“Progress Reporting Within 30 days after Purchase Order award Seller shall submit a legible reproducible copy of the Design, Manufacture and Delivery Schedule for all items detailed in the Bill of Materials of this Purchase Order. As a minimum the schedule shall include the following: 1. Material procurement schedule including Seller’s suborder dates, sub-supplier’s name and expected material delivery dates. 2. Manufacturing and delivery schedule containing: a. Start of fabrication dates. b. Starting and completion dates of all major steps during fabrication. c. Shipping date(s) Seller shall submit every 2 weeks thereafter . . . updated progress reports showing actual progress against planned progress dates and shall detail specific or potential problems of which Buyer should be made aware.”
“Any review or approval of data or documentation submitted by Seller to Buyer shall not relieve Seller of the responsibility for the accuracy of documentation or data, or compliance with all requirements of the Purchase Order. Buyer confirms that documents will not be subject to repetitive revue [sic] due to subjective reviewer comments.”
"1. This Purchase Order document 2. Attachment A 3. Attachment B 4. All other Commercial Attachments 5. Attachment C 6. All other documents listed in Attachment C in accordance with the order of precedence listed therein."
"The Mono-Piles and Transition Pieces shall comply with the requirements of this PR, its attachments and the documents listed in the following Engineering Document List. The requirements of all the referenced documents within the listed documents shall be applied where applicable. . . . “Fabrication of Offshore Structures” 760 297 97015 "
“The application of preheat involves heating the base metal, either in its entirety or just the region surrounding the joint to a specific desired temperature called the preheat temperature. This is done prior to welding. Heating may be continued during the welding process, but frequently the heat input from the welding process is sufficient to maintain the desired temperature without a continuation of the external heat source. The interpass temperature, defined as the base metal temperature between the first and last welding passes, cannot fall below the preheat temperature. Interpass temperature will not be discussed further in this report. Fabricators have successfully used gas heating for preheating for many decades. Electrical resistance elements and induction heating equipment are also used for preheat, especially when welding thicker sections. All these methods are acceptable and effective but electrical resistance and induction heating equipment can be easier to control and monitor in the field.”
“Post heat refers to the maintenance of preheat/interpass temperatures after the weld has been completed to allow increased rates of hydrogen diffusion from the weld to occur. The post heat temperature may be the same as, or greater than, the preheat temperature specified. Post heat is a technique closely related to hydrogen bake-out. Post heat is a fabrication hydrogen diffusion process usually done during repair on thick sections. In thick section repairs the weld repair will cool rapidly and this is known as “heat sink”
“Develop temperature control methods and techniques for operations involving preheat, interpass temperature, post-heat, or stress relief temperature control.”
“Develop temperature control methods and techniques for operations involving preheat, interpass temperature, post-heat, or stress relief temperature control. Maintenance and management of preheat and interpass temperature shall be in accordance with ISO 13916.”
“Preheat temperature shall be in accordance with the applicable codes except that code recommended minimum preheat temperatures shall be mandatory. Preheat requirements shall apply to all welding, including tack welding and welding of temporary attachments . . . Preheat shall be maintained a minimum of 100 mm on either side of the joint.”
“Before beginning work, [ZPMC] shall establish and qualify detailed welding procedures for various materials and components used in structures to be fabricated, in accordance with requirements of Sections 5 and 10 of AWS D1.1. Use of prequalified welding procedures as defined in Section 3 of AWS D1.1 is not permitted. Written welding procedures shall be prepared and tested in accordance with Section 4 part B of AWS D1.1 and Section 2.3 B of the Structural Welding of Offshore Structures. In the case of conflict the most onerous requirements shall apply. The procedure qualification report (PQR), including NDT and mechanical test results shall be submitted to [Fluor] together with the welding procedure specification (WPS). . . . For repair of a weld, either the original approved WPS, or one originally submitted and approved as a designated repair WPS, shall be used.”
“A Procedure to be developed by [ZPMC] [and] shall be submitted to [Fluor] for review prior to use. A repair procedure shall include the following: 1. The method of defining the type and the extent of the defect. 2. Excavation methods for removing the defect and NDE methods to ensure that the defect has been completely removed. 3. Welding procedure employed and NDE methods used to inspect the completed repair.”
“Each layer of welding shall be smooth and [free smooth and] free of slag inclusions, porosity, excessive undercut, cracks and lack of fusion prior to beginning the next layer . . .”
“The preheat and interpass temperature shall be sufficient to prevent cracking. Table 3.2 shall be used to determine the minimum preheat and interpass temperatures for steels listed in the code.”
“The principle of applying heat until a certain temperature is reached and then maintaining that temperature as a minimum is used to control the cooling rate of weld metal and adjacent base metal. The higher temperature allows more rapid hydrogen diffusion and reduces the tendency for cold cracking. The entire part or only the metal in the vicinity of the joint to be welded may be preheated (see Table 3.2). For a given set of welding conditions, cooling rates will be faster for a weld made without preheat than for a weld made with preheat. The higher preheat temperatures result in slower cooling rates. When cooling is sufficiently slow, it will effectively reduce hardening and cracking. . . . It should be emphasised that temperatures in Table 3.2 are minimum temperatures, and preheat and interpass temperatures shall be sufficiently high to ensure sound welds. . . . Based on these factors, the requirements of Table 3.2 should not be considered allencompassing, and the emphasis on preheat and interpass temperatures as being minimum temperatures assumes added validity.”
“305 Repair welding in the same area may be carried out twice. Further repairs shall be evaluated in each individual case. 307 Repair welding shall be performed using welding consumables satisfying the hydrogen test requirement given in 118. The preheating and working temperature shall when making shallow and local repairs in special and primary structural elements be raised 50°C above the level specified for production welding and be at least 100°C unless otherwise agreed. The working temperature shall be maintained until the repair has been completed. To ensure sound repair welds, the single repair length shall not be shorter than 50 mm.”
“As a consequence in most circumstances when Fluor raised comments on any submission we incorporated their comments without questioning them. I recall that when we argued with Fluor about their comments it was when they sought to impose requirements that were not in accordance with AWS D1.1 or requirements which were not in accordance with ZPMC’s common practice.”
“. . . although I was, you know, Shen Daming’s boss, but in relation to welding work [and] I was very dependent on his team and I trusted Mr Shen Daming’s team.”
“. . . We are aware that there are cracks in welding then we would apply procedures such as pre-heat, interpass heating, post weld heating, all these kind of ways, basically it using heat to prevent cracks.”
“pre-heat should be used.”
“It appears that it may be the pre-heating with a torch that might be the problem. The reason for this is because during FCAW only welding on the long seams we rarely have a problem with the welds. However, when repairs are done they are almost always done with the preheat bands off (except small Changxing workshop). The material is so thick that it may be pulling the heat away too fast - making adequate preheat impossible even if it appears that the preheat is okay. I discussed this with Ms Ma and she said ZPMC has reached a similar conclusion and has made it mandatory for all preheat to be done with the electric bands. Somebody could ask why we did not change our repair procedure if it was found to be inadequate. This is probably something we need to change.”
“(7) After welding, welds and adjacent base metal shall be heated to a temperature of 230°C minimum to 315°C maximum. The minimum heating time for repair welds shall be one hour for each 25 mm of repair weld depth from the surface, but not less than one hour. Post heat shall use electric band.” 127. Mr Dove crossed this out and beside it wrote: “NOT REQUIRED WOULD REQUIRE A NEW PQR.”
“When we arrived at the site, two large circumferential weld seams were being preheated (picture 1). In addition, 3 welders were performing repair welding at three areas (see picture 2 and 3). The repair weld seen in picture 2 is very long and was being welded by one welder. The repair weld seen in picture 3 is not long; during the interval of welding, I touched it with my hand and it was only tepid. There was no heating operator on site, and neither was there anyone controlling temperature with a tempil stick. So to speak, almost all the repair welding was performed without preheat. Later on, an operator was called to heat the scene with a flame torch. Operating in such temperature (less than 10° C) in the open air on thick plates and long weld seams, heating symbolically and carelessly with a torch while the heating operator has no tempil sticks cannot meet with the heating requirement and the temperature would cool down very quickly. Thus, there was basically no preheating for weld repair, not to mention the interpass temperature which was tended to by no one. They said that the schedule was tight and they were shorthanded, and there was not enough heating equipment. I think for short weld seams heating with flame is acceptable, but at least each welder should be accompanied by a heating operator with a tempil stick. For some long repair weld seams, the preheat temperature can never be reached by heating with flame and they must be heated with electric bands. There are three construction teams working on this pile but few people were working. Due to the terrible welding quality, each weld seam has to be repaired more or less, and for some weld seams the repair length can reach almost half the length of the whole weld seam. In January the temperature will be even lower and severe consequences could occur to the quality of repair weld if no measures are taken. Formal weld seams are heated with electric pads which, however, can be quite slow. To accelerate heating, more electric bands can be added and the heating zone can be covered up with quilts . . . the electric bands are narrow and they can only heat with one side (in some places the racks for electric bands are not properly arranged so the electric bands are positioned too far from the workpiece which results in worse heating effect). The cans are rolling and it is difficult to heat on both sides; two electric bands can be placed side-by-side on the welding zone to heat. In addition, heat loss should be reduced which can be achieved by covering up with quilts . . . Of course, this would require an increase of investment and manpower and the bosses would not be willing to do this, so the leaders’ decision would be needed. . . . Next I would like to express my views on preheat temperature: the preheat temperature in our PQR and WPS are determined in accordance with AWS D1.1, when T≤65 mm, the minimum preheat and interpass temperature is 65°C; and when T>65 mm, the minimum preheat and interpass temperature is 110°C. To prevent the temperature of workpiece from going down quickly after preheating, the initial preheat temperature needs to be higher at 150°C. The preheat temperature required by European standard is even higher, when T≤60 mm, the minimum preheat and Interpass temperature should be 130°C; when 60 mm<T≤ 80 mm, the minimum preheat and interpass temperature should be 140°C. The British client has already lowered their requirements by adopting the AWS standard rather than the European standard. We might be able to negotiate if we have done a good job in preheating and no cracking has occurred, and yet the current on-site situation is that our preheating is far below the standard and there are many problems - how could they possibly agree in such circumstances? Besides, January has the coldest weather. . . . Our problem now is how to attach more importance to preheating and how to strengthen preheating to ensure welding quality.”
