HT-2022-000090 - [2025] EWHC 723 (TCC)

The Adoption Agreement

The agreement pursuant to which the contractual claim is made was called the ‘Adoption Agreement’. Dated 13 February 2016, the Adoption Agreement provided for the “design, supply, installation, commissioning and adoption of the electricity and distribution equipment” at the Site by Modus.

Clause 2 provided that:

“In accordance with this Agreement, the Contractor shall carry out and complete the Contestable Works [the works carried out by Modus] and perform all other obligations as are identified in this Agreement to be performed on its part.”

Clause 16 similarly provided that:

“16.

The Contractor shall construct and install the Contestable Works in accordance with this Agreement, the Schedules and Appendices.”

Clause 5 required compliance with the requirements of a number of schedules. It is not in dispute that the schedules incorporated ‘Company appendices’, which in turn included ‘Instructions’ issued by SEPD as to the way in which the works were to be carried out. Compliance with good industry practice was also required. It is by reference to noncompliance with these Instructions and/or good industry practice that SEPD advances a number of criticisms of Modus’ work. It is not necessary for me to set out in full detail all Instructions pleaded by the Claimant within its Particulars of Claim. Of particular relevance, however, is an Instruction which required the sheath testing of the Works to meet the minimum specification of 100MΩ at 5kV. In circumstances described more fully below, this was relaxed to a minimum of 10MΩ at 5kV.

As to the correction of Defects, Clause 52 provided:

“The Contractor shall bear all reasonable costs incurred by the Company in fault repair or rectification of other defects associated with Adopted Contestable Works during the Defects Correction Period unless such faults are caused by the Company.”

The “Defects Correction Period” is defined in Clause 1 of Schedule A (General Conditions) to mean:

“the period of two years after the Adoption in relation to the Contestable Works…”

Clause 53 provided:

“The Contractor shall bear all reasonable costs incurred by the Company in correcting any latent defects associated with Adopted Contestable Works subject to the provisions of the Limitation Act 1980…”

Clause 54 provided:

“the Parties acknowledge that all work on Adopted Contestable Assets may only be performed by the Company and that neither the Contractor nor the Customer may correct any defects after adoption.”

There is no dispute that for contractual recovery pursuant to Clauses 52 or 53, the costs must (a) be incurred and (b) be reasonable.