SCANMUDRING AS AGAINST JAMES FISHER MFE LIMITED
OUTER HOUSE, COURT OF SESSION
[2017] CSOH 91
CA113/16
OPINION OF LORD TYRE
In the cause
SCANMUDRING AS
Pursuer
against
JAMES FISHER MFE LIMITED
Defender
Pursuer: Borland QC; Pinsent Masons
Defender: Dunlop QC; CMS Cameron McKenna LLP
23 June 2017
Introduction
[1] The pursuer, a Norwegian company, carries on a business consisting of dredging, excavation and construction works for the oil, gas and renewable energy industries. That business includes in particular the supply of subsea equipment and operating personnel to effect the removal or relocation of seabed soil or objects close to live or future subsea installations. The operation is carried out inter alia by use of subsea excavators known as scanmachines.
[2] In April 2015 the defender, an English company trading from a business address in Aberdeen under the name KDM Marine, was engaged by a German company called Vattenfall Europe (“Vattenfall”) to carry out dredging works as part of an offshore wind farm project in German territorial waters in the North Sea. The defender invited the pursuer to submit a tender to carry out the works as its sub-contractor. The pursuer submitted a proposal to perform the work using one of its four scanmachines. The proposal was made on the basis of information supplied to the pursuer by the defender that the seabed material to be dredged consisted of fine sand. After certain negotiations on price, a revised proposal by the pursuer was accepted by the defender. Commencement of dredging operations was delayed by adverse weather conditions. When work eventually commenced on 15 May 2015, it was discovered that the seabed conditions were not as had been expected, but rather consisted of a thin layer of sand containing rocks and stones of various sizes on top of a layer of stiff and sticky clay. A different method of dredging was devised by the pursuer with the approval of the defender and Vattenfall, using additional equipment shipped from Norway.
[3] The issue with which this opinion is concerned, and which was the subject of a preliminary proof, was whether the pursuer’s contractual terms of payment were varied by agreement between the pursuer and the defender following the discovery of the true seabed conditions. This issue acquired greater practical significance on 24 May 2015 when an incident occurred that resulted in the scanmachine becoming stuck on the seabed and being abandoned there until it was recovered in September 2015. The circumstances of that incident did not, however, fall within the scope of the preliminary proof.
Conclusion of the parties’ contract
[4] On 30 April (all dates are in 2015), Mr Graham Murdoch, the defender’s operations director, emailed Mr Arild Ariansen, who was then the pursuer’s contracts and sales manager and subsequently its managing director, to invite the pursuer to submit a tender for seabed preparation works whose scope was set out in the email. The sediments to be removed from the seabed were described as “fine sand”. Mr Ariansen submitted a tender the following day. Following confirmation of Vattenfall as the main contractor, there was correspondence between Vattenfall, the defender and the pursuer regarding terms of payment. Vattenfall wished to impose a deadline for completion of the works to which the pursuer and the defender were reluctant to agree. On 5 May, Mr Ariansen proposed a payment structure consisting of a target lump sum which assumed 120 hours’ work at the day rate proposed in the tender, and a reduced day rate for any further work. Mr Ariansen explained in his evidence to the court that his proposal of a target lump sum mechanism was only made on the basis that the material to be removed consisted of soft sand, as he was confident that he knew how long such work would take. The 120 hours did not include time lost due to bad weather or to suspension or interruption of work by the client. This proposal was passed by Mr Murdoch to Vattenfall and was favourably received. Mr Ariansen also advised the other parties that the scanmachine was committed to other work beginning in the Netherlands on 22 May.
[5] On 6 May, Mr Armin Braatz of Vattenfall requested, in an email sent to both Mr Murdoch and Mr Ariansen, that the scanmachine be shipped to Esbjerg, Denmark, being the port closest to the survey site. Prior to instructing mobilisation of equipment and personnel, Mr Kenneth Mackie, the defender’s managing director, sought a commitment from Vattenfall to meet the shipping costs even if no contract was concluded. The necessary commitment was provided the following day by Vattenfall’s client, Dan Tysk, and forwarded by Mr Murdoch to Mr Ariansen with confirmation that the defender would in turn cover the pursuer’s costs of mobilisation. The scanmachine and operating personnel arrived at Esbjerg on 8 May and the equipment was loaded on to the vessel “Natalie”.
