Doosan Power Systems Ltd v Babcock International Group Plc & Anor

The name “Babcock” has a long and proud history in the world of engineering and power generation. In 1867, the Babcock & Wilcox Company was established in the USA. In 1881, it set up a British subsidiary, Babcock & Wilcox Limited, which was floated on the London Stock Exchange in 1891. At the time of the flotation, the parent company granted Babcock & Wilcox Limited the right to supply steam generation equipment (such as boilers) and associated products under the Babcock name throughout the world, with the exception of the USA and Cuba. This then remained the core business of Babcock & Wilcox Limited, although it diversified into various other areas in the late 1960s and early 1970s.

In 1978, the core business of Babcock & Wilcox Limited was transferred into an existing subsidiary, Babcock & Wilcox (Operations) Limited (“B & W Operations”), which was later re-named Babcock Power Limited in 1979 and Babcock Energy Limited (“BEL”) in 1987. Following various subsequent changes of name, BEL has become Doosan Power Systems Limited, the claimant in the present action.

In 1979, following the transfer of its core business to B & W Operations, Babcock & Wilcox Limited was re-named Babcock International Limited (“BIL”). BIL was then floated on the London Stock Exchange in 1982, becoming Babcock International Plc. In 1987, BIL merged with the engineering company FKI Electricals Plc to form FKI Babcock Plc. However, the merger was short-lived and in February 1989 FKI Babcock Plc de-merged to form two new companies, Babcock International Group Plc (“BIG”) and FKI Plc. BIL then re-registered as a private limited company in 1990, resuming use of its previous name of Babcock International Limited.

BIG is the first defendant in the present action, and BIL is the second defendant. For most purposes it is unnecessary to distinguish between them. Both are holding companies, and the trading activities of the group are carried on by subsidiaries. References in this judgment to BIG include, where appropriate, other companies in the group.

The business of BIG was organised into five divisions, one of which (the Energy Division) was carried on through BEL together with its various subsidiaries and business units. The other four divisions were the Process Division, the Facilities Management Division, the Materials Handling Division and the Africa Division.

In the early 1990s the Energy Division had been making heavy losses, and in August 1995 BIG sold a 75 per cent stake in the Energy Division to a Japanese company, Mitsui Engineering & Shipbuilding Co Limited (“Mitsui”). The sale was effected by a Sale and Purchase Agreement dated 30 August 1995 (“the SPA”) to which both BIL and Mitsui were parties as guarantors (the actual vendor and purchaser companies were other companies in the respective groups). It took the form of an agreement for the sale of 75 per cent of the issued share capital of BEL (plus one further such share) for a combined consideration of £11 million in cash (prior to adjustment) and £45 million paid to acquire newly issued deferred shares, making a total of approximately £56 million.

Nearly a month later, on 28 September 1995, and pursuant to the terms of the SPA, BIL entered into a Trade Mark Licence Agreement with BEL (“the TMLA”) granting BEL an irrevocable, exclusive and royalty-free licence, unlimited in time, to use the Trade Marks (as defined) throughout the world, with the exception of Africa, on or in relation to the Products and/or Services (again as respectively defined).

The Trade Marks were defined in the TMLA as, broadly, all rights owned by BIL “in the name and trade mark BABCOCK”, in so far as such rights related to the Products and/or Services. The Products and the Services were in turn defined as the products manufactured or sold, and the services provided, “in the Business from time to time”; while “the Business” was defined as the business carried on at the Commencement Date (which was 28 September 1995) by BEL and its subsidiaries “and any business of a substantially similar nature”.

It is around these simple provisions of the TMLA that the present dispute revolves. The history of the dispute is, very briefly, as follows.

For some years after the sale of the Energy Division, no problems arose. The Energy Division, now owned by Mitsui, continued to carry on its core business in the field of conventional power generation using the Babcock name. The Energy Division also carried on certain activities in relation to the nuclear power industry, as it had before 1995, and in relation to these activities too it used the Babcock name. Meanwhile, BIG also continued to use the Babcock name, but of course only in relation to the businesses of the four Divisions which it had retained. For the most part, these businesses did not overlap with the business of the Energy Division, and increasingly BIG diversified into other areas such as infrastructure in the rail industry. Nevertheless, BIG also had at least some nuclear business of its own, mainly if not exclusively in the military nuclear sector. For example, BIG continued to service and refit the UK nuclear submarine fleet at Rosyth and Faslane in Scotland.

In 1997, BIG sold off its Process Division to AMEC Plc. Historically, the Process Division had provided a good deal of BIG’s nuclear business, including major work in connection with the design of the THORP reprocessing plant at Sellafield during the 1980s and early 1990s. More recently, however, the nuclear business of the Process Division had declined, although it had never disappeared.

