HT-2023-000321 - [2025] EWHC 1764 (TCC)

On 21 December 2021, Phil Walker and Paul Scullion, on behalf of Pharos and KML respectively, entered into a Mutual Confidentiality Agreement in respect of Pharos’ potential involvement in providing project-related support to KML in respect of the Embedment Works. On the same day, Pharos supplied the UTV-670 Data sheet and a ‘Track Record’ document. The UTV-670’s specification included ‘Trenching speeds’ of ‘200m/hr in <40kPa’, and ‘Pitch & Roll’ of ‘15^o side slopes 15^o fore and aft slopes’. The covering email stated: ‘This looks to be ideal against your requirements’.

In response to this, KML asked for ‘a schedule of rates’, and Pharos replied, ‘Please see attached indicative pricing’. There is a ‘rental’ proposal dated the same day to supply KML with a UTV-670 Trenching spread for all or part of the associated requirements for such operations on a permanent, or standby basis, inclusive of equipment, personnel and management requirements, stating that Pharos understood the required tasks, and was experienced in such, for these types of operations. Section 6 dealt with ‘Commercial’ and was split into ‘Equipment Lump Sum Fees’ and Daily Rates as follows, in the sums which eventually became part of the agreement between the parties:

On 24 December 2021, Mr Scullion confirmed that Prysmian had issued to KML a Letter of Intent covering the engineering and documentation elements of the project.

Discussions continued, and on 9 January 2022 KML provided Pharos with a collection of maps and charts from Prysmian which included two “Alignment Sheet Charts”. Neither of these charts indicated the presence of slopes greater than approximately 4°.

On 10 January 2022, a Letter of Intent was provided from KML to Pharos, again limited to the preparation of documentation.

On 18 January 2022, Mr Shaw of Pharos sent three documents to Mr Scullion and others of KML, namely a “Shallow Water Trenching Method Statement”, a “Risk Assessment & Method Statement” and a “Shore End Storyboard”. As to these:

On 28 January 2022, Mr Scullion informed Mr Taylor and others that KML was “now in receipt of a letter of award for the project”. On 4 February 2022, Mr Scullion then circulated a programme for comments on this date which proposed 5 days for trenching, as part of a total programme lasting 62 days (albeit one which appeared to have a significant gap between the equipment transiting to site and onsite commissioning). There is no documentary evidence suggesting that anyone at Pharos suggested that the programme was wholly unrealistic.

On 10 February 2022, KML issued its first draft (designated “Rev B01”) of a Project Method Statement for Prysmian. A specification sheet for the barge Mormaen was appended. A few days later, on 15 February, Mr Scullion indicated that Prysmian was considering postponing the cable burial scope ‘to give less weather exposure’. A further email on 24 February indicated that KML wanted a discussion to see whether the Embedment Works would work around ‘a window from say 22 March to maybe early April…This would mean that we could work around any weather delay in pull in and your availability…’

Prysmian provided its purchase order to KML for the execution of the landfall works on the Danish side in the frame of the Viking Link project on 7 March 2022. At this stage, the Embedment Works formed an option, which was later exercised.

On 8 March 2022, emailing Mr Scullion the previous chain of emails in which the ‘Rental Proposal’ had been provided, Mr Taylor said, ‘As discussed we can offer a standby/weather rate of £3k per day for equipment only’. An excel spreadsheet, seemingly produced by Mr Scullion, dated the same day includes a breakdown of the various costs related to the Embedment Works. The excel shows the rates provided by Pharos (e.g. £4250 for the equipment and the personnel per day), with whatever mark-up KML was making (e.g. 25% or 30%). The analysis included a section within which KML priced ‘weather’, assessed at 10 days, at the £3,000 rate for equipment provided within this email (and retaining, as per the email, £4,250 for personnel when waiting on weather). It showed 6 days for the cable burial works and 2 days mobilisation and demobilisation.

The method of calculating 6 days is itself shown (in lines 1 and 2 and columns R to W in the ‘Separate Burial’ sheet) in the spreadsheet referred to above. The basis of the calculation was explained by Mr Scullion in his evidence, not challenged on this point, which I broadly accept insofar as it identifies the basis upon which KML arrived at 6 days based upon the indicative data provided by Pharos:

“In the specifications provided by Mr. Shaw (Pharos) on 21 December 2021, Pharos indicated that the Tool had a trenching speed (i.e. a burial rate) of "up to 300m/hr (120 m/h in <50 kPa based on previous performance)". Subsequently, Pharos indicated in the Initial Draft Method Statement that the Tool had a burial rate of 250m/hr (e.g. 4.2 m/min). In any event, KML, in attempting to be prudent, wanted to allow for contingencies in its own internal cost modelling and project planning (e.g. KML wanted to calculate the expected timeframe on a conservative basis, to allow for some contingency time). Accordingly, KML determined that, even if KML allowed for a burial rate of 0.5 m/min (i.e. only 10% of that indicated in the initial specifications, or about 12% of that subsequently indicated) and assumed that the Tool could only operate for 60% of a 24-hour day (e.g. just over 14 hours, instead of 24-hour operations), it would take the Tool up to 6 days to complete the cable burial scope of 2,360m (as shown in the screenshot below). Together with 2 days for mobilisation, 1 day for calibration and 1 day for demobilisation, this was the basis upon which it was agreed that KML would pay Pharos for 10 unweathered days for hire of the Tool, equipment and Pharos' personnel.”

I note that the spreadsheet does not accord precisely with this evidence: it appears to allow 2 days for mobilisation and demobilisation (rather than 3) and nothing for calibration. There is no documentary evidence that this spreadsheet or the calculation specific to the 6 days was shared with Pharos.

By 20 March 2022, a subsequent draft of the Project Method Statement had been reviewed by Prysmian. This document indicated that KML was proposing, instead of a barge, to use a “DP [Dynamic Positioning] multicat” instead.

Prysmian sought an assurance from KML that the proposed TROV could work with a partially-buried cable “considering the time spent from the time of pull in operation will be 2 months” and was told “Yes, pre burial survey with a TSS350 will confirm the depth and position of the cable prior to trenching” [E 79 3]. Prysmian asked about the expected speed of trenching and was told “speed of 150m/hour is estimated by Pharos for this scope”. Prysmian asked specifically about the “side slope limit” of the proposed TROV, stating “That must be clear in case of ROV shall across steep a sand dune [sic]” and was told that, while the vehicle had “proved exceptionally manoeuvrable to date, the OEM supplied documentation suggest a maximum of ±15°/ 4m for both pitch & roll”. By reference to an internal Pharos review document, it was put to Mr Gamble that on the basis of a previous project, experience had shown that, ‘it has proved itself very limited at manoeuvring with a charged feed hose connected’. A charged feed hose is connected whilst the UTV-670 is actively trenching. In light of this, it was suggested that Pharos’ answer was misleading. Mr Gamble denied this, responding that the limitations related to circumstances in which the UTV-670 was offset from the vessel. At the point of answering this question, the limitations of the Suzanne A were not known. However, it is clear that there were at least some circumstances, which ultimately became relevant, in which the type of indicative speeds provided were not going to prove possible.

On 4 April 2022 KML issued revision B03 of its Project Method Statement in which it identified the proposed support vessel as the Coastal Challenger, “a DP1 multicat vessel with shallow draft”. On the same date, KML indicated by email that “We need to trench in shallow water (too shallow for a vessel) for approx. 200m, this would either be done with the TROV spread on a barge moored as close into shore as possible or with a trailer on the shoreline”.

Amongst a series of exchanges between Jake Rowland Crosby for KML and Mr Shaw of Pharos, Mr Rowland Crosby emailed Mr Shaw on 8 April identifying that ‘we have just had the slope angle at site through from our surveyor…The nearshore sandbank in the east (right) of the photo is where we see the sharpest gradient of about 13deg. Possibly there will be a sharper gradient in the nearshore section as well, we are surveying this early next week. Do you have any thoughts on this with the TROV in mind? Will it be OK with these gradients?’

On a similar note, the same day, Mr Scullion asked, amongst other things:

“We believe that the sandwaves are likely to give a depth variation of c.2.5m on the seabed. Robin, our surveyor, is confirming the pitch of these waves and we will share this information with you as soon as it is available. Please could you confirm that your unit can manage this incline and trench successfully to the depth that we require?”

In response, Mr Shaw asked if the seabed “is stable or is it constantly moving” and asked about the distance between “the megger ripples”; he then asked whether thought had been given by KML to “running our mass flow down the corridor before we drive the trencher down the route”, suggesting that if this was done shortly before trenching “it would certainly reduce the angles and reduce risks”.

Various discussions continued about the topography in the very nearshore and its potential implications. On 29 April 2022, KML issued version B04 of its Project Method Statement. This described, for the first time, the use of a guide wire, or winch wire, to support the hose and umbilical when the TROV was operating in the nearshore and very nearshore area, to KP0.23. There was evidently a meeting on this date between the parties at which this proposal was discussed.

The first purchase order (No. 16229) between the parties was dated 5 May 2022. This related to preliminary work related to a CAD Storyboard and a series of meetings. The total value of that Purchase Order was £9,750 inch VAT. The subsequent invoice relating to this purchase order was paid. On the same date, KML provided a deck layout for the Susanne A, the vessel KML eventually used, the choice of which features in a number of the allegations and counter-allegations made by the parties.