[6] Also on 6 May, Mr Ariansen emailed an updated tender to Mr Murdoch. This version (Revision 005) took into account inter alia the pricing structure that had been agreed in principle. The scope of work incorporated a reference to the sediments to be removed being fine sand. The time estimate for the performing of the work was stated to be 120 hours. Day rates were specified for the equipment, a supervisor, four operators, and a survey pole. Target lump sums were also specified for these items; in each case the sums amounted to the day rate x 5. Reduced day rates for each item were also included; these were specified to start “after 120 hours’ duration of target lump sum”. Among the terms and conditions, the following was stated: “Due to other commitments on the equipment, and if not other agreed the spread needs to be demobilised in Esbjerg by noon 20th of May 2015”. On 9 May the defender issued a purchase order to the pursuer. It is common ground between the parties that a contract between them was concluded on 9 May, constituted by (i) the pursuer’s tender Revision 005 (which also incorporated the pursuer’s standard form terms and conditions), and (ii) the defender’s purchase order.
Problems encountered after commencement of dredging
[7] After the loss of a number of days due to bad weather, dredging work began on 15 May. Problems immediately arose. The suction hose attached to the scanmachine broke because hard clay was encountered instead of fine sand. A boulder became lodged in the suction nozzle. At 18.53 on 15 May, Mr Erik Pietsch of Vattenfall emailed Mr Murdoch and Mr Ariansen to say:
“We are not advancing as fast as expected with the dredging works. Within 11h of dredging time we could remove about 10% of the volume so far. My question: does KDM equipment/personnel on Natalie have any hard end date for demob?”
Further details of the problems encountered were provided in an email sent to Mr Murdoch at 14.50 on 16 May by Mr Alistair Braid, the defender’s representative on board the Natalie. Mr Braid reported a number of issues including difficulties in positioning the vessel and the unsuitability of the vessel itself. As regards the subsea conditions, Mr Braid reported:
“As mentioned before the seabed is not what they said it would be. There is a thin layer of fine sand and in that are a lot of rocks and stones ranging in size. The problem with this is that without having a proper discharge hose all these rocks/stones are just falling in behind the dredger (as you can imagine there is a chain effect to this). Solution would be to have a longer discharge hose but without an ROV this is not possible. Once they have moved the layer of fine sand and rock they would then go back and work on the clay with the fork they are suggesting be sent out. They will also weld a bar over the nozzle to prevent sucking in large rocks that are getting stuck in the hose.
So the subsea guys [ie the pursuer’s employees] are estimating around 10 day (240 hours) working time. That is if the whole work area is the same as this…”
Mr Murdoch copied the email to, among others, Mr Ariansen and Mr Pietsch.
[8] At 11.52 (UK time), Mr Ariansen telephoned Mr Murdoch to discuss the problems that had arisen. A transcript of this call was available at the proof because Mr Ariansen’s Blackberry was set up to record all of his calls by default. Mr Ariansen first of all advised Mr Murdoch that he had found a way round the difficulty of the equipment being required for another project on 22 May. He then went on to explain that if the pursuer had been aware of the true seabed conditions, the equipment would have been set up completely differently. Mr Murdoch appears to have agreed. Mr Ariansen suggested asking Vattenfall if they should “re‑think the whole thing” and set up equipment that would work in what the conditions were now known to be. There was discussion of the difficulties that had been encountered in accurate positioning of the vessel, and Mr Ariansen observed that he would recommend changing the vessel. He did, however, express the view that “…we can do it, I think we can do it”. He agreed to summarise the pursuer’s views in an email, focusing on the problem with the soil. The conversation continued:
Mr Murdoch: We have time to get things sorted.
Mr Ariansen: Yeah, yeah, we have, we have, if we start now. But I think the initiative has to come from Vattenfall, that they want to do something differently or if they just want to continue…
…
Mr Ariansen: What are your gut feelings regards to, do we have any challenge when it comes to, towards them, regards to getting the day rate and stuff like that? Do you have a good feeling?
Mr Murdoch: No, I don’t think so, yeah they’ve, they’ve never, they have not said anything about em, being unhappy with us, so, you know…
Mr Ariansen: Ah that’s good, and they’re signing the DPRs [ie daily progress reports] as well I guess so.