By the end of the 1990s prospects were starting to look up again in the civil nuclear industry, including the increasingly important field of decommissioning and decontamination of old plant. In 1999, BIL decided to enter into a joint venture with a Swedish company called Studsvik AB. The aim of the joint venture was to exploit the burgeoning market for civil nuclear decommissioning and decontamination, with the avowed object of gaining a position second only to BNFL in that market. The name originally chosen for the joint venture company was Studsvik Babcock Nuclear Service Limited. BEL (which by now was called Mitsui Babcock Energy Limited) objected to the use of the Babcock name in this context as being an infringement of the exclusive licence in the TMLA. After an exchange of correspondence between the parties’ solicitors, BIG backed down and agreed to substitute “Rosyth” for “Babcock” in the name of the joint venture company.

By 2006, if not before, BIG had begun to embark on a policy of acquisitions with the aim of creating “a leading civil nuclear business”, as BIG described it in a presentation at the Numis Aerospace & Defence Conference in 2008. This programme of acquisitions notably included the purchase of Alstec in May 2006, followed by International Nuclear Solutions Plc in September 2007, Strachan & Henshaw in 2008, UKAEA Limited (the commercial arm of the Atomic Energy Authority) in October 2009 and the VT Group in July 2010. Following these and other acquisitions, BIG now owns and operates what is by any standards a very substantial civil nuclear business, as well as its historic military nuclear business.

Until as late as 2009, BIG appears to have continued to avoid use of the Babcock name in relation to its civil nuclear business, presumably taking the view that it was prohibited from doing so by the TMLA, or at least that it would not be commercially worthwhile to provoke a dispute on the subject with BEL. BIG had, however, in 2007 re-branded its new civil nuclear business as “BNS Nuclear Services”, where the “B” might be understood as an indirect reference to the Babcock name, and it retained the description “BNS Services” when a further major re-branding exercise took place in 2009. In 2010, however, BIG appears to have changed its policy. From then onwards it openly began to use the Babcock name, in various ways, to denote its civil nuclear business, and (to take just one example) BIG now uses its standard “plectrum” logo with the name Babcock inscribed within it across the whole range of its products and services, whereas previously it had used only a modified version of the logo, without the Babcock name, in connection with its civil nuclear business.

Meanwhile, in 2006 Mitsui had sold Mitsui Babcock Energy Limited to Doosan Heavy Industries & Construction, a subsidiary company of the Doosan Group of South Korea. Pursuant to that sale, the company was renamed Doosan Babcock Energy Limited, and following a further change of name it has become Doosan Power Systems Limited, the claimant.

Faced with the change of policy in 2010, the claimant repeated the objections which it had previously made to the use by BIG of the Babcock name in relation to its civil nuclear business. A letter before action was sent on 12 July 2010, and the present proceedings were eventually begun on 9 June 2011. The principal relief sought in the amended particulars of claim, in the form in which they stood when the trial before me started on 29 January 2013, was an injunction to restrain the defendants (BIG and BIL) from using the Trade Marks (as defined in the TMLA) on or in relation to the products manufactured or sold, and/or the services provided, in the business carried on by BEL as at 28 September 1995 and/or any business of a substantially similar nature. A further injunction was sought to restrain them from “passing off the experience and expertise of BIG in relation to the provision of products and services in the civil nuclear power industry as being the experience and expertise of the Claimants”.

In their amended defence and counterclaim served on 8 August 2011, the defendants denied that they had breached the TMLA. The general nature of the defendants’ case on liability was pleaded as follows:

“7.

As of 28 September 1995, BEL carried on the manufacture, sale and supply of steam generating heat exchange tube bundles, pressure vessels and related pipework, together with services such as the maintenance and replacement of those products (“the BEL Business”). Save for the sale of the BEL Business all other aspects of the various businesses comprising BIG remained owned and controlled by BIG and its various related companies.

8.

The technology, products and services supplied pursuant to the BEL Business were suitable for and were supplied to various business and market sectors, including power stations. The sale of BEL in the 1995 Split was not a sale of the civil nuclear business of BIG or any other market sector. Such a distinction between market sectors, namely a civil nuclear business and other businesses, did not exist in BIG at that or any time, does not reflect the business conducted by BEL as at September 1995 and is not referred to in the [SPA] or the TMLA;

…

9.

The Defendants have not manufactured, sold or supplied technology, products or services comprising the BEL Business since the 1995 Split. BIG, and the companies comprising the BIG Group, provide engineering support services and are active in the nuclear sector where the key activities are nuclear site management and operations as nuclear site licence holder, the outage support for operational nuclear reactor plant, decommissioning activities and the provision of radioactive waste management solutions and safety case analysis.”