On 10 May 2022, KML issued version B06 of its Project Method Statement, in which the support vessel was identified as the Susanne A. This version also stated that an MBES would be carried “Before TROV operations…To confirm seabed conditions…Confirm lay of the sand banks, any inclinations of concern”. The document also included the following by way of Weather Limits:

Mr Moore, Pharos’ expert, understood that the durations of the suitable weather windows from the trenching rows provided a duration plus contingency for the relevant works (albeit by reference to the final version which allowed 24+12 hours for inshore trenching and 48+24 for offshore trenching). Mr Scott, when cross-examined, also held the view that these were intended to indicate the period of time required to carry out the relevant works. I accept this agreed evidence as what can be objectively understood by the technical document. It makes sense. The parties obviously anticipated undertaking each section of trenching in one go if that were possible, as that would be the most efficient way of carrying out the work, and these were the durations anticipated by reference to the distance taking into account a conservatively ‘discounted’ trenching speed. I note, however, that this version suggests an aggregate period of 4.5 days (and, in the later version, 5 days) rather than the 6 days calculated by Mr Scullion.

The next purchase order (No. 16249) was provided dated 10 May 2022 by KML, under cover of an email dated 16 May 2022 (‘the 10 May Purchase Order’). There is no dispute that the 10 May Purchase Order incorporated the standard terms and conditions of KML (set out insofar as relevant in Section Dbelow). The main part of the purchase order was as follows:

On 17 May 2022, further to the fifth bullet point in the 10 May Purchase Order which had noted that the quotation for survey equipment was yet to be agreed, Jeff Taylor of Pharos provided a list of the required survey equipment.

The Action Tracker on 20 May 2022 indicated that Pharos was to review the ‘BAS’ (a Burial Assessment Study) to confirm the suitability of the TROV. Paul Scullion was also tasked with issuing a revised PO. The Tracker was emailed to the Pharos and the KML team under cover of an email of the same date which referred Chris Gamble of Pharos to the ‘BAS I sent you early today, please can you review’.

The BAS had been prepared for the main contractor in February 2022 by a company called Asso Subsea. On considering the part of this BAS which related to the Embedment Works, Pharos understood that the seabed might consist not just of sand and silt, but that it might also contain gravel or shale or some other dense granular material. These heavier materials tend to accumulate in the bottom of the trench before the cable settles into the trench, and can prevent the cable from being buried to the required depth. To address this, Pharos considered it may be necessary to “overtrench” (i.e. create a deeper trench than would ordinarily be necessary), and arranged to bring a 1m extension piece to Denmark, to extend the reach of the 2.1m sword by 1m.

In a WhatsApp exchange on 23 May 2022 between Jeff Taylor and Paul Scullion, Mr Taylor asked for the payment terms of 60 days to be reduced to 30 days, as to which Mr Scullion said that he would see what he could do.

On the same day, Mr Taylor emailed Paul Scullion of KML stating:

In a second email a couple of hours later, Mr Taylor said,

The table then set out various equipment, including lay flat hoses and the sword extension, stating that the ‘Total Inc of Cost+10%’ to be £81,103.

There is no suggestion in the documentation that there was any other communication between the parties about any other aspects of the 10 May Purchase Order.

On 24 May 2022, KML issued revision B07 of its Project Method Statement in which it provided details of the means by which the umbilical and hose would be attached to the winch wire.

The next day, Mr Scullion wrote to Mr Taylor attaching a revised purchase order, and re-attaching the terms and conditions:

The equivalent section of the replacement purchase order, dated 23 May 2022, was as follows (‘the Revised Purchase Order’):

It can be seen that additional wording has been introduced to reflect the ‘cost+10%’ additional equipment, with the sum of £81,000 stated and ‘value NTE’. This means Not To Exceed. This additional wording is located where the words, ‘Plus weather at applicable rates’ had previously been, which words no longer appear. The scope of works has been reduced in font size, and amended to remove the parenthesis in the fifth bullet point.

Mr Taylor responded thanking Mr Scullion for the Revised Purchase Order, but asking ‘As discussed, can we have some amendments to payment terms agreed?’, setting out a justification for the request. There is no dispute that this was, then, agreed.

Both parties accepted that there was a variation effected by the Revised Purchase Order. The as varied agreement constituted the agreement between the parties (‘the Contract’).

KML’s “Action Tracker” created on 26 May 2022 noted “Works schedule – Mobilisation date: 08/06/22”. The following day, Mr Gamble of Pharos informed Mr Thomas of KML that he still needed a shipping address as “presently booking for departure UK 6^th June, ETA 9^th AM Esbjerg”.

