McCain Foods GB Ltd v Eco-Tec (Europe) Ltd
| Jurisdiction | England & Wales |
| Judge | Mr Recorder Acton Davis |
| Judgment Date | 27 January 2011 |
| Neutral Citation | [2011] EWHC 66 (TCC) |
| Court | Queen's Bench Division (Technology and Construction Court) |
| Date | 27 January 2011 |
| Docket Number | Case No: OLS 79004 |
[2011] EWHC 66 (TCC)
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
TECHNOLOGY AND CONSTRUCTION COURT
Royal Courts of Justice
Strand, London, WC2A 2LL
Mr Recorder Acton Davis QC
Sitting as a Deputy Judge of the High Court
Case No: OLS 79004
Mr Riaz Hussain (instructed by Eversheds LLP) for the Claimant
Mr Andrew Latimer (instructed by Cobbetts LLP) for the Defendant
Hearing dates: 26 th–29 th October, 1 st–5 th November, 2 nd December 2010, 27 th January 2011
The Deputy Judge:
This Action was tried in London but remains in the Leeds District Registry by the Order of Mr Justice Ramsey made on 12 July 2010 [1/233].
The claim relates to the purchase by McCain Foods (GB) Limited ("McCain") of a BGPur system ("the System") from the Defendants Eco-Tec (Europe) Limited ("ETE") under an Equipment Purchase Agreement including a Specification. In essence McCain argue that the System proved impossible to commission successfully. Thus McCain treated ETE as being in repudiatory breach of contract and accepted that breach alternatively rescinded the Contract in consequence of which McCain seek recovery of monies paid under the Contract and damages. That claim is denied and is met by a counterclaim for money outstanding under the Contract. Both claim and counterclaim include a claim for interest.
The System
The System was intended to remove Hydrogen Sulphide (H 2S) from biogas produced in the Claimant's waste water treatment processes at its Whittlesey plant in Cambridgeshire. The clean biogas was intended to be used by the Claimant in the generation of electricity through a Combined Heat and Power ("CHP") plant to provide a source of power and electricity for the plant entitling, it is alleged, the Claimant as an Ofgem accredited generator of renewable electricity within the United Kingdom, to obtain Renewables Obligation Certificates based on the calculated energy value of electricity produced.
Mr Gamble, the expert Consulting Engineer called on behalf of the Claimant, produced a system flow diagram at TB3/555AAAA, which is itself an expanded version of a system flow diagram at TB3/555.
The wastewater effluent from the plant is processed by means of a covered anaerobic lagoon ("CAL") which produces a methane rich gas (biogas). McCain intended to use the biogas as a fuel in the CHP gas engine driven electricity generation sets. The biogas from the CAL contains H 2S in a concentration which would be unacceptable in the gas engine, McCain therefore required a system for removing the H 2S from the biogas prior to feeding the biogas to the engine. Hence the need for the System. The System as installed consisted of two elements, namely what has become known as the McCain System and the Eco-Tec System. The inter-play between the two Systems is the cause of a substantial issue in this dispute.
The main components of the McCain System are as follows:
(a) The gas analyser at the top left of Mr Gamble's diagrams is an on-line instrument which continuously samples, analyses and records the main constituents of biogas from the CAL. That instrument is part of the McCain equipment and is installed in the main biogas pipeline from the CAL to the factory.
(b) To the right of this in the same pipeline is a condense pot whose purpose is to separate out liquid droplets that are entrained in the biogas or have condensed from the biogas.
(c) The McCain blower which draws the biogas from the CAL and sends it to the factory is shown in the diagrams as a small circle containing a triangle to the right of the condense pot. The apex of the triangle points to the right indicating the direction of the flow of biogas.
(d) The flare at the top right of the diagrams is only used when there is no demand for the biogas produced by the CAL.
The main components of the Eco-Tec System are:
(a) The gas blower circulates gas round the BGPur circuit and the condense pot back to the discharge and recirculation lines.
(b) The gas contactor is a cylindrical vessel in which the chemical reaction takes place between the H 2S in the gas and the chemical absorbent provided by Eco-Tec. This gas contactor includes an agitator which creates the necessary turbulence to mix thoroughly the biogas with the chemical absorbent. The gas contactor has an internal overflow pipe through which the liquor is continuously discharging to the air contactor.
(c) The gas contactor also has a water-fill line by means of which the total quantity of liquid in the System is maintained.