Mr Murdoch: Yeah yeah yeah, so I think it’s all good so far, if we stay proactive and come up with solutions to problems that are coming up, they’ve got to get this done, eh?
Mr Ariansen: I think we have good solutions, it’s just that they need to be, eh, play along with it and of course there’s cost involved…
Mr Murdoch: We’ve also got to say that, eh, the timescale we gave them is now out the window.
Mr Ariansen, Yeah, I think that’s the best idea. Soils like this I would never give a target lump sum on this soils
Mr Murdoch: Yeah
Mr Ariansen: because it’s just one rock stuck and you need to have a recovery,
Mr Murdoch: Yup
Mr Ariansen: but when working in sand it’s so easy working in sand, we know quite exactly the time consuming, but uh,
Mr Murdoch: Yeah
Mr Ariansen: so I think we need to get away from that and just use normal day rates,
Mr Murdoch: Yeah
Mr Ariansen: but of course be as proactive as we can be.
Mr Murdoch: Yup, ok. Cool, cool.
Mr Ariansen: I work the email and you, you have to take it towards Vattenfall then.
Mr Murdoch: Yes, sure.
In his evidence to the court, Mr Murdoch accepted that the true soil conditions were such that there was no prospect of completing the work within 120 hours.
[9] Mr Ariansen followed up this telephone conversation with a lengthy email at 12.20 to Mr Murdoch and others, much of which it is necessary to set out:
“Hi Graham
Answer to Vattenfall’s question:
- The project so far have had it clear challenges, with all from vessel capabilities, crane capabilities, survey, transponder signal that’s jumping +-2 meter and soil conditions way out of what’s informed about.
- Our recommendation and setup of equipment is no longer ideal due to the significant changes in soil conditions.
- The vessel and crane capabilities become much more critical due to changes in soil.
- increased need for launch and recoveries, which today is a risk for the equipment due to crane capabilities.
- increased operational time, i.e. waiting on [weather] ratio is more critical.
- We can’t commit to the target lump sums estimates as they are not based on these type of conditions.
Suggestion of solution:
- Re-engineer the setup of the Scanmachine as a result of new soil conditions, this will have a cost impact in the range of 50 000 – 150 000 NOK.
- Need a “go” ASAP if we shall have this done and delivered by start of week.
…
3. Remove Target Lump sum and reduced day rate, and only applies normal day rate. We can’t move forward before this is confirmed in [writing].
…”
(Mr Ariansen made seven suggestions in all, including consideration of changing the vessel.)
[10] Mr Ariansen’s email was forwarded by Mr Murdoch to Mr Pietsch, who replied later the same day (copied to Mr Ariansen):
“Hi Graham,
thanks for below confirmation of your teams and equipment availability.
We will get back soonest/expected by tomorrow to some of your suggestions at least – we are still awaiting the survey report from Madog to further align.
I understand that spare hose is required and should be ordered/shipped to Esbjerg. Please check if this has been kicked off. If not, please do so.”
Mr Ariansen emailed Mr Murdoch, observing that he read this “as a go for sending new hoses”, and sought Mr Murdoch’s instructions to “go ahead and come back with cost and ETA”. Mr Murdoch replied “Yes please do so Arild, advise costs though so we can get approval”.
[11] Mr Erik Hoveland, the pursuer’s operations manager, began to investigate means of transporting the necessary additional hoses to Esbjerg, hampered by the fact that 17 May was a Sunday and a Norwegian national holiday. At 09.09 on 17 May, Mr Pietsch emailed Mr Murdoch, with Mr Ariansen among others copied in:
“Hi Graham,
With regards to your engineering suggestion item 1) – please immediately proceed with the re-engineering works. However, it is yet a bit unclear for us what you are going to engineer so please elaborate a bit more and substantiate your invoices about hours that were required. We trust that the re-engineering will have a positive impact on production rates which you may show in an indicative working schedule for the dredging works.
The current plan for the vessel is to leave port Monday afternoon/evening. You would need to be prepared with your re-engineering by that time.
The weather forecast looks favorable for the upcoming week. In order not to lose time we have decided to continue using the Natalie for this weather period.
Related to your “Going future” commercial proposal I will revert to you latest tomorrow.
Thank you all for being pro-active on your support on this campaign.”