The defendants thus seek to characterise the business actually carried on by BEL in September 1995 as, in essence, the manufacture, sale and supply of boilers and related pipework, together with the provision of services relating to those products. Those products and services were supplied to various business and market sectors, but no part of BEL’s 1995 business was specifically civil nuclear business, or defined by reference to any specific market sector.

In their counterclaim, the defendants claimed to be entitled to either or both of the following declarations: first, a declaration that the exclusive licence granted to BEL pursuant to the TMLA “is confined to use of the name “Babcock” in relation only to the BEL Business”; secondly, a declaration that the defendants “are not prevented from carrying on business under or by reference to the name “Babcock” in relation to the civil nuclear power industry”. As originally formulated, the second of these declarations appeared to imply that the defendants are entitled to use the name “Babcock” in relation to the civil nuclear power industry, even where the activities in question fall within the scope of the BEL Business as defined in paragraph 7 of the defence. In the course of the trial, however, counsel for the defendants made it clear that they do not seek to go that far, and the second declaration should be qualified by the addition of the words “except in relation to the BEL Business” at the end.

In its reply served on 1 September 2011, the claimant took issue with the defendants’ limited definition of the BEL Business. It alleged that various products supplied by BEL were nuclear specific, and that in 1995 BEL’s business of steam generation in nuclear power plant was significantly different from that in conventional (e.g. coal-fired) power plant. BEL’s nuclear-related expertise was said to be of long standing, with specialist staff available for deployment on nuclear-related work when the requirement arises. Although BEL’s business had always included non-nuclear projects, BEL at all material times “maintained a civil nuclear capability and business” (paragraph 15). Furthermore, nuclear projects are inherently of a long term nature, and BEL’s civil nuclear business was accordingly a long term one. The fact that in 1995 only a small amount of products and services was being supplied to the nuclear industry was irrelevant to the nature of the business conducted by BEL at that time, given the long-term nature of the business and the short-term downturn in it caused by government policy (in the UK and most of the rest of the world) at that time (paragraph 24).

It will already be apparent from this brief introduction that two matters lie at the heart of this case. One is the proper construction of the exclusive licence granted to BEL in the TMLA. The other is a factual inquiry: what was the business actually carried on by BEL at the time of the 1995 split, and to what extent (if at all) was it nuclear business? I propose to approach these questions in the following way. First, I will set out the relevant provisions of the SPA and the TMLA, and make some preliminary observations about the questions of construction which arise. I will then introduce the witnesses of fact who gave evidence at the trial (perhaps surprisingly, no expert evidence was adduced on either side). I will then describe the development of the businesses of BEL and BIG, concentrating in particular on nuclear-related business, and on any material which may objectively help to throw light on the interpretation of the TMLA and may therefore be admissible as an aid to its construction. I will then take stock of the position.

I have already described the general nature of the SPA. It was entered into on 30 August 1995 between Babcock Energy Management Limited, the immediate parent company of BEL, as the Seller; Mesco (UK) Limited as the Buyer; BIG as the Seller’s Guarantor; and Mitsui as the Buyer’s Guarantor. The date fixed for completion of the sale was 29 September 1995. Clause 13 was headed “Use of Intellectual Property Rights”, and clause 13.2 provided as follows:

“The Seller and the Seller’s Guarantor hereby grants and agrees to procure at or after Completion forthwith upon the request of the Buyer that each other member of the Seller’s Retained Group shall grant to the Company for nominal consideration, a non-exclusive perpetual, irrevocable royalty-free licence to use and exploit worldwide the Shared Intellectual Property Rights in the business of the Group. For the avoidance of doubt, the licence of the Babcock trademarks and trade name included in the Shared Intellectual Property Rights shall be on the terms set out in the Trade Mark Licence.”

The Trade Mark Licence was defined to mean “the trade mark licence in the agreed form between [BIL] and [BEL]”, or in other words what became the TMLA. The wording of the final sentence of clause 13.2 made it clear that the terms of the TMLA were to prevail over the wording of the wider grant of Shared Intellectual Property Rights contained in the first part of clause 13.2, in the event of any inconsistency between them. Thus there is no conflict between the wider grant of a non-exclusive licence under clause 13.2 and the exclusive right to use the Babcock name and marks conferred by the TMLA.

The grant of rights to use the Babcock name was reinforced by non-compete covenants contained in clause 14 of the SPA. Under clause 14.1, the Seller and BIG undertook that for a period of 50 years after completion they would procure that each other member of the Retained Group (other than Babcock Africa, in relation to which special provision was made in the Africa Licence):

“shall not, directly or indirectly use the name or the trade mark Babcock, or any confusingly similar name or trade mark, to compete, directly or indirectly, with a business of any Group Company [i.e. BEL, its subsidiaries and associated undertakings] as operated at the date of this Agreement, whether alone or jointly with, through or as manager, adviser, consultant or agent for another person.”

