Deepak Fertilisers and Petrochemicals Corporation v ICI Chemicals & Polymers Ltd
| Jurisdiction | England & Wales |
| Judge | LORD JUSTICE STUART SMITH |
| Judgment Date | 12 November 1998 |
| Judgment citation (vLex) | [1998] EWCA Civ J1112-9 |
| Docket Number | QBCMF 98/0139/3 QBCMF 98/0154/3 |
| Court | Court of Appeal (Civil Division) |
| Date | 12 November 1998 |
[1998] EWCA Civ J1112-9
Lord Justice Stuart-Smith
Lord Justice Otton
Lord Justice Tuckey
QBCMF 98/0139/3
QBCMF 98/0140/3
QBCMF 98/0154/3
IN THE SUPREME COURT OF JUDICATURE
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
COMMERCIAL COURT
(MR JUSTICE RIX)
Royal Courts of Justice
Strand
London W2A 21L
MR MARK HAVELOCK-ALLAN QC and MR ANDREW BAKER (instructed by Rosemary S. Crump) appeared on behalf of the Deepak.
MR TERENCE MOWSCHENSON QC (instructed by Messrs Herbert Smith) appeared on behalf of ICI.
MR RICHARD WILMOT-SMITH (instructed by Messrs Berrymans Lace Mawer) appeared on behalf of Davy.
This is the judgment of the Court to which all three members have contributed. There is before the Court an appeal by Davy McKee (London) Ltd. ('Davy') who are defendants in the action against part of the judgment of Rix J. dated 19 December 1997. The plaintiffs in the action Deepak Fertilisers and Petrochemicals Ltd. ('Deepak') appeal against other parts of the judgment. Imperial Chemical Industries plc ('ICI') are also defendants in the action. They support Davy's appeal and are respondents to Deepak's appeal. It is a regrettable feature of the case that it took the judge over 18 months from the hearing in April 1996 to deliver judgment. That delay is wholly unacceptable. It entirely defeats one of the principal aims of the Commercial Court which is to give quick answers so that the parties can resolve their differences expeditiously. Having said that, it is right to say that the judge's judgment is exceptionally full, detailed and careful, and runs to over one hundred pages of transcript. It is reported at (1998) 2 LLR 139.
In his judgment Rix J. answered ten preliminary issues on the construction of a contract, dated 22 May 1987, between Deepak and Davy ('the contract'). The contract was for the sale by Davy of a process licence, process design and know-how in connection with the proposed design, construction (by others, in fact an associated company of Davy in India) operation and maintenance of a 300 metric ton per day low pressure methanol plant at Taloja in India. The material parts of the contract as set out and summarised by the judge at 2 LLR 145–148 (with minor omissions and additions), are set out in the Appendix to this judgment. The plant was built between January 1988 and September 1991. It was commissioned in October 1991. After the plant had been operating for four months a letter of acceptance was issued and dated 6 February 1992. The plant exploded on 30 October 1992. Fortunately no-one was hurt; but much damage was caused and the plant had to be rebuilt. The claims in the actions amount, with interest to over £100m.
The preliminary issues were ordered to ascertain whether Davy's contractual answers to the claim were valid. If they were then the claim against them would fail. The preliminary issues also affected the position of ICI. There was no contractual relationship between ICI and Deepak. But by a licence agreement, dated 11 November 1981, ICI had licensed Davy to use its technology. By its terms ICI agreed to comment on Davy's design, provide information, advise and assist on the start up and operation of plants using the process and gave some guarantees. But those obligations were accompanied by stringent exclusion of liability clauses. It is unnecessary to consider the effect of the licence agreement in any detail.
Deepak initially sued only ICI by writ issued on 7 September 1993. The claim was for negligence, negligent misrepresentation and breach of collateral warranties, the warranties being in identical terms to the misrepresentations. On 14 January 1994 ICI issued third party proceedings against Davy, following which Deepak issued a writ against Davy. The actions were consolidated and in June 1995 a consolidated Points of Claim was served in which the claims against ICI and Davy are set out. The claims based on negligence, negligent misrepresentation and breach of collateral warranty against Davy are broadly the same as those against ICI. In addition there are claims based on alleged breaches of express or implied terms of the contract. There is a Limitation issue so far as Davy is concerned; but that is not presently before the Court.