“Due to the cold weather, cracking can easily occur on weld seams. Currently the pass rate for repair is low and the huge amount repair is worrying. The quality of weld repair directly affects production progress . . . After tracking and making analysis by Mr Shen and other welding engineers on the cracks that occurred during weld repair, conclusions have been drawn which indicate that the following four efforts shall be made: 1. Strengthen control on welding process; in particular, the preheat and interpass temperatures must be strictly controlled to prevent transverse cracking; 2. As FCAW wires have a high hydrogen content and wires exposed to the air will contain moisture which can easily cause cracking, they must be timely stored indoors after use.”
“In order to have good welding repair quality, we hereby reiterate several points. Firstly, each stage in the repair process is critical, especially when the plates are thick and constraining stress is high. WPS and the repair procedure must be strictly implemented during on-site construction. Detailed procedure is attached herein. Secondly, we need to reiterate some matters for your attention. Please ensure preheating temperature and measures before gouging and welding; try to use newly unpacked wires in the repair or at least do not use wires that have been placed in the open air overnight; . . . conduct PWHT after welding; FCAW is recommended for the first repair while manual metal arc welding is recommended for multiple repairs in the same area; especially pay attention to the above matters in outdoor repairs. In a nutshell, we can overcome difficulties by working together closely and complete the welding and repair work with required quality.”
“It is my belief that in order to avoid confusion in the workshops as to the repair procedure to be used in a particular repair, the critical repair procedure was used for all repairs from6 February 2009 onwards.”
“We have never come across so many defects of such a serious nature in our many years of experience in welding. With respect to good quality and workmanship, the work in Shanghai on shipments 1-3 was significantly worse than normally encountered in steel construction.”
“4.5 Even Fluor’s expert John Marlow stated “I have never encountered this extent of hydrogen cracking in fabrication in my experience”
“In my view, based on what I saw of ZPMC’s welding in 2008, ZPMC had a total disregard for weld quality. They broke every fundamental welding rule in the book and did not heed or adopt any suggestions/recommendations made by many industrial experts that would lead to a significant improvement in weld quality. In fact, the welding at ZPMC could be described as being ‘out of control’.”
“There was an[d] extremely wide variation in weld quality between workshops, ie some welding was of an acceptable standard, whereas other workshops produced an extremely low, unacceptable, weld quality.”
“Inadequate preheating was observed on the thick wall flange fabrication, ie the pyrometer was applied to the heated surface, and not on the reverse side to where the heating was being applied.”
“Although significant improvement in the weld quality of the welding on the MPs and TPs has been achieved, there is still an enormous amount of work still to do ie. Many welders, who produce welds that are barely acceptable, will need additional instruction and guidance on how to improve their welding. Welders who produce poor welds must be removed. Welder testing is ongoing. More good quality welding inspectors are needed. SQS Inspectors working week needs to be reduced.”
“1. ZPMC expressed regret for welding problems of the first shipment Mono Piles. But ZPMC will go all out to take remedial action and cooperate with Fluor [in] the repairing activities. 2. The loss from the first shipment is due to lack of experience and under estimate, so ZPMC has some responsibility and ZPMC could share partial responsibility.”
“Proper preheating (50~150°C) . . . and interpass temperature must be used in order to release hydrogen which may cause cracking in weld metal when electrodes are used for medium and heavy plate.”
“When preheating is done from the backside, for example, correctly with electrical heating mats, or with a gas manifold or gas burners, then that heating would be maintained throughout the welding repair process, or the welding process. Whereas if a welder preheats with a torch, he may say, with his Tempilstik, “That has reached 110°C, I can start welding”, one minute that temperature could drop to 40, 50, 60°, because the heat has not soaked through the thick section of material, and that acts as a massive heat sink. It pulls the heat away from the surface.”
“. . . I think the issue here is not so much how the pre-heat was applied in terms of what was actually required, so there is no requirement to heat from the backside. That might be considered best practice, but it is not actually a requirement. So if you look at the codes and you look at the Fluor specification, both of those are silent in terms of how heat treatment, post or pre-heat should be applied. With that in mind, I think ZPMC adopted a practice that is common and fairly standard throughout the industry, and, you know, the alternative of heating from the backside might be considered better practice but it was not required.”
“This preheat and all subsequent minimum interpass temperatures shall be maintained during the welding operation for a distance at least equal to the thickness of the thickest welded part (but not less than 3 in [75 mm]) in all directions from the point of welding.”
“It makes no sense to read the Code as requiring one to measure the temperature a minimum of 75mm away from the point of welding in a through thickness direction. That could only be done if, for example, the steel was at least 80 mm thick and the repair no deeper than 5mm. Most of the time it would simply be impossible.”
“Now, when we repair, hang the electric pre-heated plate over the opposite side, the entire process is undergoing heating. 2 hours after welding completed, cut off the electric plate, hugely reduced the production of crack.” (4). A report from the Testing Centre dated10 February 2009 following the discovery of transverse cracks in branch company 3. I have already quoted the relevant passage but, for convenience, I shall set it out again: “In order to have good welding repair quality, we hereby reiterate several points. Firstly, each stage in the repair process is critical, especially when the plates are thick and constraining stress is high. WPS and repair procedure must be strictly implemented during onsite construction. Detailed procedure is attached herein. Secondly, we need to reiterate some matters for your attention. Please ensure preheating temperature and measures for gouging and welding; try to use newly unpacked wires in the repair or at least do not use wires that have been placed in the open air overnight; try not to make the repair groove too narrow and too deep, and ensure the shape coefficient; grinding the carburized layer till it turns metallic lustre before welding; properly control the parameters in the welding, adopt multi-layer and multi-pass welding; conduct PWHT after welding; FCAW is recommended for the first repair while manual metal arc welding is recommended for multiple repairs in the same area; especially pay attention to the above matters in outdoor repairs.”
“In the morning, 57 transverse cracks were found beyond the acceptance criteria in the MP [reference] six circles butt which need to be repaired . . . More than 20 areas found beyond acceptance criteria in T026-3-67 circles butt are all transverse cracks need to be repaired . . . ”
“Comply strictly with WPS. Use electric heating to preheat each weld seam. The weld width shall be controlled at around 16 mm. After completion of the welding, use non-alkali bulk fabric to wrap the weld surface and vicinity tightly to make them cool down slowly.”
“In my view, as noted in my first report, there is a greater risk of hydrogen cracking occurring in thick section repair welds rather than normal production welds due to: • The potential for increased diffusable hydrogen in repair welds due to the shorter time between consecutive weld passes. • A high level of constraint in repair welds that can result in very high residual stresses. • Increased heat sink that can result in fast cooling rates, which can result in increased hardness and increased strength and reduce the potential for hydrogen to diffuse out of the repair weld.”
“Temperature is a more important factor than elapsed time for the diffusion of hydrogen and it is difficult to be certain that hydrogen build up is a key factor in repair welds.”
“MR BRANNIGAN: Mr Teale, we can agree this, can’t we: the one thing you wouldn’t do, standing at Vlissingen, looking with horror at the fact you had these cracks, you couldn’t just go ahead and install them without undertaking the sort of exercises you have just described? MR TEALE: That is why I just described it.”
“MR BRANNIGAN: I understand that. I think you agree that the one thing, the one purpose you cannot put these things to, whenever they arrive on the dock and you see the cracks in them, you cannot load them out and put them in the ground, can you? DR GORDON: No.”
“We believe the current weld repair procedure is giving defect-free welds. Fluor are applying a 150C preheat as mentioned earlier, however they are also applying a 200C PWHT to, though I am not sure of how long or what cooling arrangements.”