(d) The liquid overflowing from the gas contactor vessel passes via a liquid pipe to the air contactor, a second cylindrical vessel, in which air is blown through the liquid. The oxygen in the air reacts with the liquor. In the reaction, elemental sulphur is created and precipitated as fine sulphur crystals.
(e) There is an air blower which forces air down a central tube in the air contactor vessel to the bottom of the vessel. Like the gas contactor the air contactor is equipped with an agitator to create the necessary turbulence to mix thoroughly the air and the liquor. The air bubbles rise to the surface and, on the way, collect crystals of sulphur which attach themselves to the bubbles. This creates a froth on the surface which should flow over an internal weir to a discharge at the bottom right side of the vessel.
(f) To the right of the air contactor is a stand-pipe. This is a narrow vertical cylinder with, at low level, an inlet and outlet and level measuring instrumentation by means of which the make-up of water to the gas contactor is controlled.
(g) To the right of the stand-pipe is a slurry pump which pumps the wet slurry of sulphur crystals to a filter press to be dried.
(h) The filter press shown at the bottom right-hand corner of the diagram is a series of rectangular filter cloths supported within very strong steel frames with the whole assembly on a steel support structure. As its name suggests, the means of drying the slurry is to squeeze it. This is done by a combination of mechanical pressure and compressed air. Once the filter press is full, the frame must be opened up and manually emptied.
Mr Gamble's evidence (which was not challenged in this respect) was that the normal method of operation is as follows:
(a) The biogas is drawn from the CAL by the McCain fan which is controlled so as to maintain a constant gas pressure in the CAL.
(b) The McCain biogas pipe-line is connected directly via the McCain fan to the factory boilers or to the flare, depending on the demand for the gas.
(c) The intention was to deliver the biogas to the new CHP engine when the BgPur scrubbing system became operational.
(d) There are two connections into the McCain biogas pipe-line and between them an isolating valve which enable the biogas to be drawn out of the McCain pipe-line to be treated with the BgPur scrubbing system and then returned to the pipe-line.
(e) The biogas is injected into and mixed with the liquor in the gas contactor vessel. There is a chemical reaction in which the H 2S is absorbed into the liquor.
(f) The liquor flows under gravity into the air contactor vessel. Air is injected into and mixed with the liquor. The air causes a chemical reaction in which sulphur particles are precipitated and the liquor is restored to its original composition.
(g) The liquor is re-circulated back from the bottom of the air contactor vessel into the gas contactor vessel. There is thus a continuous circulation of liquor from the gas contactor vessel to the air contactor vessel and back.
(h) In the air contactor vessel, sulphur particles attach themselves to the air bubbles rising in the liquor and a froth is formed at the surface of the liquor.
(i) The froth should flow over a weir within the air contactor vessel and from there via the stand pipe to the filter press. The filtrate from the filter press is re-circulated back to the air contactor vessel.
(j) When the filter press is full, the flow of liquor to the press is stopped. The press is subject to compressed air to dry further the solids which are then manually discharged. The filter press is then closed and the filter process re-started.
(k) As there is a constant loss of liquor in the solids removed from the filter press there has to be a continuous make-up of liquid. The lost liquid is replaced by softened water. The flow rate of the water is controlled by the level sensor in the stand pipe. In effect, the flow of water into the gas contactor vessel controls the level of the liquor in the stand-pipe.
(l) The liquor in the System is diluted by the softened water and the BGA solution and caustic solution are dosed to maintain the pH and active chemical concentration at the required levels for effective operation.
The Contract
I consider later elements of the pre-contract negotiations because the claim in part is based upon alleged representations and/or collateral contract. However whilst I deal with those allegations out of deference to the arguments of Counsel, in my judgement this dispute can be decided on the provisions of the Contract. Hence I first set out the provisions of the Contract.
It is now common ground that the contract documents referable to the supply and purchase of the System are the Equipment Purchase Agreement (" EPA") dated 26 November 2007 [ CB/Tab 6 (with a signed copy at TB1/58) and the Performance Specification at CB/Tab5].
The following provisions of the EPA are relevant.
At CB/65 the total price is fixed at £263,531.35 with a delivery date of 20/03/08 (to a UK port).
At CB/66 in Schedule A to the EPA it is provided that,
"McCain is entering into this Agreement on the basis of commitments, representations and warranties made to McCain by Seller, including but not limited to the...
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