Although there is a dispute on the facts as to the cause of the explosion, it being Davy's case that Deepak ran the plant at dangerously high temperatures, for the purpose of determining the preliminary issues, the facts alleged in the statement of claim were accepted as correct. They were set out in two documents, 'Statement of facts to be assumed from the points of claim' and 'Statement of additional agreed facts'. The judge summarised the assumed facts at 2 LLR pp.142–144 and Transcript.3–9 (CBB.386–392). For the purposes of this appeal it is sufficient to set out the allegations in the manner helpfully summarised by Mr Wilmot-Smith QC in his skeleton argument on behalf of Davy. References are to paragraphs in the Amended Consolidated Points of Claim to be found at pp.197–230 of CBA.
The contract is pleaded at paragraph 3. In paragraph 10 it is alleged that eight representations were made by ICI or Davy. These relate to the track record of the technology when applied in other plants and the satisfactory nature and performance of tube-cooled methanol converters, and the back-up service provided by ICI. The representations are said to have been made:
(a) In a 'contract proposal' submitted jointly by Davy and Davy Powergas India Pte Ltd. (DPGIL) in December 1986.
(b) A telex from DPGIL, dated 13 February 1987.
(c) An oral representation by an ICI employee at Billingham, Tyne and Wear, on 29 July 1987.
(d) A letter from Davy to Deepak, dated 17 August 1987.
It is alleged that these representations amounted to collateral warranties in consideration of which Deepak entered into the contract (para.11), though it should be noted that the representations in (c) and (d) are after the contract date.
It is alleged that ICI and Davy owed Deepak a duty of care in making the representations or causing or permitting them to be made on their behalf (para.13); the representations were negligently made by ICI and Davy (para.15); and it is said that the representations were inaccurate and misleading (para.16). If they had known the true position Deepak would have installed a different type of methanol converter (para.17).
In paragraph 18 it is alleged that ICI were under a duty of care in the preparation of the design, design parameters, the approval of the mechanical and /or scheme drawings, and the process design for the methanol converter.
Paragraph 18A somewhat incongruously alleges 'a like duty' on Davy which presumably means a like duty of care and express (or implied) contractual obligations (which are not qualified by a duty to take care) to prepare and supply to Deepak all necessary drawings, data and information to enable Deepak to set up and run the plant safely, and all design and engineering drawings and technical information for a tube-cooled methanol converter. In further and better particulars supplied in the course of argument, Mr Havelock-Allan QC for Deepak identified the terms of the contract relied upon as Articles 3.2.1; 3.2.2; 3.2.5.2; and clauses 1, 3 and 12 of Annexure IV.
Breaches of the collateral warranties referred to in paragraphs 10 and 11 are alleged against ICI in paragraph 21.
In paragraph 22 it is alleged that ICI were told that Deepak were experiencing difficulties in operating the plant and sought their assistance and that as a result ICI were under a duty of care to assist Deepak in solving and correcting the difficulties or to warn that continued operation of the plant might be dangerous. Breach of the duty of care on the part of ICI are alleged in paragraph 23.
In paragraph 23A it is said that Davy owed a like duty of care to that alleged against ICI in paragraph 22. Further express (or implied) contractual obligations are alleged: (a) to provide qualified and experienced personnel to supervise the operation of the plant, assist Deepak in solving and correcting the difficulties encountered in operation and to warn of dangers that might arise (Articles 3.7.1; 5.3.1; 6.5.5.1.(i)(a) and 6.7.3 were particularised by Mr Havelock-Allan); and (b) a duty to communicate details of improvements to the process (Article 10.5.3). Breaches of those duties and obligations are alleged in paragraph 23B.
The explosion is alleged to have been caused by breaches of the duties of care alleged against ICI and Davy in paragraphs 18 and 18A, and breach of the contractual obligations set out in paragraph 18A by Davy (para.25). Alternatively the explosion is said to have been caused by the breaches by ICI of warranty and duty alleged in paragraphs 21 and 23 or Davy's breach of warranty, duty or contract alleged in paragraphs 21 and 23B (para.26). It is then alleged that the breaches of warranty, duty, contract or misrepresentations caused the loss and damage alleged.
It can therefore be seen that claims are brought on the express terms of the contract against Davy and against both defendants:
(a) In breach of a duty of care to act in a certain way
(b) In negligent misrepresentation
(c) For breach of collateral warranties alleged to derive from the representations.
It is Davy's case that all these liabilities are specifically excluded by the express provisions of the contract. In particular:
(a) All liability for breach of express (or implied) terms of the contract...
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