“Transverse cracks found in the experiment were typical hydrogen induced cracking. The contributory factors mainly include: diffusible hydrogen content and its distribution, stress and material hardening microstructure. In terms of repair weld, because the welding repair area is small, the weld is short and the cooling rate is high. When conducting welding repair, the specified preheat temperature can be reached fast. Once welding repair is conducted, as it is semi-auto welding, inter-pass temperature can be very high, and the repair welding can be finished quickly. However, when repair welding is conducted in winter, as the constraint stress is large and cooling rate is high, residual stress and repair weld diffusible hydrogen cannot be released easily after welding, which can easily induce transverse crack.”
“Non-Destructive Testing is the term used to describe a test or series of tests that can detect welding or in-service flaws without damaging the component under test. This can be achieved by the use of ultrasound, magnetic fields, penetrating fluids and x-rays or gamma-rays, to name but a few. The flaws, that could potentially compromise the integrity of the component, can be either surface breaking or buried within the welds or parent material. Ultrasonic testing is similar to that used on pregnant women to check the age and health of the baby.”
“The amplitude of the response from a flaw depends on many factors including the flaw size, the flaw type(s), the flaw orientation relative to the ultrasonic beam and the manner in which the UT is conducted. The ultrasonic responses from different types of defect are different and this permits defects to be characterised, e.g. as cracks, lack of fusion or other forms of welding defect. Defects can be complex in nature, either individually or as a combination of co-existent defect types, and the process is somewhat subjective. Some defects however, such as transverse cracks, are straightforward to characterise.”
“101 Prior to commencement of fabrication the contractor shall submit a plan for NDT, NDT procedures . . . For acceptance by the purchaser. . . . 104 Methods of NDT shall be chosen with due regard to the conditions including the sensitivity of the method and the method’s ability to detect defects likely to occur as a consequence of the chosen welding process . . . 201 NDT shall be performed in accordance with agreed written procedures that, as a minimum, give detailed information on the following aspects: . . . 401 The extent of NDT shall be based on type and level of design stresses and on the importance of the connection in question. The welds shall be assigned inspection categories equal to the highest structural category of the two components. . . . Aspects that shall be considered in determining the extent of NDT are: . . . - technique . . . 402 Unless otherwise agreed, NDT shall normally be carried out to an extent not less than required in Table B1 . . . . . . 403 If a consistently low NDT failure rate is documented, the extent of NDT inspection required for elements within structural category primary may be reduced, but shall not be less than poor Inspection category III . . . 405 Frequent repairs shall result in increased extent of NDT. The extent of NDT shall be increased in a manner such that all relevant defects are discovered in the areas of concern and that representative sampling is carried out on all welds. When the weld quality level has been restored, the extent of examination may be reduced in agreement with the purchaser 406 If severe defects (i.e. cracks and other planar defects or excessive slag lines) occur repeatedly, all welds made with the same welding procedure during the period in question, shall be examined full length. Frequent occurrence of excessive porosity can be indicative of inadequate handling of welding consumables. If inadequate handling is confirmed, the welds made during the period in question shall be investigated by adequate methods for hydrogen induced cracking. 413Ultrasonic testing Ultrasonic testing shall be performed according to approved procedures. The procedures shall be established according to recognised standards. . . . 417 For evaluation of flaw indications a reference curve shall be established. The curve shall be plotted on the instrument screen. Imperfections, which produce a response greater than 20% of the reference level shall be investigated to the extent that the operator can determine the shape, identity and location of all such imperfections and evaluate them in terms of the acceptance criteria. All defects exceeding the acceptance criteria shall be reported unless more stringent requirements are agreed.”
“Then you investigate the signal (you characterise it). You stop the probe and point it at the place where the signal was found. You then twist and rotate it around that position to get the maximum signal size (which is noted) and observe how the signal changes as you move the probe, to see if it has the characteristics of common flaws and whether it is crack-like. Having decided the type of flaw, it must then be assessed against the project criteria, most particularly measuring the flaw’s length, (in a tightly specified manner), to decide if it is to be rejected. . . . These two stages are often not distinguished in witness statements and expert reports that I have read. If a witness says that the signal was above threshold when he investigated it, he is not necessarily saying it was above threshold when he did the search scan. It may only have been above threshold when the probe was rotated and the signal maximised during the “investigation”. (The “search” scan will always have a smaller signal than the maximum found when investigating).”
“Indications which the operator based on experience, knowledge of the welding method and joint geometry deems likely to be cracks, lack of fusion or lack of penetration may be unacceptable regardless of echo amplitude and length. In such cases an independent examination by another operator shall be performed.”
“Based on ZPMC’s experience, there is no need to do UT after grinding, because the grinding is only the work for the surface of weld. So, we think that only MPI should be done according [to] the specification after grinding, and UT can be done before grinding. Please confirm our understanding is correct..”
“Agreed. All welds to be UT examined & repaired. Where grinding is required (as table) then MPI at 100% shall be performed as a further check for crack detection.”
“Frequent repairs shall result in increased extent of NDT. The extent of NDT shall be increased in a manner such that all relevant defects are discovered in the areas of concern and that representative sampling is carried out on all welds. When the weld quality level has been restored, the extent of examination may be reduced in agreement with the purchaser.”
“MR JUSTICE EDWARDS-STUART: Mr Lilley, in this context, looking at paragraph 104, could you just give me, off the top of your head, three methods of NDT? Just name three methods. MR LILLEY: there is radiography, ultrasonics and magnetic particle. MR JUSTICE EDWARDS-STUART: Right. Is scanning pattern D a different method from scanning pattern E, in your view? MR LILLEY: I would call it a technique.”
“Vince has asked me to forward to you both this e-mail that I sent to him on Thursday. Basically it summarises my enquiries with DNV since the issue of our report of 27th March, on NDT and acceptance standards. It concludes that; on what we have seen, we cannot have confidence in the current ultrasonic inspections performed by ZPMC and SGS. Therefore, without revised procedures and 100% re-inspection we should conclude that there are sub-surface flaws present in these components (monopiles and transition pieces) that do not comply with the standard.” 343. The other e-mail referred to in the passage quoted above was an internal e-mail sent by Mr Edwards to others within RWE on2 April 2009 (“the Edwards e-mail”). In that email he said this: “The bottom line is that for all of: UT sensitivity (including corrections for transfer loss), defect evaluation and sizing, defect removal, scanning and detection for transverse flaws (chevron cracking, our interpretation of the DNV code and our expectations based on other EN and ISO inspection codes [are] required to be applied on this project. I can expand on the detail further if required, much of which is covered anyway by our last report but in a nutshell ZPMC and Fluor should be: 1. Testing with angle probes at DAC + 14 dB and evaluating anything that breaks the DAC line. 2. Measurements/corrections for transfer loss should be carried out and applied 3. sizing the length of defects should be done using the 6 dB technique, which means basically all of its length 3. when excavating flaws lack of fusion and slag defects must be completely removed even if the bits at the ends are very low amplitude. The only way to check this is to grind the surfaces of the excavation and carry out MPI. 4. Transverse scans should be carried out from the weld cap provided the surface is smooth enough, which it should be on normal submerged arc welds of this size and in the case of what we have seen at ZPMC after the welds have had a proper visual inspection and have been dressed or repaired so they conform. This is another practical reason for doing the MT prior to the UT. (My emphasis) My recommendations would be: My recommendations would be: (1) . . . (2) Modify the ZPMC and SGS UT NDT procedures to reflect requirements above and retrain/instruct operatives as appropriate . . . Without the above I cannot see anyway that GGOWL will be able to have confidence that the butt welds on the MPs and TPs are free from sub-surface flaws.”
“I took exception to his criticisms, and spent a lot of time in April and May 2009 refuting them. As well as setting out my own views in numbers of e-mails, I roped in support from outside experts including Ohlen from DNV, and American expert called Bill Blanshan, and later an English expert ASNT level III called Dr Ian Thomas. Eventually Dr Thomas produced a report on6 May 2009 concluding that our procedures complied with DNV code.”
“Today, the total length of the weld seams for which the UT testing was performed is 43,748 mm and 3 areas, measuring 470 mm in total, need to be repaired. Supervising Engineer randomly inspected 12 repaired areas on M 48-12 - M 4817-1 prepared by Zhu Chunjing team and transverse cracks were found thereon. Gouging was arranged and MT testing will be performed tomorrow. I really could not stop them doing the gouging. Zhu Youngjun and Fang Min wanted to do gouging and grinding themselves. In the end nothing could be done so Meng Guangdong and Li Yujun had to bring the gouging gun. After gouging, Fang Min did the grinding by himself. I will pay more attention to this in the future. I heard that Big Changxing did not even allow supervising engineer to perform spot check. Please find the daily pass rate in the Daily UT tracking record for the UK Wind Farm Project. . . .”
“In respect of the small CX part of the wind farm project, during the UT inspection on the weld seams, transverse cracks are being found in the repair areas successively, see figure 1. The first time is that the supervisor detected defects in the length of 20 mm for repair on MO32-14 circle weld produced by Zhu Chunjing construction team on12 Jan 2009 and during the UT (horizontal scanning) on the repair, transverse crack was found with the depth of 30 mm. Because of this, small CX strengthened preheat and post heat to eliminate transverse cracks (must use electric heating to preheat the weld to 110°C and welding shall be conducted after inspector has inspected and confirmed. The interpass temperatures shall be controlled above 230°C. Repaired surfaces should be ground smooth and transitioned smoothly into the adjacent base metal or weld. After welding, electric heating should be continued for 1 hour. After that, the welding area should be covered with chrome free mat for the welds to cool down slowly to the ambient temperature). Based on aforesaid, Zhu Chunjing construction team repaired 12 areas on MO48, and then found transverse cracks on all of these 12 repaired areas by UT.”
