Biffa Waste Services Ltd v Maschinenfabrik Ernst Hese GmbH

JurisdictionEngland & Wales
JudgeTHE HON.MR.JUSTICE RAMSEY,The Honourable Mr Justice Ramsey,The Hon. Mr Justice Ramsey
Judgment Date31 October 2008
Neutral Citation[2008] EWHC 2657 (TCC),[2008] EWHC 2210 (TCC),[2008] EWHC 6 (TCC)
Docket NumberCase No: HT-06228,Case No: HT-06–228,Case No: HT-06-228
CourtQueen's Bench Division (Technology and Construction Court)
Date31 October 2008

[2008] EWHC 2210 (TCC)

IN THE HIGH COURT OF JUSTICE

QUEEN'S BENCH DIVISION

TECHNOLOGY AND CONSTRUCTION COURT

Before:

The Hon. Mr Justice Ramsey

Case No: HT-06-228

Between
Biffa Waste Services Limited
First Claimant
Biffa Leicester Limited
Second Claimant
and
Maschinenfabrik Ernst Hese GMBH
First Defendant
Outokumpu Technology Wenmec AB
Second Defendant
Vanguard Industrial Limited
(Trading as Pickfords Vanguard)
(In Voluntary Liquidation)
Third party
Hese Umwelt GMBH
Fourth Party

Ben Patten (instructed by Herbert Smith) for the Claimants

David Allen QC (instructed by Ince & Co) for the Second Defendant

I direct that pursuant to CPR PD 39A para 6.1 no official shorthand note shall be taken of this Judgment and that copies of this version as handed down may be treated as authentic.

Approved Judgment

THE HON.MR.JUSTICE RAMSEY

The Hon Mr Justice Ramsey :

Introduction

1

By a judgment dated 11 January 2008 (“the January Judgment”) I made various findings on liability in relation to a fire which occurred on 27 June 2004 during the course of the construction of a domestic waste recycling facility at Bursom in Leicester. The fire started in a ball mill which had been supplied and installed by Outokumpu Wenmec AB (“OT”).

2

The recycling facility at Bursom formed part of the obligations of Biffa Leicester Limited (“Biffa Leicester”) under a PFI contract with Leicester City Council (“LCC”) for the collection, recycling and disposal of Leicester's domestic waste (“the PFI Contract”). Organic material which is produced by the recycling plant at Bursom is then transported a few miles to a plant at Wanlip where it is used to produce methane which then generates electricity. As this electricity is produced from a renewable resource financial benefits accrue in the form of statutory incentives.

3

Biffa Leicester entered into a back-to-back contract with an associated company Biffa Waste Services Limited (“Biffa Waste”), by which Biffa Waste effectively undertook to Biffa Leicester to discharge Biffa Leicester's obligations in respect of the construction of the plant. The work was then further subcontracted to Maschinenfabrik Ernst Hese GMBH (“MEH”) who, in turn, sub-contracted the work to Hese Umwelt GMBH (“HU”) who entered into a contract with OT to design, supply and install the Ball Mill at Bursom.

4

In the January Judgment I held, amongst other things, that OT was liable to Biffa Leicester and Biffa Waste (together referred to as “Biffa”) in tort for the fire which caused a delay to the operation f the plant of 217 days or some seven months from 28 June 2004 to 31 January 2005. Although I also made findings of liability and quantum against MEH and ordered interim payments to be made by MEH to Biffa, MEH became insolvent and has since January 2008 taken no part in the proceedings.

5

Following the January Judgment I gave directions for a quantum hearing, including directions for the exchange of evidence. As pleaded at that stage the quantum of Biffa' claim was some £2 million. However, following meetings between quantum experts for Biffa and OT, they were able to agree figures and narrow the differences on quantum issues. As a result, in the third joint statement prepared by the quantum experts on 23 May 2008, Biffa's claim was valued by Biffa's expert at some £334,757.

6

There were further agreements and by the end of evidence at the quantum hearing the following issues remained:

(1) The value of Biffa's claim for lost electricity sales. OT contended that the loss was £102,025. Biffa claimed £176,223. The difference depended on two issues: the conversion factor from gas to electricity and whether Biffa should have produced some gas from compost available during the seven month delay period.

(2) The value of Biffa's loss of income from sale of recycled materials. OT contended that the loss was £114,486; Biffa claimed £149,038.

(3) The value of savings made at Bursom and at Wanlip during the seven month delay. OT contended that savings of £490,605 had been made at Bursom and £522,715 at Wanlip. Biffa's figures were respectively £420,354 and £504,173. The difference related to internal hire costs, agency labour costs, sub-contracting costs and rent.

