Outotec (USA) Inc. v MW High Tech Projects UK Ltd
Jurisdiction | England & Wales |
Judge | Lord Justice Coulson,Lord Justice Arnold,Lord Justice Stuart-Smith |
Judgment Date | 24 July 2024 |
Neutral Citation | [2024] EWCA Civ 844 |
Court | Court of Appeal (Civil Division) |
Docket Number | Case No: CA-2023-002568 |
[2024] EWCA Civ 844
Lord Justice Coulson
Lord Justice Arnold
and
Lord Justice Stuart-Smith
Case No: CA-2023-002568
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
BUSINESS AND PROPERTY COURTS
TECHNOLOGY AND CONSTRUCTION COURT (KB)
His Honour Judge Stephen Davies (sitting as a High Court Judge)
Royal Courts of Justice
Strand, London, WC2A 2LL
Adrian Williamson KC, Paul Bury and John Steel (instructed by Walker Morris LLP) for the Appellants
Simon Hale (instructed by Holman Fenwick Willan LLP) for the Respondent
Hearing date: 26 June 2024
Approved Judgment
This judgment was handed down remotely at 11.00am on 24 July 2024 by circulation to the parties or their representatives by e-mail and by release to the National Archives.
Introduction
The issue that arises on this appeal is whether the judge below erred in deciding that, although the misrepresentation claims made in these proceedings against the first appellant (“Outotec”) could and should have been raised in the Main Action, these proceedings should not be struck out as an abuse of process in accordance with the principles outlined in Johnson v Gore Wood and Co. (a firm) [2002] 2 AC 1 and subsequent cases. The appeal raises, in unusual circumstances, a particular issue as to whether a breach of the guidelines set out in Aldi Stores Ltd v WSP Group PLC [2007] EWCA Civ 1260; [2008] 1 WLR 748 (“the Aldi guidelines”) can be sufficient, or whether it is also necessary to demonstrate vexation/oppression/harassment sufficient to justify striking out the claim as an abuse of process. If the latter is necessary, can Outotec show it here?
I set out the factual background and the issues before the judge in Sections 2 and 3 respectively. I identify the more limited scope of this appeal in Section 4. Then, having identified the parts of the judgement below that are relevant to the issue on appeal (Section 5), the applicable principles of law (Section 6), and an outline of the parties' submissions (Section 7), I approach the central issue in this way. In Section 8, I summarise the principal findings made by the judge against MW, the respondent. Thereafter, I go on in Section 9 to analyse whether the judge was right not to strike out the misrepresentation claims against Outotec. I am very grateful to counsel on both sides for their excellent written and oral submissions.
The Factual Background
Pursuant to a main contract dated 20 November 2015, Energy Works (Hull) Limited (“EWH”) engaged MW as a main contractor to build a new ‘waste to energy’ power plant in Hull.
Pursuant to a sub-contract also dated 20 November 2015, MW engaged Outotec to supply some of the relevant plant, in particular a gasifier, and to carry out other related works. The second appellant, (“Metso”) provided a parent company guarantee (“PCG”) to MW on behalf of Outotec. The original PCG was provided in 2017 and a second PCG, in substantially the same terms, was provided in 2022.
The main contract works were significantly delayed. On 4 March 2019, EWH terminated the main contract because, on their case, MW's liability for liquidated damages had reached the contractual cap, thus entitling them to terminate. That termination brought about an automatic assignment by MW to EWH of the benefit of the sub-contract with Outotec.
On 26 July 2019, EWH started proceedings against MW, claiming damages in respect of the delays and the consequences of the termination. They also advanced a claim for defects in MW's work. The total claim was around £164.5m. MW defended the claim, primarily on the basis that they were entitled to an extension of time, which would in turn have meant that EWH were not entitled to terminate the main contract. MW also brought their own Part 20 proceedings against Outotec. Outotec defended the Part 20 claim and counterclaimed for monies outstanding under the subcontract. I shall refer to all those claims and cross-claims, including the Part 20 claims and cross-claims, as “the Main Action”.
The Main Action was carefully case managed in the TCC and proceeded to a five week trial before Pepperall J in the summer of 2021. Thereafter there were detailed oral and written closing submissions. The first judgment in the Main Action was handed down on 20 December 2022 ( [2022] EWHC 3275 (TCC)). That was primarily concerned with MW's liability to EWH. One of the reasons for the lengthy period between trial and judgment was, as Pepperall J pointed out at [8] – [10] of his judgment, that the evidence at trial had often just scratched the surface of the many issues, and he had been left to do a good deal of ‘unpacking’ on his own.