“For the Xiaochangxing branch of the Greater Gabbard Wind Farm Project, in the weld UT detection process, transverse cracks have been discovered at the repair points, as shown in Figure 1. The first time was on12 January 2009 , during the random inspection on the MP MO32-14 CW completed by Zhu Chunjing’s construction team, a length of 20 mm was repaired. After the repair, the UT inspection horizontal scan found a transverse crack with a depth of 30 mm.”
“There is still a transverse crack in the repair area on T003-02 at Gaokua workshop. The construction team erased the mark and marked a false location, and after re-inspection tomorrow afternoon, the supervisor will be asked to confirm.”
“ZPMC’s welding was not perfect and the welds did not look pretty, but I considered the issues to be snagging items and I had no idea that the welds contained cracks. If I had known this, I would have investigated them prior to the shipment departing (as we later did with Shipment 3), not least because they had all the necessary equipment and infrastructure in Shanghai and very little in Vlissingen.”
“Groot lay on ship appeared [XX] cracked. Welding cracks problem, how to deal with it". In evidence, Mr Li said that this referred to another project: he said that the vessel mentioned was a 4,400 ton pipe laying vessel (Day 14/44-45). (2) On31 January 2009 Mr Chu sent an e-mail entitled “Progress in Small CX" to a large number of recipients in ZPMC, which included Mr Lu and Mr Liu Jianbo, the Changxing General Manager. Under the heading “Difficulties”, this said: “5. Performing UT for transverse cracking inside the repaired welds is a key factor that is constraining the progress. Contact Mr Gu Fuming today and ask for technical support.”
“Quality: Transverse cracks often appear on FCAW welds. Mr Shen, please go to Small CX to help find out the cause.” (4) Two days later Mr Chu sent another e-mail to a similar group, but this time including Mr Liu Jianbo, in which he said “inside the repaired welds often exist transverse cracks, bothering progress". (5) At a Project Coordination Meeting held on7 February 2009 it was recorded that: “Due to the cold weather, cracking can easily occur on weld seams. Currently the pass rate for repair is low and the huge amount of repair is worrying. The quality of weld repair directly affects production progress. There are still over 50 m of weld seams that need to be repaired for Shipment 1 and we must hurry up in weld repair.”
“Transverse scans should be carried out from the weld cap provided the surface is smooth enough, which it should be on normal submerged arc welds of this size and in the case of what we have seen that ZPMC after the welds had a proper visual inspection and have been dressed or repaired so they conform. This is another practical reason for doing the MT prior to the UT.” 396. Mr Estabrook’s response, typed into the e-mail, was as follows: “Incorrect. There is absolutely no requirement whatsoever to scan the surface of the weld cap according to DNV OS C401. Scanning is performed to pick up all indication in all planes in the weld.”
“Based on the above facts, it is our opinion that the weld quality inspection process on the project meets specifications, is healthy, and is providing the specified quality for the project.”
“because it might give them an excuse to NCR the shipment and that is going to cause me all sorts of problems in terms of the money and the schedule.”
“RWE have not provided the exact location of their reported defects in the circ welds of MP 082, so it is impossible to determine if TOFD was applied to these same welds locations. As Fluor QA at ZPMC was not informed of these findings until RWE had left China, there was no opportunity to verify the exact nature of these indications. However, the testing performed by ZPMC, Sonovation and SGS does not indicate any transverse cracking.”
“• F have no proposal to do more NDT’s (sic) but will check for underfill. G may request more NDT’s. There is a concern over IGI 04 . . . • TP’s - Coating checks, adhesion checks, visual inspections. 14/05/09: G reviewing whether more NDTs are necessary. G requested a drawing of the welding geometry but F maintain that there isn’t one. G to revert with the testing requirements formally early next week.”
“There are some transverse cracks on the repaired MP welds, and of course they have already been repaired. Regarding the reason for multiple times of repair, the base considers that it is because the welding procedure is not strictly followed. However, after the site has strengthened control, the problem is still not completely resolved. Fluor has not squarely brought up the issue; maybe it’s because Fluor was rather weak in its NDT check. And yet this is a very serious issue. If Fluor finds further problems that we left out during the check at the client’s wharf, things will get out of hand. We have to request the base to find out the root cause of the problem and solve it from its root once and for all.”
“Further to other communication and meetings about the works to be carried out in Vlissingen, please take this note as confirmation that GGOWL want to verify weld acceptance and quality by additional NDT. The requirement is to inspect to ZPMC procedure simply QC-DNV-UT-02, Revision 1 dated17th February 2009 using scan D as defined in the procedure. GGOWL will arrange independent NDT operators to carry out the work, they will be available from 25th to 30th May. The area of weld to be inspected is the internal ground welds in the location of the mud line being the highest stressed areas, three monopiles are to be inspected. In most cases this will mean the three circumferential ground welds internal to the monopiles. The intention is to carry out ultrasonic NDT of the most available length of weld without additional access facilities being provided by Fluor, this in terms of weld length is expected to be about 6 meters and with the three ground welds being inspected be the equivalent of one full circumferential weld per monopile. The three monopiles to be inspected should be nominated by Fluor together with time periods for inspection so as not to cause any disruption to the planned works in Vlissingen.”
“UT was carried out on 3 piles on ground welds. Some indications were found, these are planar defects. And are not considered to be cracks. We are excavating one of the indications to determine if the indications are detrimental and will continue to scan additional ground welds if these are found to be injurious to the structural integrity.”
“Fluor and GGOWL have been undertaking further NDT on the first shipment of Mono-Piles in Vlissingen and I am sorry to say that in one of the first Mono-Piles that was checked we found a crack in the steel measuring 40 mm x 25 mm. This is extremely serious and at the moment we do not know if this is an isolated incident or not. Either way it is not good news for the Project. We will know more by the end of the day as to the seriousness of the problem but meanwhile you need to consider planning to get your NDT expert over to Vlissingen for him to see the extent of the problem and validate our findings as this could result in an extensive back charge. As soon as I get more information I will send it over to you.”
“Ultrasonic examination of the five fatigue ground wells in the mud-line on MP IGH-06 revealed that four out of the five welds contained recordable transverse indications varying in amplitude. The indications are recorded as typically planar defects that are outside the code acceptance criteria. Additional testing on MP IGI04 is continuing but similar indications have been identified and examination of MP ICJ-03 is continuing. Based on this sample, the validity of the ultrasonic examination executed by ZPMC on all mono piles within the 1st shipment is in question and the examination results have to be re-validated and appropriate weld repairs made to ensure that all welds meet code requirements.”
“We were already fixing the ones that we knew about. But we had to do more. The effect of the NCR was now we had to do the whole shipment. Q. So you had to then do the whole shipment? A. Yes. Q. Yes. I think you agree with me that once you receive the NCR that getting it cleared was the driver for you? A. Yes. Q. And at the point at which the NCR had been issued, your evidence to the Tribunal was that you believed the welds to be sound. Do you stand by that bit of evidence? A. I do.”
“٠ Scanning Pattern D shall be required for all repairs and whenever deemed possible to sufficiently couple the probe to the face of the weld to allow scanning. ٠ Scanning Pattern E shall be required for all welds regardless of whether or not the weld has been scanned using Pattern D.”
“The first shipment of Mono Piles and Transition Pieces arrived in Vlissingen already and we understand from your email that Fluor had found some welding problems by undertaking NDT. Your email also suggested ZPMC staff shall be in Vlissingen to validate the findings which could result in extensive back charge. ZPMC offered our assistance within reach in Vlissingen. And ZPMC is of opinion that ZPMC has fully fulfilled the contractual obligation. The site work in Vlissingen is performed by Fluor voluntarily and it’s out of the contract scope. The reasons are as follows. The NDT inspections carried out during fabrication by ZPMC are all strictly compliance with the NDT procedure approved by both parties. Following are some extract from its requirement: . . . In view of above, ZPMC considers that the NDT testing in Vlissingen beyond the agreed NDT procedure scope. Therefore, testing and repair work in Vlissingen are out of the contractual specification between ZPMC and Fluor, and back charge to ZPMC is not appropriate. Quite a few weld defects discovered are within the scope of allowable and it will not impact the operation ZPMC will try our best to support Fluor.”
“Based on the above two paragraphs, Fluor maintain that it is their right to backcharge ZPMC for the costs involved in additional inspection of the MonoPiles at Vlissingen and furthermore to claim for the additional costs for all repair and rework and any other expenses incurred including stand-by costs payable to our installation contractor due to the lack of acceptable piles that can be installed. Furthermore we wish to advise our intention to claim for liquidated damages for delay due to the late arrival of the 1st shipment . . . We are in the process of working out the costs, some of which are ongoing and will not be finalised for some time. As soon as the full extent of these are known we will let you know the overall cost of this claim giving you a detailed breakdown of the costs involved. Please be advised that the contents of this letter only refers to the Mono-Piles from the 1st shipment and we reserve our right to submit further claims in the event of any additional inspection, rework and/or delays for any other items being supplied. We invite ZPMC to offer proposals as to how we can work together to mitigate the cost and schedule impact resulting from this problem.”