(4) The value of uninsured losses, being an MEH invoice for £26,429 and project management costs for Mr Nattrass of £6,956.

7

In addition, the parties have agreed figures for Landfill Tax repayment loss of £342,295; onward haulage costs of £138,317; landfill gate costs of £169,230 and SRM settlement costs of £37,500.

8

In this judgment I now consider what sums Biffa are entitled to recover from OT as a result of the fire and the consequent period of delay in respect of the various disputed items.

Evidence

9

Biffa submitted the second, third and fourth witness statements of Ray Nattrass and the first and second witness statements from Simon Crook. As set out in the January Judgment Mr Nattrass was employed by Biffa Waste as project manager for the project to provide the plants at Bursom and Wanlip. Mr Crook is now General Manager of Biffa Leicester and as Operations Manager since April 2003 was familiar with the project since that date. Both Mr Nattrass and Mr Crook gave evidence which, I am satisfied, honestly reflected what they knew or recalled about the claims being made.

10

I have already referred to the assistance which has been given by the quantum experts in agreeing figures and narrowing issues. Biffa instructed Mr Damian Glynn of Teceris and OT instructed Mr James Stanbury of RGL. Both gave evidence and for the issues which remained much depended either upon factual evidence or were matters for submissions. I am satisfied that the matters on which the experts disagreed represented areas where their opinions honestly differed, often because of uncertainties as to the facts.

11

I therefore turn now to the issues which remain as to quantum.

Loss of Electricity sales

12

Biffa claims that during the period of seven months when the Plant was not producing organic material, the plant at Wanlip could not produce electricity from methane and therefore Biffa lost a sum equivalent to the electricity sales which would have been made during that period. Biffa now claims £176,223 under this head of claim, based on Mr Glynn's calculation; OT accepts a figure of £102,025 based on Mr Stanbury's calculations.

13

Although at the hearing the matter proceeded on the basis that such loss was recoverable and the only debate was as to the quantum of such loss, subsequent to that hearing OT submitted a short further written submission in which it raised two points. The first was a reference to Spartan Steel v. Martin & Co [1973] QB 27 which it said supported a proposition that Biffa could not claim damages in tort “based on lost sale contracts yet to be made at an unknown date in the future because such contracts and alleged losses are not immediately consequential on the physical damage of the tort”. Although not expressly stated to be a reference to this head of loss, this is the only claim which it seems could amount to “lost sale contracts”.

14

In response to that submission, Biffa submitted that it was unclear why Spartan Steel was relevant; Biffa should have been alerted to the argument which would have needed evidence and that any questions of remoteness and duty which might be raised by OT based on Spartan Steel would require more extensive reference to authorities. As I have indicated, I have taken this submission to refer to this head of claim. On that basis, I do not see that Spartan Steel supports OT's closing submissions as OT states in these further submissions. Rather, it opens up a new and uncertain argument after the close of the hearing and one which I do not consider I should entertain for the reasons given by Biffa.

15

Two issues explain the difference between the figures put forward by the two experts. The first issue is the correct conversion rate which should be used to convert the lost gas production into lost electricity for the purpose of calculating the lost electricity sales. The second issue, which was conceded by OT in closing, concerned whether Biffa should have used some of the organic material produced by the Bursom plant in the period July 2004 to January 2005 so as to make gas to produce some electricity during that period.

16

In addition, in its closing submissions, OT introduced a new issue concerning the period for electricity production. Whilst I have found that there was a period of 7 weeks and 2 days delay caused by the fire, OT submits that the court should assume that, but for the fire, Wanlip would have been able to produce electricity for a maximum of 5 months. It submits that this is because one month would have been taken up with commissioning, testing and building up sufficient stocks of compost and one month would then have been needed to allow the “seeding” of the gas plant to produce sufficient gas to commence electricity generation.

17

Biffa objected to this new contention, made only in closing submissions, on the basis that Biffa had no proper opportunity to deal with it. I consider that Biffa was justified in that objection. However, in addition, I do not accept that the contention by OT has any merit. The period of delay was a period from June 2004 when the plant was being commissioned until January 2005 when the plant had been reinstated to the same state as it was in June 2004. If the fire had not occurred then the overall plant would have required a further period after June 2004 for commissioning, testing, building up stocks of compost and seeding of the gas plant to produce sufficient gas to commence electricity generation. Equally, after January 2005 the plant required a similar period for those operations before it could commence electricity generation. It follows that the...

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