Mr Murdoch emailed Mr Ariansen and Mr Hoveland: “Please feel free to answer Vattenfall direct.”
[12] By 11.20 on 17 May, Mr Hoveland had identified a means of transportation of the hoses, to arrive at Esbjerg on the afternoon of Monday 18 May. He quoted the total cost of the hoses plus transportation as 100,000 NOK. No engineering hours were required. Mr Hoveland commented “Need a go on this ASAP!” Mr Murdoch replied “As mentioned before please go direct to Erik Pietsch for approval of all plans and costs at this stage”. At 13.14, Mr Pietsch responded “Thank you. Please go ahead. Please send it through to Blue Water [a transportation company favoured by Vattenfall]”. The equipment duly arrived at the vessel on 18 May. On 19 May, Mr Hoveland emailed to Mr Murdoch a variation order in respect of the cost of the hoses plus transportation.
Revision 006
[13] On 19 May, Mr Murdoch requested a collation of the pursuer’s updated costs for the project, because Vattenfall wished “to check current status”. At 22.44, Mr Ariansen emailed Mr Murdoch:
“Hi Graham
Please find attached a updated tender reflecting the variations in the project.
I have also attached a draft invoice based on our DPR’s up to and including the 19th of May.”
A revised tender, with the number Revision 006, was attached to Mr Ariansen’s email. A number of changes were noted in the revision track sheet, including:
The effect of the third bullet point above was to substitute for the target lump sums and reduced day rates the full day rates in the tender for the equipment, supervisor, operators and survey pole.
[14] In the draft invoice also attached to Mr Ariansen’s email, the pursuer calculated the payment due in respect of the scanmachine, supervisor, four operators and the survey pole, for 12 days to 19 May at the (full) day rate. In his evidence to the court, Mr Murdoch acknowledged that he had received and read the invoice, and passed it on to Vattenfall. He did not recall reading the tender Revision 006 and thought that he probably had not.
[15] The daily progress report for 18 May shows that the Natalie remained at Esbjerg on standby throughout that day due to bad weather. The “program for next 24 hours” was stated to be “Waiting on weather; Transit to field”, from which I infer that the vessel returned to the field on Tuesday 19 May. Dredging work resumed on 20 May. Daily progress reports were produced and signed each day by representatives on the vessel of the pursuer, the defender and Vattenfall. The scanmachine was operational during all or most of each of 20, 21, 22, 23 and 24 May, until work was brought to an end during the afternoon of 24 May by the occurrence of the incident previously referred to.
[16] A further telephone conversation between Mr Ariansen and Mr Murdoch took place on 22 May 2015, ie during the period after recommencement of dredging but before the occurrence of the incident. This too was recorded on Mr Ariansen’s Blackberry. Much of the call was taken up with criticism of a company that had provided depth and tidal survey services. In the course of the conversation, Mr Ariansen inquired whether issues with the quality of the survey would affect Vattenfall’s attitude to “us” – ie, presumably, to both the defender and the pursuer. Mr Murdoch replied “No, Jesus, no, the guy’s happy with what we’ve proposed, he realises there’s a difference in soils”. Later in the call, Mr Ariansen said “I think that Vattenfall, my impression is that they are quite happy or very happy with the performance of the excavation – so that’s good”. Mr Murdoch agreed.
Oral evidence
[17] Witness statements were lodged on behalf of the pursuer by Mr Ariansen, Mr Hoveland, and Mr Kenneth Vestly who was the pursuer’s representative on board the Natalie, and on behalf of the defender by Mr Murdoch and Mr Keith Douglas, the defender’s chief financial officer. Oral evidence was given by Mr Ariansen, Mr Murdoch and Mr Douglas, and I have mentioned certain passages of evidence in my narrative above. I found all witnesses to be credible and generally reliable on matters of fact. In my assessment, however, the witness statements and oral evidence added little to the contemporaneous material. In so far as it did not consist of narrative of facts that are evident from the emails and other communications, the evidence largely comprised statements of subjective intention or understanding.