“I disagree with the logic of the last few paragraphs starting at “After further consideration . . .”
“Accordingly, the dilemma we faced was that if we really did change back to the previously approved NDT procedure, the likelihood was that we would catch only some but not all of the transverse cracks; and if that scanning was not done properly, we would miss even more. At that stage, we still did not have an ECA to tell us what, if any, defects would be left unrepaired and we did not have an independent expert view confirming Doug Fuller’s analysis of the code. Against that background, I knew that however GGOWL responded to our bluff, Fluor had no choice but to continue to find all the defects and repair them.”
“The client’s project director John Hill called me late afternoon today. He asked me if I was serious in continuing executing the works in Vlissingen as I told them in my presentation Thursday morning in Camberley. I reconfirmed to him the direction I am taking. Hill states Fluor should adapt the testing methodology themselves to include pattern-d on non-grounded welds. This because scanning pattern-e is not picking up to transverse defects which maybe can only be allowed for certain cracks (sic) sizes as stated by TWI. He stated we are responsible for installing products with minimum design life 25 year and can not step back from this. He also stated that he was going to slow us down and stop us by executing NDT testing in shipment 2 monopiles that we have prioritised for loadout on the barge: “once we find a defect, which we will by carefully searching, you have to repair it”
“Thanks. Agree. Let us make sure our designer and technical experts are in agreement that piles passing the code testing are 25 year piles. Then Pat should work with Jim to explain we have a code compliant product with a valid warranty and see if we can get on with it. I don’t like the attitude of (sic) expressed in the call and Jim should be made aware that the “test until we find something” threat will be a no win for all of us.”
“By mid-July, I began to realise, after several weeks of investigating the welding and NDT issues, that Fluor and ZPMC had not done anything wrong in Shanghai. Fluor/ZPMC had developed a code-compliant UT procedure, and by all accounts, both Fluor and ZPMC had complied with those procedures. The only reason GGOWL (and now Fluor) was obtaining different results in Vlissingen was that they had changed the procedure in a way that was more likely to discover and reject indications found in the welds. I began to feel quite strongly that Fluor was only required to do what the DNV Code required and not what GGOWL was demanding . . . Unfortunately, I was not successful in convincing GGOWL (Jim Smith) on these points.”
“I started to become convinced that the reason we started to find the cracks in Vlissingen was because of the fact that we did not apply to ZPMC testing code. So, at that point in time, I thought if the testing code - the ZPMC testing code - is correct and we find cracks in Vlissingen with a different testing code, we apply the D-scan on top of unground welds, then there might be an argument that ZPMC is correct. So that is what I - that is my recollection of that - of that time.”
“At paragraphs 9.4 and 9.8 of his Witness Statement, John Hill makes an effort to repeat GGOWL’s position that it never “directed” or “instructed”
“Root Cause Analysis report from Fluor (presentations of 25th June & 16th July) identified Hydrogen cracking arising from failure to adequately control consumables in the SA W process in ZPMC. Fluor indicated changes in the process had been implemented following the 3rd shipment. Following ultrasonic examination of a sample of ground welds in a selection of three mono piles a number of recordable transverse indications varying in amplitude were detected as follows: . . . The indications are recorded as typically planar defects that are outside the acceptance criteria defined in table B5 of the code. As all welds in this shipment of mono piles utilized the same welding procedure the integrity of all items is in question until the requirements of clause B405 and B406 of the code have been complied with.”
“Root Cause Analysis report from Fluor identified hydrogen induced cracking in submerged arc welds arising from failure to adequately control consumables during the welding process in ZPMC. Ultrasonic examination of a sample of welds was undertaken to determine if hydrogen induced cracking was present. Examination was completed in accordance with ZPMC US procedure ZPQCDNV-U2-02 Rev1 Feb 17th 2009 with cap scan (D) used on ground welds profiles and side scan (E) on un ground weld profiles. A sample of circumferential and longitudinal weld in three mono piles was selected and a number of recordable transverse indications varying in amplitude were detected as follows: . . . The indications are recorded as typically planar defects that are outside the acceptance criteria defined in table B5 of the code. As all welds in this shipment of mono piles utilized the same welding procedure the integrity of all items in the batch is in question until the requirements of clause B405 and B406 in section 3 of the code have been complied with.”
“Basically we did not just order piles from them - we told them how to build the mouse trap. They followed our instructions, we signed off on the product that was shipped, so how can they have any responsibility. We watched them do exactly what we said to do. Later, people we presented as experts gave them repair procedures. These people were not experts and these repairs caused more cracks. We started repairing things in Europe without ever telling them about it and ended up spending a lot of money and getting nothing for it.”
“NDT deviate. Do again. Cracks - Some of the procedures. Acceptance Criteria not perfect. Client use this reason not to install, cost.” “Alternate proposal Install the product as is 1 to 3 What is Fluor will provide SSE notification no cost from either side Roundness, Lounge, Paint”
“Some cracks were found by using the same method for weld metal defects. Fluor, ZPMC, and the customer all checked but did not find. Now we should share the loss incurred by these quality problems.”
“So on the first day, which is the 1 October, we discussed the concept. At the end of the meeting ZPMC walk away, did not really provide too much comment, and I assumed they actually updated or provided a status update on our meeting to Mr Guan. And subsequently they came back the following day and they were basically giving us their response to the eight points that we have.”
“No, what I remember is going through and laying out the eight points. And I think I actually started with nine and said: listen, before we get started, we are going to talk about a lot of things. Let’s make sure that whatever we agree here, it’s going to be in writing, it’s going to be signed by both sides because we are going to be talking about a lot of stuff. So I remember kicking off the meeting that way. I remember laying out the points.”
“Q. . . . You didn’t want ZPMC to get the impression that Fluor had agreed to waive its claims against ZPMC A. I don’t think that we did, impression or otherwise. Q. You did what? A. Waive our claims against ZPMC. Q. That’s what you had said at the meeting, didn’t you, no claims? A. For extra contractual testing. Q. What does that mean? A. It was the extra contractual testing. Q. What does that mean? A. It means what it says in that letter. Q. No, but what do you mean by that? Because you’ve used that term I think on five occasions today. When you say there will be no claims against ZPMC for extra contractual testing, what’s that? A. That was testing - D scan on top of the unground welds at a higher sensitivity and everything else that was associated with that. Q. But you would only have ever had a claim against ZPMC for that testing if they were in breach of contract; correct? A. I’m not sure about that. We expected ZPMC to go through there and provide us a welded product that didn’t have defects in it, regardless of how it was tested. Q. Yes. And your concern was that defects were being found in the welds; correct? A. Say that again. Q. Your concern was that defects were being found in the welds? A. Of course. Q. And that was causing you to incur massive delay and additional cost? A. Yes. There were a lot of costs associated with the fact that there were defects in those welds, yes. And we had told ZPMC on several occasions that: we would not be here trying to mitigate this problem if there were no cracks in those welds.”
“The message that you should send back to Guan indirectly is that I was disappointed in not being able to settle are issues on GG after making the effort to travel all the way to China and meet with him face to face. We continue to appreciate all of the support they are providing and appreciated Shipment 5 arriving on the agreed date. However, ZPMC must understand that since we did not settle the issues between us during my last visit, all of the issues remain to be settled. At some point, we will need to meet again to settle those issues and this will need to be done before we do any more work together . . . The key point I need them to understand is that at this point, we have not agreed on anything. You do not need to be blunt or direct, but specifically we have not agreed to waive claims against each other.”
“Steve: I arrived over the weekend and kept a low profile for the week. On Wednesday I received a request to meet with Mr Cao in Pudong on Thursday. Mr Cao, Gao Feng (Ryan), and Fred (VP of Quality Assurance) represented ZPMC at the meeting. They had 4 items on their agenda: 1) They would like a formal letter from us confirming the direction to demobilise their workforce from performing weld repairs in Vlissingen. . . . With regard to item 1, I told them that we would discuss this request internally and respond before the end of next week. I cautioned that the letter would likely reflect the fact that we have not reached agreement and that all items we had discussed, including the agreement not to pursue claims against each other were still on the table and needed to be resolved at the next time Mr Dobbs was in Shanghai or Mr Guan was in the US. (I asked Hans Ho to make sure this statement was clearly recorded in the Meeting Minutes when they are produced.) . . . In all, the meeting was constructive and Mr Cao clearly wants to continue their assistance in Vlissingen and Shanghai. He confirmed they were in agreement with the items we discussed in the meetings in late September with the exception of the form of guarantee and that issue was with Mr Guan.”
“Ryan, Please incorporate the following comments to your meeting minutes that was discussed on that day. “The lack of agreement on the items (8 concept points) from our October 1 meeting including agreement not to claim against each other and the need to come to closure on these items the next time Mr Dobbs is in Shanghai or Mr Guan is in the US. Therefore all items remains (sic) open as there are integral part of the entire agreements.”
