

508.	In relation to the cause or causes of settlement of the G2 and G5 boiler foundations and whether the G5(and G2) formation level was lowered after Arup’s inspection on 23rd July 1996. I have reached the following conclusions.

509.	I have concluded that the formation levels were not lowered after 23rd July 1996.  I have also concluded that the ground that was found beneath the foundations G2 and G5 in 1997 was in situ ground.    Paragraph 58.8 of the Particulars of Claim identified the physical properties of the ground both in July 1996 and in May 1997.  I have specifically rejected Arup’s contention that the damage was caused by damage through blasting or the use of fill or loose rock fragments in the foundations.  Insofar as it is necessary to do so, I also reject Arup’s allegations in relation to failure to give notice that G2 and G5 were ready for inspection, failure by CEPAS/SCC to provide proper technical supervision, failure by CEPAS/SCC to carry out proper work etc.

510.	Insofar as it is necessary to elaborate on how the movement of the foundations occurred, I accept the theory of Professor Hudson, set out in his evidence as being on the balance of probabilities the most likely explanation.

511.	Finally, on the basis of my findings, the limitation issue does not arise.