Argument for the pursuer
[18] On behalf of the pursuer, it was submitted that in the foregoing circumstances the parties varied the contract concluded on 9 May 2015, and that the contract as varied incorporated Revision 006. The court’s approach to determining whether a variation had occurred should be the same as its approach to determining whether a contract had been formed. The court should adopt an objective approach, asking itself what reasonable and honest men in the position of the parties and having their shared knowledge of the surrounding circumstances would have understood by the communications which passed between them, and what they did: Baillie Estates Ltd v Du Pont (UK) Ltd [2009] CSOH 95 (affd [2009] CSIH 95), Lord Hodge at paras 25 and 26; RTS Flexible Systems Ltd v Molkerei Alois Müller GmbH [2010] 1 WLR 753, Lord Clarke of Stone-cum-Ebony at paragraphs 45 and 50. The actual intention of each party was not relevant, but statements of subjective intention communicated to the other party formed part of the factual matrix. Actings of the parties after the time of the alleged variation were relevant to the extent that they cast light on what reasonable persons would have understood at that earlier time.
[19] By 18 May, it had been clear to all parties that there was no realistic prospect either of the work being completed in 120 hours or of demobilisation by 20 May. Vattenfall had seen Mr Ariansen’s emails describing the seabed conditions and the resultant problems, the proposed solution, and the cost implications of the solution, including departure from the target lump sums and the reduced day rate. Vattenfall had given its approval of the shipment of the hoses. Those were the circumstances in which the pursuer sent Revision 006 and its draft invoice to the defender. Thereafter the vessel returned to the dredging site and work recommenced. The decision to sail and recommence work must have been taken by Vattenfall and the defender.
[20] By 20 May, when work recommenced, the parties had through their direct oral discussions, email correspondence and conduct evinced a clear common intention to abandon the target lump sums and reduced day rate arrangements contained in Revision 005, and to proceed on the basis of the full day rate. This was reflected in Revision 006. Reasonable and honest men in the position of the parties at the time would have understood this to be the case.
Argument for the defender
[21] On behalf of the defender it was submitted that the court should find that the contract entered into on 9 May 2015 was not varied by agreement between the parties. By way of backdrop, it was clear from the pre‑contractual communication that the pursuer knew, as a matter of practical and commercial reality, that the defender could only agree terms with the pursuer if Vattenfall had first given its approval to those terms and/or agreed to remunerate the defender in line with them. That never happened. The pursuer moreover recognised the need for formal agreement of contractual terms.
[22] It was not clear either (a) when the variation was said by the pursuer to have been agreed or (b) what the pursuer contended were the terms of the contract as varied. The pursuer’s difficulty in this regard underlined the inherent flaw in its argument, namely that there was no point in time at which an agreed set of varied terms could be identified. The law was clear: the court was entitled to conclude that a contract had been varied, absent written evidence thereof, if there were facts and circumstances explicable only on the basis that there was an express or implied agreement to vary: Minevco Ltd v Barratt Southern Ltd 2000 SLT 790, Lord Justice Clerk (Cullen) at para 16. The pursuer had failed to establish facts and circumstances which were explicable only on the basis that the parties had agreed to vary the contract on particular terms.
[23] The variation could not have occurred during the telephone call on 16 May because Mr Ariansen had said to Mr Murdoch that the pursuer’s proposed solution had to be agreed, and that there was cost involved. Nor could it have been affected by the email sent shortly thereafter because again Mr Ariansen expressly sought agreement. The instruction by Vattenfall on 17 May to proceed with re-engineering works could not have effected a variation of the contract between the pursuer and the defender; nor was it explained how the defender’s consent to that instruction could have such an effect. Nor was Mr Murdoch’s failure to object to the terms of either Revision 006 or the draft invoice sufficient to satisfy the Minevco test. As at 19 May, the pursuer was aware that Vattenfall had not yet responded to its commercial proposal. The telephone call on 22 May was of no contractual significance. The most likely analysis was that the pursuer had sent Revision 006 to the defender in the hope of reaching agreement in terms thereof, but decided to recommence work despite not having received a formal acceptance from the defender or from Vattenfall, whose agreement it knew was required. On an objective consideration, it could not be said that the facts and circumstances were explicable only on the basis that there was an express or implied agreement to vary the contract. The terms of the pursuer’s contractual entitlement remained those set out in Revision 005.