“gaofeng, Personally I think it is all right to add this issue (because it is the only issue which has not been agreed at the time). But you should send the finalised meeting minutes to Mr Guan for his information and thus he knows that Fluor would talk about this issue again with him in the future. There will be a big trouble if we agree that Mr Guan has not been notified. Please consider.”
“Dear Ryan, Subject: NDT and Repair of Mono-Pile and Transition Piece Welds This letter is in response to your letters dated . . . concerning the above referenced subject. Because we have had ongoing discussions with ZPMC regarding the issues raised in those letters, we do not think it would be productive to rebut each point with additional correspondence. Suffice it to say that Fluor continues to disagree with some of the statements made in those letters regarding the MP and TP welding and sets forth below a statement of the path forward that ZPMC should be following in the circumstances that have defined that course of action. As a result of the Non Conforming Reports (“NCRs”) issued by the Greater Gabbard Offshore Winds Ltd (“GGOWL” or the “Employer”) with respect to certain welds in the mono piles on Shipment Nos. 1, 2, and 3, there has been much confusion regarding the appropriate Non-Destructive Testing (“NDT”) and the subsequent repair of any defects found in the welds, and, unfortunately, that has in turn caused much disruption and delay to this Project. This letter is an attempt to address that issue so that you will have a better appreciation of Fluor’s actions in this regard and to finally put to rest questions concerning this problem. As you know, any deficiencies that were discovered in ZPMC’s welding procedures with respect to the MPs and TPs have been and continue to be addressed by your QC personnel and our QA staff. We have always expected ZPMC to follow acceptable and appropriate welding procedures regardless of what requirements GGOWL imposes or attempts to impose on the welding process, and that expectation remains in full force and effect. The NCR with respect to Shipment No. 1 was not issued by GGOWL until that shipment reached Vlissingen and was inspected and tested by GGOWL there, even though GGOWL had done NDT on the MP welds while they were still at ZPMC’s facility in Shanghai. In an attempt to satisfy the Employer’s demands, Fluor agreed, under protest and with a complete reservation of its rights, to adopt an NDT procedure being required by the Employer, even though that procedure required ultrasound testing with a different scan pattern and at a higher sensitivity than that required by Fluor’s Contract with the Employer, the applicable welding codes incorporated therein, and Fluor’s Inspection and Test Plan (“IT&P”). That Employer Required NDT and Remediation required an extraordinary undertaking at the Vlissingen Staging Port, including the establishment and maintenance of a vast infrastructure to support the testing and repair work, as well as, of course, the transfer of some one hundred fifty ZPMC tradesmen to the Vlissingen Staging Port to perform that work. . . . Fluor has continued to meet with the Employer in an attempt to: (a) better understand the Employer’s justification for issuing the NCRs and subsequently imposing the Employer Required NDT and Remediation; and (b) share with the Employer the investigation and analysis that Fluor and its consultants have done with respect to that issue, so as to give it the assurances that the structural integrity of the MPs and TPs and the twenty-five year design life and not in any way or to any extent been diminished. We know you share our conclusions in this regard and look forward to having your assistance in that effort with the Employer. I believe that, going forward, the best approach is for ZPMC and Fluor to work together in an effort to ensure that all the welding of the MPs and TPs, which remains to be completed, is performed in the appropriate standards of quality so as to eliminate any issue in that regard. We look forward to having your cooperation.”
“Doug – It was a very late and hard drinking night with Zhou and Kang last night. On bridge, . . . For GG they do not understand the claims assignment, but seemed willing to sign up. I will work with legal on some wording.”
"Dear Mr. Kang: I am very pleased that we have reached an understanding on the joint pursuit of the substantial additional costs both Fluor and ZPMC have incurred as a result of the MP and TP weld testing and repair protocol required by Greater Gabbard Offshore Winds Ltd. ("
"Dear Mr. Kang: This letter confirms our agreement on the close out of the Purchase Order and final payment to ZPMC. As you know, Greater Gabbard Offshore Winds Ltd., the owner of the Project (the "
"in respect of all those MPs and TPs in Shipments 1, 2 and 3 that were not repaired in Vlissingen". a warranty of the materials and workmanship it provided in the fabrication of the MPs and TPs under the Purchase Order for twenty-five (25) years from the date of acceptance of the Project by the Owner. Such warranty shall be in writing in a form to be provided by Fluor; shall be, by its express terms, assignable to the Owner (or its successor in interest) by Fluor in its sole discretion; and shall cover all direct In the final version of the letter the words "and indirect" were inserted between "direct" and "damages". damages resulting from any structural failure of the MPs or TPs, including, without limitation, their repair or replacement as necessary. Please indicate your agreement with the terms and conditions of this letter by signing the enclosed copy on behalf of ZPMC and returning it to me. Any dispute that may arise under this agreement shall be resolved in the manner provided in our Purchase Order No. 66577000-2-0001. Thank you for your cooperation in resolving this issue."
“3. The centre piece of these discussions had 3 elements: • We agreed not to pursue claims against each other • Fluor would take a claim for against the Owners and ZPMC would support that claim • ZPMC would provide a 25 year guarantee for the installed product 4. As I recall, we agreed on all issues, but the form of the 25 year guarantee. We could not agree on the form of guarantee. . . . 6. We have brought 2 letters today to discuss. You will find many similarities between these letters and our previous discussions. 7. It is important we complete the agreement on both letters before end of Thursday. 8. The first letter deals with how we proceed with the significant issue of the weld quality. This letter has 6 points which we have translated to Chinese so we can discuss. 1. Same as we had discussed before. ZPMC will assign ownership to Fluor for all its claims and Fluor will pursue this issue with the Owner. 2. ZPMC agrees not to submit any claim against Fluor. 3. Fluor agrees not to submit any claim against ZPMC. . . .”
“In each case, my notes were shorthand for the claim that we and ZPMC believed we had for extra contractual work directed by GGOWL. At the meeting, that was the only claim we were discussing: we were not suddenly switching from discussing assigning claims for extra contractual work directed by GGOWL to abandoning that concept and simply waiving any and all claims . . .”
“I do not know that I gave it thought, to be honest with you. I mean, the letters, I intended them to be itself-explanatory. Yet, if they had questions, if ZPMC had questions, I was going to take those back to our attorneys, have them answer it, and go forward.” 504. Then there was the following exchange, at Day 8/108: “Q. And if your objective had been to preserve the right to bring ZPMC - bring proceedings against ZPMC for the cost and delay that you now claim against them, if you lost against Gabbard, you would have said so? A. No. The letters were prepared by our attorneys. I was not going to go through there and start putting words in the mouth of our attorneys. Like I said, I expected ZPMC to go through there and read those very carefully and ask any questions they have. But I was not going to go through there and interpret them for them. I wasn’t going to do that.”
“Some issues concerning the project: 1. Waive claim against each other, but ZPMC must support Fluor in its claim against the Owner. However, because of the defects, ZPMC shall give a 25-year warranty. 2. Achieve a good settlement with ZPMC on the commercial contract. There are two letters which can be used to close the relevant issues. Hope that the letters can be signed by Thursday this week. (1) Both parties waive claim against each other; (2) ZPMC to support Fluor in its claim against the Owner; (3) ZPMC to provide a 25-year warranty. Commission Fluor to make claims against the Owner? No guarantee to win. Relevant documents support (relevant to ZPMC) If Fluor wins the case, Fluor will share the proceeds on a 50/50 basis with ZPMC after deducting relevant costs. The above-mentioned discussion is similar to the principles previously discussed. 2. Final settlement of the commercial contract with ZPMC. . . . The warranty can only be provided in the name of ZPMC itself. It is impossible to provide a bank guarantee.”
“If the costs exceed the award, such difference shall be borne by Fluor”
“Q. I'm looking at 20902, but of course you can look at the Chinese. Under paragraph 2 there is a sub-paragraph (i) that says: "Both parties waive claim against each other". A. (Interpreted). Yes. Q. To the best of your recollection, is that what Mr Fuller said? A. (Interpreted). I remember that there were two aspects to both parties waive claim against each other, ie Fluor would not claim against us. And, secondly, we do not claim against them. And that's how both parties waive claim against each other. That's what he means. Further to that, he actually went into great details about waiving claim against each other. and I remember, very specifically, that he said Fluor would not claim against us in relation to any issues to do with welding. Q. That's not what the – A. (Interpreted). In addition to that, ZPMC also waive all claims against Fluor in relation to any additional cost incurred as a result of the crack issues. Q. Well, that's not what your note says, is it? It certainly doesn't contain that detail. A. (Interpreted). I remember it very clear – THE INTERPRETER: Sorry. I will start again. A. (Interpreted). It doesn't mean that I didn't hear that he said these things. And he actually said it in -- with a lot of details. And I can recall the meeting quite distinctly in my mind. Before the meeting in September/October there was lots of discussions. So, therefore, you can see in my note it actually said that: "The above-mentioned discussion is similar to the principles previously discussed".”
“Material will be delivered CFR Vlissingen 9 months from receipt by Seller of design documentation . . .”
