Energy Works (Hull) Ltd v MW High Tech Projects UK Ltd
| Jurisdiction | England & Wales |
| Judge | Mr Justice Pepperall |
| Judgment Date | 12 May 2023 |
| Neutral Citation | [2023] EWHC 1142 (TCC) |
| Docket Number | Case No: HT-2019-000259 |
| Court | Queen's Bench Division (Technology and Construction Court) |
and
[2023] EWHC 1142 (TCC)
THE HONOURABLE Mr Justice Pepperall
Case No: HT-2019-000259
IN THE HIGH COURT OF JUSTICE
BUSINESS AND PROPERTY COURTS OF ENGLAND AND WALES
TECHNOLOGY AND CONSTRUCTION COURT (KBD)
Rolls Building
Fetter Lane, London EC4A 1NL
Stephen Dennison KC, Felicity Dynes, Sanjay Patel and Mathias Cheung (instructed by Fenwick Elliott LLP) for the Claimant
Jonathan Acton Davis KC, William Webb KC, Ebony Alleyne and Thomas Saunders (instructed by Clyde & Co. LLP) for the Defendant
Adrian Williamson KC and Paul Bury (instructed by Walker Morris LLP) for the Third Party
Judgment (No. 2)
Hearing dates: 10, 11, 14, 15, 16, 17, 18, 21, 22, 23, 24, 29 & 30 June, 1, 2, 5, 6, 7 & 8 July, 8, 9 & 10 September 2021, and 5 December 2022
Further submissions: 25 & 30 November and 9 & 16 December 2022 6 & 13 February 2023
| Page | |
| INTRODUCTION | 3 |
| SUMMARY OF MY FINDINGS | 3 |
| SETTLEMENT | 4 |
| THE MINOR DEFECT CLAIMS | 7 |
| DEFECT 17: THE FUEL-FEED SYSTEM | 7 |
| DEFECT 7: LADDERS | 8 |
| THE ALLEGATIONS | 8 |
| LIABILITY | 9 |
| QUANTUM | 10 |
| THE CONTRIBUTION CLAIM | 11 |
| DEFECT 35: BAGHOUSE HOPPER & AIR SLIDES | 12 |
| DEFECT 25: GASIFIER REFRACTORY LINING FAILURE | 13 |
| DEFECT 10: MOTORS | 13 |
| EWH'S CLAIM AGAINST M+W | 13 |
| THE CONTRIBUTION CLAIM | 14 |
| DEFECT 3: FURNACE INSPECTION EQUIPMENT | 14 |
| EWH'S CLAIM AGAINST M+W | 14 |
| THE CONTRIBUTION CLAIM | 15 |
| DEFECT 34: OFA DAMPERS | 15 |
| DEFECT 33: BLOCKAGES OF BOILER SCREEN HOPPER & MULTICYCLONES | 15 |
| DEFECT 37: HYDRATED LIME DOSING | 16 |
| DEFECT 14: UREA INJECTION NOZZLES | 17 |
| VARIATIONS | 17 |
| VARIATION 3 | 17 |
| VARIATION 29 | 19 |
| VARIATION 30 | 20 |
| VARIATION 31 | 20 |
| VARIATIONS 32 & 34 | 21 |
| ABATEMENT | 22 |
| THE ARGUMENT | 23 |
| ANALYSIS | 23 |
| EXCHANGE RATES | 25 |
| INTEREST | 25 |
INTRODUCTION
My principal judgment in this case was handed down on 20 December 2022 and can be found at [2022] EWHC 3275 (TCC), (2022) 206 ConLR 40. It ran to some 856 paragraphs and resolved the major issues in this litigation. In this second judgment I deal with the outstanding matters in issue between the main contractor, MW High Tech Projects UK Limited (“M+W”), and the gasifier subcontractor, Outotec (USA) Inc. (“Outotec”).
SUMMARY OF MY FINDINGS
For the reasons explained below, I make the following further findings in the third-party proceedings:
2.1 The settlement between the employer, Energy Works (Hull) Limited (“EWH”), and M+W does not preclude M+W from pursuing its contribution claims or from relying on the defence of abatement. [See paragraphs 3–15.]
2.2 I assess M+W's contribution claim in the total sum of £20,000:
Defect no.
Defect
Award (£)
Paragraphs
Principal judgment
This judgment
28
Noise issues
Nil
728–740
23
Over Fire Air / Under Fire Air slagging issues
Nil
741
17
Feeding system – screw and bin design
Nil
742–749
19–22
9
Inadequate corrosion protection
Nil
750–755
32
Blocked bed cones
Nil
756
7
Use of ladders and specification of ladders
20,000
23–40
35
Baghouse hopper and air slides
Nil
41–44
25
Gasifier refractory lining failure and damage to fuel feed chute
Nil
45
10
Motors
Nil
46–53
3
Furnace inspection equipment
Nil
54–60
34
OFA dampers
Nil
61
33
Blockage of boiler screen hopper and multicyclones
Nil
62–66
37
Hydrated lime dosing
Nil
67–69
14
Urea injection nozzles
Nil
70
£20,000
2.3 I dismiss Outotec's claim for variations. [See paragraphs 71–100.]
2.4 M+W's defence of abatement succeeds in the sum of $488,746.65. [See paragraphs 101–113.]
2.5 I have determined the proper construction of the provisions for enhanced interest at clause 41.8 of the subcontract at paragraphs 114–122.