Decision
[24] In RTS Flexible Systems Ltd v Molkerei Alois Müller GmbH (above) at paragraph 45, Lord Clarke of Stone-cum-Ebony, delivering the judgment of the Supreme Court, set out the principles to be applied by the court in determining whether a binding contract had been concluded between parties, as follows:
“Whether there is a binding contract between the parties and, if so, upon what terms depends upon what they have agreed. It depends not upon their subjective state of mind, but upon a consideration of what was communicated between them by words or conduct, and whether that leads objectively to a conclusion that they intended to create legal relations and had agreed upon all the terms which they regarded or the law requires as essential for the formation of legally binding relations. Even if certain terms of economic or other significance to the parties have not been finalised, an objective appraisal of their words and conduct may lead to the conclusion that they did not intend agreement of such terms to be a precondition to a concluded and legally binding agreement.”
Lord Clarke went on to consider the statement by Steyn LJ in G Percy Trentham Ltd v Archital Luxfer Ltd [1993] 1 Lloyds Rep 15 at 26 that contracts may come into existence not as a result of offer and acceptance but during and as a result of performance. Lord Clarke observed (para 54):
“We do not understand Steyn LJ to be saying that it follows from the fact that the work was performed that the parties must have entered into a contract. On the other hand, it is plainly a very relevant factor pointing in that direction. Whether the court will hold that a binding contract was made depends upon all the circumstances of the case, of which that is but one.”
[25] The present case is concerned not with whether a binding contract was created but rather with whether a subsisting binding contract was varied by agreement. The case law on creation of a contract is of assistance in respect of variation to the extent that in both circumstances it is open to the court to have regard to performance as a factor in determining whether the contract was concluded or varied, as the case may be. But the parallel is not exact because in the case of variation there is the further possibility that performance has been rendered under the original contract terms. As Lord Justice Clerk Cullen noted, delivering the opinion of the court in Minevco Ltd v Barratt Southern Ltd (above) at paragraph 16:
“It is not in question that a clause of a written contract cannot be varied or altered by verbal agreement. However, the position may be different if there are facts and circumstances which are explicable only on the basis that there was an express or implied agreement. As Lord Robertson observed in Baillie v Fraser (1853) 15D 747 at p 750: ‘It is a delicate thing to infringe on the terms of a written contract, but when the parties have been acting so as to alter it by their conduct, then we must give effect to the change’.”
Senior counsel for the defender was correct, in my view, to place emphasis on the word “only” in this passage: that is the test which must be applied in determining whether a variation of a subsisting contract has been effected by the conduct of the parties.
[26] It is important in the circumstances of the present case to focus upon the contractual relationship between the pursuer and the defender. One of the controversial issues was whether any variation of the pursuer’s terms of payment was conditional upon approval of such variation by Vattenfall. I am not persuaded that it was. The pursuer was not a party to the contractual arrangement between Vattenfall and the defender, and Mr Ariansen professed not to know what price had been agreed between them. In his communications with Mr Murdoch, Mr Ariansen concerned himself only with the contractual entitlement of the pursuer. Undoubtedly, the attitude of Vattenfall was of great importance. After problems were encountered on 15 May, it was for Vattenfall as main contractor to take the decision on whether and if so how the dredging work was to proceed. It is unsurprising, therefore, that on 17 May Mr Murdoch encouraged Mr Ariansen and Mr Hoveland to communicate directly with Mr Pietsch of Vattenfall. Time was short and nothing could happen without Vattenfall’s authorisation. That is not, however, the same as a finding that the terms of payment in the pursuer’s contract with the defender could not be altered without Vattenfall’s agreement to an equivalent amendment of the terms of payment in its contract with the defender.
[27] At the time when Mr Ariansen sent his email to Mr Murdoch on 16 May, it was the parties’ common understanding that the contractual timescale could not be adhered to; as Mr Murdoch put it, the timescale that had been given to Vattenfall was “out the window”. That was so in two respects: in the first place, it was their common understanding that the work could not and would not be completed by 20 May, and, importantly, in the second place, it was their common understanding that, assuming a solution could be found and approved by Vattenfall, the pursuer’s work would take longer than 120 hours. Against that background of common knowledge, Mr Ariansen confirmed in his email that the pursuer could keep the scanmachine available for as long as necessary “if we agree on terms and how to solve the challenges”. He made clear the pursuer’s position that it could not commit to the target lump sum because of the true seabed conditions, and set out the pursuer’s revised pricing proposal as part of his suggested solution. Another part of that solution was the provision by the pursuer of additional equipment capable of coping with the rocks and stones and clay layer that had to be dredged. Such equipment had to be sourced and transported to Esbjerg in time to allow the Natalie to sail on 18 May. On 17 May, having been advised of the cost of provision and transportation of the hoses required (including the information that no re-engineering cost was chargeable), Vattenfall gave an unequivocal instruction to proceed with the shipping of the hoses to Esbjerg, to be loaded on to the Natalie.