“The condition that goods are of merchantable quality requires that they should be in such an actual state that a buyer fully acquainted with the facts and, therefore, knowing what hidden defects exist and not being limited to their apparent condition would buy them without abatement of the price obtainable for such goods if in reasonably sound order and condition and without special terms.”
“The task is to determine what the words of the instrument, read against the relevant background, would have meant to a reasonable reader. It is an iterative process in which possible meanings are checked against their likely consequences and the background facts. If the language is reasonably susceptible of two or more meanings, the court should choose that which best serves the object or purpose of the transaction, objectively ascertained. Any interpretation must, so far as possible, be one that is not impractical or over-restrictive or technical in practice. But three further points are of importance in this case. First, the question is not what the parties meant to say; but what is the meaning of what they did say. Second, the language that they used is likely to be the most important factor, unless the court can conclude that something has gone wrong with the language. Third, where the parties have themselves defined their own terms, the court must give effect to those definitions.”
“28. The rule that pre-contractual negotiations are inadmissible was clearly reaffirmed by this House in Prenn v Simmonds[1971] 1 WLR 1381 , where Lord Wilberforce said (at p 1384) that earlier authorities “contain little to encourage, and much to discourage, evidence of negotiation or of the parties’ subjective intentions.”
“Now, I think it is quite fixed - and no more wholesome or salutary rule relative to written contracts can be devised - that where parties agree to embody, and do actually embody, their contract in a formal written deed, then in determining what the contract really was and really meant, a Court must look to the formal deed and to that deed alone. This is only carrying out the will of the parties. The only meaning of adjusting a formal contract is, that the formal contract shall supersede all loose and preliminary negotiations - that there shall be no room for misunderstandings which may often arise, and which do constantly arise, in the course of long, and it may be desultory conversations, or in the course of correspondence or negotiations during which the parties are often widely at issue as to what they will insist on and what they will concede. The very purpose of a formal contract is to put an end to the disputes which would inevitably arise if the matter were left upon verbal negotiations or upon mixed communings partly consisting of letters and partly of conversations. The written contract is that which is to be appealed to by both parties, however different it may be from their previous demands or stipulations, whether contained in letters or in verbal conversation. There can be no doubt that this is the general rule, and I think the general rule, strictly and with peculiar appropriateness applies to the present case.” . . . 38. Like Lord Bingham, I rather doubt whether the ICS case produced a dramatic increase in the amount of material produced by way of background for the purposes of contractual interpretation. But pre-contractual negotiations seem to me capable of raising practical questions different from those created by other forms of background. Whereas the surrounding circumstances are, by definition, objective facts, which will usually be uncontroversial, statements in the course of precontractual negotiations will be drenched in subjectivity and may, if oral, be very much in dispute. It is often not easy to distinguish between those statements which (if they were made at all) merely reflect the aspirations of one or other of the parties and those which embody at least a provisional consensus which may throw light on the meaning of the contract which was eventually concluded. But the imprecision of the line between negotiation and provisional agreement is the very reason why in every case of dispute over interpretation, one or other of the parties is likely to require a court or arbitrator to take the course of negotiations into account. Your Lordships’ experience in the analogous case of resort to statements in Hansard under the rule in Pepper v Hart[1993] AC 593 suggests that such evidence will be produced in any case in which there is the remotest chance that it may be accepted and that even these cases will be only the tip of a mountain of discarded but expensive investigation. Pepper v Hart has also encouraged ministers and others to make statements in the hope of influencing the construction which the courts will give to a statute and it is possible that negotiating parties will be encouraged to improve the bundle of correspondence with similar statements. . . . 40. In his judgment in the present case, Briggs J thought that the most powerful argument against admitting evidence of pre-contractual negotiations was that it would be unfair to a third party who took an assignment of the contract or advanced money on its security. Such a person would not have been privy to the negotiations and may have taken the terms of the contract at face value. There is clearly strength in this argument, but it is fair to say that the same point can be made (and has been made, notably by Saville LJ in National Bank of Sharjah v Dellborg[1997] EWCA Civ 2070 , which is unreported, but the relevant passage is cited in Lord Bingham’s paper in the Edinburgh Law Review) in respect of the admissibility of any form of background. The law sometimes deals with the problem by restricting the admissible background to that which would be available not merely to the contracting parties but also to others to whom the document is treated as having been addressed. Thus in Bratton Seymour Service Co Ltd v Oxborough[1992] BCLC 693 the Court of Appeal decided that in construing the articles of association of the management company of a building divided into flats, background facts which would have been known to all the signatories were inadmissible because the articles should be regarded as addressed to anyone who read the register of companies, including persons who would have known nothing of the facts in question. In The “Starsin” (Homburg Houtimport BV v Agrosin Private Ltd[2004] 1 AC 715 ) the House of Lords construed words which identified the carrier on the front of a bill of lading without reference to what it said on the back, on the ground that the bankers to whom the bill would be tendered could not be expected to read the small print. Ordinarily, however, a contract is treated as addressed to the parties alone and an assignee must either inquire as to any relevant background or take his chance on how that might affect the meaning a court will give to the document. The law has sometimes to compromise between protecting the interests of the contracting parties and those of third parties. But an extension of the admissible background will, at any rate in theory, increase the risk that a third party will find that the contract does not mean what he thought. How often this is likely to be a practical problem is hard to say. In the present case, the construction of the agreement does not involve reliance upon any background which would not have been equally available to any prospective assignee or lender. 41. The conclusion I would reach is that there is no clearly established case for departing from the exclusionary rule. The rule may well mean, as Lord Nicholls has argued, that parties are sometimes held bound by a contract in terms which, upon a full investigation of the course of negotiations, a reasonable observer would not have taken them to have intended. But a system which sometimes allows this to happen may be justified in the more general interest of economy and predictability in obtaining advice and adjudicating disputes. It is, after all, usually possible to avoid surprises by carefully reading the documents before signing them and there are the safety nets of rectification and estoppel by convention. Your Lordships do not have the material on which to form a view. It is possible that empirical study (for example, by the Law Commission) may show that the alleged disadvantages of admissibility are not in practice very significant or that they are outweighed by the advantages of doing more precise justice in exceptional cases or falling into line with international conventions. But the determination of where the balance of advantage lies is not in my opinion suitable for judicial decision. Your Lordships are being asked to depart from a rule which has been in existence for many years and several times affirmed by the House. There is power to do so under the Practice Statement (Judicial Precedent)[1966] 1 WLR 1234 . But that power was intended, as Lord Reid said in R v National Insurance Comrs, Ex p Hudson[1972] AC 944 , 966, to be applied only in a small number of cases in which previous decisions of the House were “thought to be impeding the proper development of the law or to have led to results which were unjust or contrary to public policy". I do not think that anyone can be confident that this is true of the exclusionary rule. 42. The rule excludes evidence of what was said or done during the course of negotiating the agreement for the purpose of drawing inferences about what the contract meant. It does not exclude the use of such evidence for other purposes: for example, to establish that a fact which may be relevant as background was known to the parties, or to support a claim for rectification or estoppel. These are not exceptions to the rule. They operate outside it.”
“37. As Lord Hoffmann himself put it in para 14 of his speech in Chartbrook Ltd v Persimmon Homes Ltd[2009] UKHL 38 ,[2009] AC 1101 , in every case in which the interpretation of the language used in the contract is in issue, the question is what a reasonable person having all the background knowledge which would have been available to the parties would have understood them to be using the language in the contract to mean. In Chartbrook the House of Lords considered and rejected the submission that what at para 42 Lord Hoffmann called the exclusionary rule, which excludes evidence of what was said or done in the course of negotiating an agreement for the purpose of drawing inferences about what the contract means, should now be abolished. It accordingly remains part of English law. The exclusionary rule does not exclude such evidence for all purposes. Lord Hoffmann put it thus in para 42: "It does not exclude the use of such evidence for other purposes: for example, to establish that a fact which may be relevant was known to the parties, or to support a claim for rectification or estoppel. These are not exceptions to the rule. They operate outside it." 38. It is not in dispute that, where negotiations which culminate in an agreement are not without prejudice, the exclusionary rule applies to the correct approach to the construction of the agreement. Nor is it in dispute that in those circumstances evidence of the factual matrix is admissible as an aid to interpretation even where the evidence formed part of the negotiations. The distinction between objective facts and other statements made in the course of negotiations was clearly stated by Lord Hoffmann in para 38 of Chartbrook: "Whereas the surrounding circumstances are, by definition, objective facts, which will usually be uncontroversial, statements in the course of pre-contractual negotiations will be drenched in subjectivity and may, if oral, be very much in dispute." 39. Trial judges frequently have to distinguish between material which forms part of the pre-contractual negotiations which is part of the factual matrix and therefore admissible as an aid to interpretation and material which forms part of the pre-contractual negotiations but which is not part of the factual matrix and is not therefore admissible. This is often a straightforward task but sometimes it is not. In my opinion this problem is not relevant to the question whether, where the pre-contractual negotiations that form part of the factual matrix are without prejudice, evidence of those negotiations is admissible as an aid to construction of the settlement agreement. The two questions are, as I see it, entirely distinct.”