On 27 May, Mr Gamble provided information to Mr Thomas and Mr Rowland Crosby in relation to the water hose couplings which evidently had been discussed earlier between them. The Senior Project Engineer for KML, Mr Berry, responded, ‘Jake has just forwarded me this e-mail. This solution looks good. Do you have any idea of the tensile strength at each joint?’. Mr Gamble replied:

“Unfortunately I don’t have anything on the tensile joint of these couplings, which are a bit of a late entry into the equation due to supply issues with our favoured option. The lay flat-hose to which they attach is rated to 37,000kg, internally we were hoping to get a load test performed, but we are still awaiting delivery and suspect there will be insufficient time pre-project to complete this scope.”

Mr Berry then answered, on 30 May, indicating that he understood and that he would think they were fairly robust due to their purpose but considered it would be good to check if possible. He continued, ‘I have only seen these connections used on land/deck - Is the plan to lock the release handle somehow for offshore use, perhaps cable tie it in position?’ Mr Gamble said, in response to this, that they had been advised that the latching handle could be bolted once in the closed position.

The “Action Tracker” created on 31 May 2022 noted “Works schedule – Mobilisation date: 09/06/22”.

On 1 June 2022, Pharos issued a letter addressed “To Whom It May Concern”, seeking assistance with the temporary export of the UTV-670 trenching system, explaining that the system would be undertaking shallow water burial works as part of the Viking Link project. The letter noted that the project “is scheduled to commence mobilisation onto the salvage vessel Susanne A…on the 9^th June 2022 in the port of Esbjerg”, and that the works were “estimated at 14 days (may extend to 30 days to allow for local weather constraints)”. The UK customs’ position is evidenced on three of the consignment notes, dated 6 June 2022. These were issued for the export of the UTV-670 and the other equipment. Reflecting the difficulties that were then encountered, they are marked “Permission to progress not granted to this entry”.

Between 7 and 17 June 2022, both parties made repeated and extensive efforts to accelerate customs clearance for the UTV-670 and related equipment. It is clear that the National Clearance Hub were being chased daily for updates. The email exchanges also suggest that there was no particular issue with the paperwork which had been submitted. Both Mr Walker and Mr Scullion were active in writing to various governmental departments in trying to accelerate the release of the UTV-670. In one email exchange on 15 June 2022, Mr Walker wrote to the Department for International Trade, and suggested that Pharos faced going bankrupt as a result of the implications of the delays. Mr Walker accepted, in cross-examination, that this was a lie. In another email, on 17 June 2022, he suggested that Pharos’ client was going to terminate the contract, ‘as they/we will not be able to absorb the vessel currently on hire for ten days further’. Mr Walker accept that this, too, was not true. Although the same line of cross-examination was not taken with Mr Scullion of KML, I note that in his email of 15 June 2022, Mr Scullion indicated that the vessel spread on hire was not working as a result of the absence of the trenching equipment, whereas even on KML’s own case no delay had actually been caused by the non-arrival of the equipment by 15 June because of the weather conditions. This too, therefore, was somewhat of an overstatement of the true impact of the customs delays, no doubt with the intention of seeking to put pressure on the authorities. This Court plainly does not condone any of the communications in which the true impact of the absence of the UTV-670 was misrepresented to the authorities. However, I do not draw the conclusion from Mr Walker’s admission in evidence that he had lied in these emails that he was not candid in his evidence before me.

On 17 June 2022, confirmation was received that the goods were cleared to proceed.

Meanwhile, on 10 June 2022, KML issued revision B10 of its Project Method Statement. This noted that “the sand waves and beach are very mobile and likely the bank arrangement, slopes and positions will have changed since the last MBES. The MBES survey prior to operations [7] will confirm final positions of the sand waves and hence the positions the vessel will take to complete the operations”.

On this date, the consecutive daily sequence of detailed progress reports prepared contemporaneously by the parties started. Pharos produced an “Equipment Daily Report” and KML produced a “Daily Progress Report” every day up to and including 18 August 2022 (and KML produced one more “Daily Progress Report” on 19 August 2022). A series of daily calls between Prysmian, KML and Pharos also started, which were followed up by an email reporting the contents of the calls. I refer to these in more detail below.

On 20 June 2022, the three delayed consignments arrived at the Port of Esbjerg. The two pumps had already been mobilised onto the deck of the Susanne A and the remaining items, including the UTV-670, were then mobilised on the vessel over the next two days. On 22 June 2022, the Susanne A sailed from Esbjerg for Henne Strande, and works commenced in the late evening of 23 June 2022.