[28] It is useful to consider how matters stood with regard to the contractual relationship between the pursuer and the defender as at 18 May, when the Natalie was ready to sail with the equipment that would enable dredging work to re-commence. The pursuer had indicated that if a technical solution could be found, it could proceed with performance but without the target lump sums or reduced day rates. All parties were satisfied that a solution had been found. The pursuer and the defender were both aware that the decision whether to go ahead had to be made by Vattenfall, and that Mr Pietsch had given express authorisation to proceed with supply and transportation of the hoses in order to allow the vessel to return to the field. The only reason for transporting equipment to Esbjerg was to enable dredging work to re-start as soon as possible. It may thus be inferred that the pursuer and defender were in agreement that work should re-start. But on what payment terms? In my view, approval or authorisation by Vattenfall is not material to the answer to this question. As I have noted, it was by now common ground between the pursuer and the defender that the duration of the contract would not be 120 hours, and indeed that any figure for the contract period could only now be an estimate. Mr Ariansen had explained to Mr Murdoch why in the light of discovery of the true seabed conditions it was not willing to work to a target lump sum, and had indicated unequivocally the payment terms upon which it was willing to continue. Mr Murdoch had accepted that explanation. The defender had acquiesced in the vessel sailing from Esbjerg and in the re-commencement of dredging after the vessel arrived at the field.
[29] In these circumstances, I consider that the Minevco test is met, and that the circumstances are explicable only on the basis that there was an express or implied agreement between the pursuer and the defender that the pursuer’s terms of payment had been varied. I say “express or implied” because it is possible to construe Mr Murdoch’s responses during the telephone conversation with Mr Ariansen on 16 July as express agreement to alteration of the payment terms. Alternatively, one can treat Mr Murdoch’s agreement to the continuation of work for what was now an indefinite period with a revised scope of works as implicit agreement to the amended terms of payment which had been specified by Mr Ariansen as a condition. It is, of course, the case, that confirmation in writing was never sent as envisaged in Mr Ariansen’s email, but the actings of parties in proceeding with the altered performance are indicative of agreement that this formality did not have to be observed.
[30] A further indication in favour of the foregoing interpretation of the facts and circumstances is Mr Murdoch’s apparent acquiescence in the revised charges set out in the draft invoice sent to him by Mr Ariansen on 19 May and passed on by him to Vattenfall. I find no reason to reject Mr Murdoch’s evidence that he did not read Revision 006 at the time, but the pursuer’s amended terms of payment were apparent from the draft invoice, which contained no reference to the target lump sums or reduced day rate, and no objection appears to have been raised by the defender.
[31] One of the criticisms made by the defender of the pursuer’s case was that it failed to specify with any precision the time at which the variation was said to have occurred. In a case such as the present one where the constitution or variation of a contract is inferred from an objective appraisal of the parties’ words and conduct, I do not regard this as a forceful criticism. It is sufficient in the present case to find that by at latest 20 May, when dredging work recommenced, it must have done so on the basis of the pursuer’s amended payment terms.
[32] In reaching my conclusion on the variation of the parties’ contract, I have not found it either necessary or appropriate to address the question whether the defender’s contract with Vattenfall was similarly varied. That is not a question arising for decision in the present action and I express no opinion on it. It is sufficient for present purposes to say that I find nothing in the correspondence to persuade me that there was a sufficiently close relationship between the two contracts that neither could be varied without the other.
Disposal
[33] For the foregoing reasons, I hold that the contract concluded between the parties on 9 May 2015 was varied to the extent of deleting the provisions in Revision 005 regarding target lump sums and reduced day rates and by substituting the day rates specified in section 3.2 of the pursuer’s tender Revision 006. There was clearly also a variation with regard to a need for demobilisation by 20 May. I need make no finding at this stage as to whether any other variations were effected. I shall put the case out by order to discuss further procedure.