“14. Over the past 45 years, the House of Lords and Supreme Court have discussed the correct approach to be adopted to the interpretation, or construction, of contracts in a number of cases starting with Prenn v Simmonds[1971] 1 WLR 1381 and culminating in Rainy Sky SA v Kookmin Bank[2011] UKSC 50 ;[2011] 1 WLR 2900 . 15. When interpreting a written contract, the court is concerned to identify the intention of the parties by reference to "what a reasonable person having all the background knowledge which would have been available to the parties would have understood them to be using the language in the contract to mean", to quote Lord Hoffmann in Chartbrook Ltd v Persimmon Homes Ltd[2009] UKHL 38 ,[2009] 1 AC 1101 , para 14. And it does so by focussing on the meaning of the relevant words, in this case clause 3(2) of each of the 25 leases, in their documentary, factual and commercial context. That meaning has to be assessed in the light of (i) the natural and ordinary meaning of the clause, (ii) any other relevant provisions of the lease, (iii) the overall purpose of the clause and the lease, (iv) the facts and circumstances known or assumed by the parties at the time that the document was executed, and (v) commercial common sense, but (vi) disregarding subjective evidence of any party's intentions. In this connection, see Prenn at pp 1384-1386 and Reardon Smith Line Ltd v Yngvar Hansen-Tangen (trading as HE Hansen-Tangen)[1976] 1 WLR 989 , 995-997 per Lord Wilberforce, Bank of Credit and Commerce International SA (in liquidation) v Ali[2002] 1 AC 251 , para 8, per Lord Bingham, and the survey of more recent authorities in Rainy Sky, per Lord Clarke at paras 21-30. 16. For present purposes, I think it is important to emphasise seven factors. 17. First, the reliance placed in some cases on commercial common sense and surrounding circumstances (eg in Chartbrook, paras 16-26) should not be invoked to undervalue the importance of the language of the provision which is to be construed. The exercise of interpreting a provision involves identifying what the parties meant through the eyes of a reasonable reader, and, save perhaps in a very unusual case, that meaning is most obviously to be gleaned from the language of the provision. Unlike commercial common sense and the surrounding circumstances, the parties have control over the language they use in a contract. And, again save perhaps in a very unusual case, the parties must have been specifically focussing on the issue covered by the provision when agreeing the wording of that provision. 18. Secondly, when it comes to considering the centrally relevant words to be interpreted, I accept that the less clear they are, or, to put it another way, the worse their drafting, the more ready the court can properly be to depart from their natural meaning. That is simply the obverse of the sensible proposition that the clearer the natural meaning the more difficult it is to justify departing from it. However, that does not justify the court embarking on an exercise of searching for, let alone constructing, drafting infelicities in order to facilitate a departure from the natural meaning. If there is a specific error in the drafting, it may often have no relevance to the issue of interpretation which the court has to resolve. 19. The third point I should mention is that commercial common sense is not to be invoked retrospectively. The mere fact that a contractual arrangement, if interpreted according to its natural language, has worked out badly, or even disastrously, for one of the parties is not a reason for departing from the natural language. Commercial common sense is only relevant to the extent of how matters would or could have been perceived by the parties, or by reasonable people in the position of the parties, as at the date that the contract was made. Judicial observations such as those of Lord Reid in Wickman Machine Tools Sales Ltd v L Schuler AG[1974] AC 235 , 251 and Lord Diplock in Antaios Cia Naviera SA v Salen Rederierna AB (The Antaios)[1985] AC 191 , 201, quoted by Lord Carnwath at para 110, have to be read and applied bearing that important point in mind. 20. Fourthly, while commercial common sense is a very important factor to take into account when interpreting a contract, a court should be very slow to reject the natural meaning of a provision as correct simply because it appears to be a very imprudent term for one of the parties to have agreed, even ignoring the benefit of wisdom of hindsight. The purpose of interpretation is to identify what the parties have agreed, not what the court thinks that they should have agreed. Experience shows that it is by no means unknown for people to enter into arrangements which are ill-advised, even ignoring the benefit of wisdom of hindsight, and it is not the function of a court when interpreting an agreement to relieve a party from the consequences of his imprudence or poor advice. Accordingly, when interpreting a contract a judge should avoid re-writing it in an attempt to assist an unwise party or to penalise an astute party. 21. The fifth point concerns the facts known to the parties. When interpreting a contractual provision, one can only take into account facts or circumstances which existed at the time that the contract was made, and which were known or reasonably available to both parties. Given that a contract is a bilateral, or synallagmatic, arrangement involving both parties, it cannot be right, when interpreting a contractual provision, to take into account a fact or circumstance known only to one of the parties. 22. Sixthly, in some cases, an event subsequently occurs which was plainly not intended or contemplated by the parties, judging from the language of their contract. In such a case, if it is clear what the parties would have intended, the court will give effect to that intention. An example of such a case is Aberdeen City Council v Stewart Milne Group Ltd[2011] UKSC 56 , 2012 SCLR 114, where the court concluded that "any … approach" other than that which was adopted "would defeat the parties' clear objectives", but the conclusion was based on what the parties "had in mind when they entered into" the contract (see paras 17 and 22). 23. Seventhly, reference was made in argument to service charge clauses being construed "restrictively". I am unconvinced by the notion that service charge clauses are to be subject to any special rule of interpretation. Even if (which it is unnecessary to decide) a landlord may have simpler remedies than a tenant to enforce service charge provisions, that is not relevant to the issue of how one interprets the contractual machinery for assessing the tenant's contribution. The origin of the adverb was in a judgment of Rix LJ in McHale v Earl Cadogan[2010] EWCA Civ 14 ,[2010] 1 EGLR 51 , para 17. What he was saying, quite correctly, was that the court should not "bring within the general words of a service charge clause anything which does not clearly belong there". However, that does not help resolve the sort of issue of interpretation raised in this case.”
“76. This conclusion is not a matter of reaching a clear view on the natural meaning of the words and then seeing if there are circumstances which displace that meaning. I accept Lord Clarke's formulation of the unitary process of construction, in Rainy Sky SA v Kookmin Bank[2011] 1 WLR 2900 , para 21: "[T]he exercise of construction is essentially one unitary exercise in which the court must consider the language used and ascertain what a reasonable person, that is a person who has all the background knowledge which would reasonably have been available to the parties in the situation in which they were at the time of the contract, would have understood the parties to have meant. In doing so the court must have regard to all the relevant surrounding circumstances. If there are two possible constructions, the court is entitled to prefer the construction which is consistent with business common sense and to reject the other." 77. This unitary exercise involves an iterative process by which each of the rival meanings is checked against the provisions of the contract and its commercial consequences are investigated (Re Sigma Finance Corp ([2009] UKSC 2 )[2010] 1 All ER 571 , para 12 per Lord Mance). But there must be a basis in the words used and the factual matrix for identifying a rival meaning. The role of the construct, the reasonable person, is to ascertain objectively, and with the benefit of the relevant background knowledge, the meaning of the words which the parties used. The construct is not there to re-write the parties' agreement because it was unwise to gamble on future economic circumstances in a long term contract or because subsequent events have shown that the natural meaning of the words has produced a bad bargain for one side. The question for the court is not whether a reasonable and properly informed tenant would enter into such an undertaking. That would involve the possibility of re-writing the parties' bargain in the name of commercial good sense. In my view, Mr Morshead's formulation (para 67 above), on which his case depends, asks the court to re-write the parties' leases on this illegitimate basis.”
“Estoppel by representation may in some cases overlap with estoppel by convention but it is, in legal terms, distinct. Wilken and Ghaly (The Law of Waiver, Variation, and Estoppel 3rd Ed) summarise the elements of this estoppel at Paragraph 9.01 by reference to two parties A and B as follows: "First, A makes a false representation of fact to B . . . Second, in making the representation, A intended or knew that it was likely to be acted upon . . ., B, believing the representation, acts to its detriment in reliance on the representation. Fourth, A subsequently seeks to deny the truth of the representation. Fifth, no defence to the estoppel can be raised by A". They go on to say at Paragraph 9.04 that the "weight of authority favours the view that estoppel by representation is a rule of evidence rather than of substantive law". The doctrine does not, in itself, amount to a cause of action. The authors consider that representations of present intention can give rise to estoppel by representation but that representations of future intention in simple terms will not at least usually give rise to such estoppel due to running foul of the contractual doctrine of consideration (see for instance Paragraph 9.26). They accept that representations of mixed fact and law may give rise to an estoppel by representation. The editors of Spencer Bower on The Law Relating to Estoppel by Representation (4th Ed) go somewhat further and suggest that an estoppel by representation of law may now be raised, quoting Kleinwort Benson Ltd v "First, A makes a false representation of fact to B . . . Second, in making the representation, A intended or knew that it was likely to be acted upon . . ., B, believing the representation, acts to its detriment in reliance on the representation. Fourth, A subsequently seeks to deny the truth of the representation. Fifth, no defence to the estoppel can be raised by A". Lincoln CC[1999] 2 AC 349 and[1999] 2 Lloyd's Rep 159 .”