SETTLEMENT
On 16 December 2022, EWH, M+W and M+W's parent company (M+W Group GmbH) entered into a settlement agreement by which the M+W companies agreed to make a payment in full and final settlement of EWH's claims. On behalf of Outotec, Adrian Williamson KC and Paul Bury contend that this settlement has “utterly changed the landscape.” They submit that the proper legal analysis is that M+W cannot now recover any sums upon its contribution claim and cannot rely upon the defence of abatement unless it can prove that the settlement was reasonable; the settlement included specific sums attributable to Outotec's breaches of contract; and those specific sums are themselves reasonable. They contend that M+W ought to have pleaded an amendment to reframe its case on the basis of the settlement but has failed to do so. Having failed to plead or prove that any ascertainable and reasonable part of the settlement sum was attributable to Outotec's breaches of contract, it is submitted that the contribution claim and the defence of abatement must now fail.
Jonathan Acton Davis KC and William Webb KC, who appear for M+W, reject this analysis. They contend that the true effect of the Civil Liability (Contribution) Act 1978 following the settlement of EWH's claims against M+W is as follows:
4.1 First, M+W no longer needs to prove that it was liable to EWH, rather it is sufficient if M+W would have been liable in the event that EWH's case was proven.
4.2 Secondly, once this hurdle is overcome, it is still necessary for M+W to prove that Outotec was liable to EWH for the same damage.
4.3 Thirdly, the amount of the contribution is fixed by a broad assessment as to the sum that is “just and equitable.” Such assessment is not affected by the settlement.
Further, they contend that settlement has no impact on the issue of abatement which is not a freestanding claim but a defence to the price of goods and services.
There is a line of authorities that where a main contractor settles an employer's claim, he can seek to recover a contribution from a subcontractor not by first proving his own liability to the employer but by proving:
6.1 that the employer's claim was not so weak that no reasonable party would take it sufficiently seriously to negotiate any settlement that involved making a payment;
6.2 that the amount paid in settlement was reasonable having regard to the strength of the claim in the sense of being within the range of settlements which reasonable parties in the position of the main contractor might have made having regard to all the circumstances;
6.3 that the subcontractor's breach of duty caused the loss incurred in satisfying the settlement; and
6.4 that — as will generally be the case where a subcontractor is in breach of contract and a claim by the employer is in the reasonable contemplation of the parties — the possibility of a reasonable settlement of such claim was also within the reasonable contemplation of the parties to the subcontract.
See Siemens Building Technologies FE Ltd v. Supershield Ltd [2009] EWHC 927 (TCC), [2009] 2 All E.R. (Comm) 900, Ramsey J, at [80]. Such formulation was not challenged on appeal: [2010] EWCA Civ 7, [2010] 1 Lloyd's Rep. 349. See also General Feeds Inc. Panama v. Slobodna Plovidba Yugoslavia [1999] 1 Lloyd's Rep, 688, Colman J, at page 691; Biggin v. Permanite [1954] 2 K.B. 314, CA; and 125 OBS (Nominees 1) v. Lend Lease Construction (Europe) Ltd [2017] EWHC (TCC), [2017] T.C.L.R. 8, Stuart-Smith J, as he then was.
There is a statutory basis for no longer requiring the main contractor to prove its own liability to the employer. Section 1(4) of the Civil Liability (Contribution) Act 1978 provides:
“A person who has made or agreed to make any payment in bona fide settlement or compromise of any claim made against him in respect of any damage (including a payment into court which has been accepted) shall be entitled to recover contribution in accordance with this section without regard to whether or not he himself is or ever was liable in respect of the damage, provided, however, that he would have been liable assuming that the factual basis of the claim against him could be established.”
It is, however, important to understand that this line of authorities does not obviate the need for the main contractor to prove the subcontractor's breach of contract: see Fletcher & Stewart Ltd v. Peter Jay & Partners (1976) 17 B.L.R. 38.
In the leading case of Biggin, the claimant settled an arbitration arising out of the supply of defective roofing materials. It then sought to recover the settlement sum in an action against the supplier. At first instance, Devlin J, as he then was, found that the settlement sum was irrelevant to the issue of quantum and dismissed the claim holding that the claimant was required to prove its actual loss, being its actual liability to the customer. Somervell LJ, as he then was, disagreed. At page 361 he explained:
“I think that the judge here was wrong in regarding the settlement as wholly irrelevant. I think, though it is not conclusive, that the fact that it is admittedly an upper limit would lead to the conclusion that, if reasonable, it should be taken as the measure. The result of the judge's conclusion is that [the claimants] must prove their damages strictly to an extent to show that they equal or exceed £43,000; and that if that involves, as it would here, a very complicated and expensive inquiry, still that has to be done. The law, in my opinion, encourages reasonable settlements, particularly where, as here, strict proof would be a very expensive matter.”
Singleton LJ added, at page 325:
“If, upon the evidence, the...
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