Pepperall J's findings in his first judgment were largely adverse to MW. In consequence, MW immediately settled with EWH by making a payment of £75 million.
MW's Part 20 claim alleged that Outotec were liable for any liquidated damages due to MW and for 15 items of defective work. The delay case was abandoned shortly before trial, so the focus was on the 15 defects. The Part 20 claim was eventually advanced by way of contribution and abatement only. It could not be pursued as a claim for damages for breach of the sub-contract, because O'Farrell J had concluded, in a judgment at [2020] EWHC 2537 (TCC), that such claims were not open to MW following the assignment of the sub-contract to EWH.
The Part 20 claims were the subject of Pepperall J's second judgment, handed down on 12 May 2023 ( [2023] EWHC 1142 (TCC)). Again, the findings were broadly adverse to MW. What Pepperall J found due to MW by way of abatement was far less than the sums he had found due to Outotec under the sub-contract in his first judgment. The overall result was that Outotec were entitled to judgment in the sum of around £9.3m, together with interest of around £2.2m. Outotec were also awarded its costs of the Main Action on an indemnity basis, in consequence of MW's failure to beat Outotec's offer under CPR Part 36.
On 21 December 2022, the day after Pepperall J had handed down the first part of his judgment in the Main Action, MW commenced the current proceedings against Outotec and (by reference to the PCG) against Metso. In these proceedings, MW allege that it was induced to enter into the Hull sub-contract with Outotec as a result of fraudulent or alternatively negligent misrepresentation. The allegations are summarised at paragraphs 7 of the Particulars of Claim as follows:
“7. In summary, M+W's case is that:
7.1. Between 2011 and February 2016 Outotec knowingly or recklessly, alternatively negligently, made false representations to M+W that it had experience in the design, supply, and manufacture of process plant and technology suitable for the staged gasification of RDF as required for the Hull Project. Further, Outotec represented that it had pilot plants which: 7.1.1. had been used to test, and thereby verify, process plant and technology equivalent to the Subcontract Plant and which was already proven to be successful in the processing of RDF equivalent to that anticipated to be processed at the Hull Project, and/or
7.1.2. could and would be used to prove, and verify, that the relevant process plant and technology was proven to be successful in the processing of RDF equivalent to that anticipated at the Hull Project prior to the delivery of the Subcontract Plant.
7.2. As Outotec intended, M+W acted in reliance on those representations and was induced to enter into the Subcontract.
7.3. Contrary to its representations, Outotec:
7.3.1. did not have any experience or track record of successfully designing or manufacturing or procuring plant or equipment capable of the successful staged gasification of RDF;
7.3.2. did not have multiple pilot plants that it either had used or intended to use to verify that its process plant was proven, and that its technology was viable for the gasification of RDF;
7.3.3. did not have a pilot plant at which it could test plant and equipment equivalent to the Subcontract Plant to be supplied for the Hull Project;
7.3.4. did not have any intention of establishing that the process plant, and technology it intended to supply for the Hull Project would work and was ‘proven’ before delivery of the Subcontract Plant for the Hull Project;
7.3.5. did not have sufficiently experienced personnel to provide advisory and supervisory services for the construction, installation, commissioning and testing of the Subcontract Plant in accordance with Good Industry Practice (as defined by Clause 1.1 of the Subcontract) and/or good engineering practice and/or as otherwise required by the Subcontract.”
Paragraph 59 of the Particulars of Claim makes plain that MW allege that “each and every representation” on which they rely was made “fraudulently, in that the individual making or adopting the particular representation on behalf of Outotec knew it was false, or did not believe it to be true, or was reckless, not caring whether it was true of false.” The misrepresentations themselves are put into five different categories (Categories A-E). They are then scheduled out at length in Schedule 1. They are all said to have been made during the pre-sub-contract negotiations between MW and Outotec, between 2011 and 2015, before work ever started on site.
The damages claimed in the current proceedings are put at no less then £166.9m. This is calculated by identifying the gross costs incurred by MW on the whole Hull project, less the total monies that they received. Of course, the largest single item that makes up that balance is the sum of £75m that MW paid to EWH, together with the costs of the Main Action. Thus MW are now seeking to pass on to...
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