Remediation costs - Can you have "a Rolls Royce solution to a Ford Escort problem"?

Southern Electricity Power Distribution PLC v OCU Modus Ltd [2025] EWHC 723 (TCC) (27 March 2025)

Construction works carry inherent risks of imperfections, yet when defects arise, what are parties reasonably expected to do? The court was asked to assess the reasonableness of the remedial works in the recent case of Southern Electricity Power Distribution PLC v OCU Modus Ltd [2025] EWHC 723 (TCC) (27 March 2025) where the adopted remedial works were described as the "Rolls Royce" option.

Background

Southern Electric Power Distribution PLC (SEPD), owns and operates electricity distribution infrastructure across the UK. One of its customers, a photovoltaic solar farm at Wroughton Airfield, entered into a connection agreement which required the installation of two 7km 33kV ducted underground cable circuits including 6 cables in total.

SEPD engaged OCU Modus Limited (Modus), for the design, supply, installation, commissioning and adoption of the electricity and distribution equipment (the Works) by a contract dated 13 February 2016 (the Agreement). The Agreement required the Works to meet certain minimum standards. The works were completed and following some pre-completion testing, SEPD energised the circuit and signed a completion certificate on 4 April 2016.

Discovery of the defects

A short time after the cables had been energised, one of the circuits failed. SEPD’s investigations discovered undocumented amendments and repairs which were visible to all of the cables, although it was not clear who had carried out the repairs or when. One of these issues appeared to be the cause of the failure. Modus denied responsibility for the alleged defects and claimed the defective work and subsequent repairs were due to a third party and had been carried out without their authorisation or knowledge.

SEPD performed emergency repairs and re-ran the tests, but the Works failed to meet the minimum standards required under the Agreement. Further investigation suggested that there were multiple issues with the circuit and a number of other unrecorded repairs and other issues. Following these further investigations, the minimum required standard was dropped to a lower standard. However, even at the lower thresholds, subsequent testing showed five of the six cables were still defective.

Remedial works

Following further investigation and testing, SEPD assessed what remedial works would be best placed to fix the situation and narrowed down its options to:

1. full replacement of both circuits and all the joints; or
2. replacement of all joints and up to 10% partial replacement of the circuit; or
3. replacement of all joints that had not already been replaced.

Having assessed these options, SEPD opted for full replacement of the Works (the Adopted Solution). SEPD’s remedial works focused on replacing the existing circuit by installing new cable along a different route, not alongside the existing route (the overlay method). This Adopted Solution was to avoid any outages caused by any disconnection and reliance upon any additional items of Modus’ Works which were defective (including the ductwork, reinstatement materials and backfill of topsoil which also did not meet the contractual specification). SEPD’s total claim value for the repairs was £2,642,237.71.

Modus denied liability for the defects and/or denied that it was reasonable for SEPD to have chosen a remedial solution which required full replacement works and recovery of the costs of doing so from Modus – counsel for Modus was quoted within the judgement as describing the issue as “whether SEPD should be compensated for implementing a Rolls Royce solution to a Ford Escort problem”.

The decision

Ultimately the court held that Modus was responsible for the defective works. The judge then distilled the arguments regarding the reasonableness of the Adopted Solution and associated costs into three central questions, as follows:

1. was it reasonable for SEPD to replace the circuits by the Adopted Solution?
2. if it was reasonable, are the actual costs of doing so properly attributable to the defendant's wrong rather than a consequence of the claimant's choice?
3. if so, are the actual costs of doing so themselves reasonable?

The judge, Justice Constable, gave the answer to all three questions as "yes" and noted that “it was objectively reasonable to assume, when determining the appropriate remedial scheme, that the defects were widespread and that they would lead to progressive degradation of the integrity of the circuits. As such, it was reasonable to adopt a scheme which addressed the avoidance of future, premature failure of the circuits.” As for which remedial scheme was to be considered most appropriate, Justice Constable agreed that just replacing the faulty joints was a “materially inferior” solution as SEPD would be left with a circuit worse than the one they were entitled to under the Agreement. Therefore, the judge agreed that only replacing the circuits would put SEPD back in the position it would have been but for the breach and was to be “reasonably justified” because it minimised to the greatest extent possible future intervention by way of further fault finding, remedial work or indeed later replacement.

In assessing the reasonableness of SEPD’s remedial works and whether the costs for doing these works were properly attributable to Modus’ defective work rather than SEPD’s choice, the judge decided SEPD’s Adopted Solution was “both reasonable, and caused in law by the underlying breaches and defective circuits”. The judge awarded SEPD its total claim value for the repairs of £2,642,237.71

Key takeaways

While the details of the court’s reasoning in this case are fact specific, the case is a useful reminder for parties on how courts assess claims for remedial works and what questions need to be answered to pursue a successful claim.

For anyone seeking to claim costs for defective works, parties should meticulously document their processes for deciding which option they are electing to use in order to justify the ‘reasonableness’ of the decision, including reliance upon expert evidence in relation to technical matters and commercial meetings considering costs as well as quotes for different schemes of works.

Conversely, those parties who may seek to challenge remedial schemes proposed by others equally need to be able to provide evidence of the reasoning behind their challenges to the proposed scope, methodology, cost, etc. of the proposed remedial works.

Ultimately, whether the "Rolls Royce" solution is appropriate and/or reasonable will be a matter of fact in each case, but a clear demonstration as to why the scheme and costs are each reasonable and clearly linked to the breach or default (rather than a matter of claimant choice) will be key arguments in any attempt to recover the costs for remedial works.