Clause 14.2 then provided as follows:

“For 3 years starting on the date of this Agreement, the Seller shall not, and shall procure that each member of the Seller’s Retained Group (other, in the case of the restriction in clause 14.2.1 below, than any holding company of the Seller’s Guarantor for the time being) shall not, directly or indirectly:

14.2.1

operate, or be engaged, concerned or interested in, or assist, a business which competes, directly or indirectly, with a business of a Group Company as operated at the date of this Agreement, whether alone or jointly with, through or as manager, adviser, consultant or agent for another person; or

14.2.2

solicit or induce any member of the senior management of any Group Company as at the date of this Agreement to leave employment with such company.”

This obligation, it should be noted, protected any business operated by the Energy Division at the date of the sale, whether or not such business was carried on under the Babcock name. As before, there were certain exceptions, including one relating to Babcock Africa.

For their part, the Buyer and Mitsui entered into a corresponding obligation to protect the Retained Group in clause 15.1:

“The Buyer shall not, and the Buyer’s Guarantor shall procure that each member of the Group shall not, directly or indirectly use for a period of 50 years after Completion, the name or trade mark Babcock, or any confusingly similar name or trade mark to compete, directly or indirectly, with a business of any member of the Seller’s Retained Group as operated at the date of this Agreement, whether alone or jointly with, through or as manager, adviser, consultant or agent for another person.”

It is important to note that, with the exception of the three year covenant in clause 14.2, these mutual obligations did not prevent either BEL or BIG from competing with each other in the same areas of business. All that they were prevented from doing was using the Babcock name or trade marks to compete with the businesses which had been sold off, or retained, as the case may be. Thus the right to use the Babcock name and marks was split between the businesses sold off and those retained.

I now turn to the TMLA. I have already summarised its main relevant provisions. It was made on 28 September 1995 between BIL (“the Licensor”) and BEL (“the Licensee”). It recited that BIL was the legal and beneficial owner of the Trade Marks (as defined), and that pursuant to the SPA BIL had agreed to grant a licence to permit BEL to continue to use the Trade Marks on the terms and conditions set out below.

“Trade Marks” was defined in clause 1.1 as meaning (unless the context otherwise required):

“… any and all rights now or hereafter owned by [BIL] in the name and trade mark BABCOCK and all associated device marks and logos, all registrations and applications for the same in any country insofar as the same are in respect of the Products and/or Services …”

“Products” and “Services” were defined respectively as meaning “the products manufactured or sold in the Business from time to time, and “the services provided in the Business from time to time”. “Business” meant:

“… the business carried on as at the Commencement Date [i.e. 28 September 1995] by [BEL] and its subsidiaries and any business of a substantially similar nature.”

The “Territory” was defined as meaning the world other than the Excluded Territory and the Non-Exclusive Territory. For present purposes nothing turns on the latter definitions, which between them embraced the whole of sub-Saharan Africa.

Clause 2 was headed “Grant”, and provides as follows:

“2.1

[BIL] hereby grants to [BEL]:-

2.1.1

an irrevocable exclusive royalty free licence unlimited in time to use the Trade Marks in the Territory on or in relation to the Products and/or Services. The exclusivity of this licence is subject to the licences and permissions granted prior to the date hereof by [BIL] to third parties with a common origin to use the Trade Marks; and

2.1.2

an irrevocable non-exclusive royalty free licence unlimited in time to use the Trade Marks in the Non-Exclusive Territory on or in relation to the Products and/or Services.

2.2

The Licence granted in Clause 2.1 shall include the right to subcontract the manufacture of the Products and the provision of the Services and the right to sub-licence any party without the consent of [BIL].

2.3

For the avoidance of doubt [BEL] shall be entitled to use the word BABCOCK as part of its corporate or trading name or that of any of its Affiliates in respect of the Business.

2.4

The rights conferred hereby upon [BEL] in the Territory shall be automatically extended to encompass the Excluded Territory and the Non-Exclusive Territory also, upon expiry or termination of the Africa Licence or upon the acquisition by [BEL] of a majority shareholding in Babcock Africa or of substantially the whole of the Babcock Africa Energy Business whichever is the earliest.”

If the definitions of “Products”, “Services” and “Business” are read into the first limb of paragraph 2.1.1, it may be reformulated as the grant of:

“an irrevocable exclusive royalty free licence unlimited in time to use the Trade Marks in the Territory on or in relation to the products manufactured or sold from time to time, and/or the services provided from time to time, in the business carried on as at 28 September 1995 by BEL and its subsidiaries and any business of a substantially similar nature.”

I would make the following preliminary observations about the way in which the parties chose to frame the grant of the exclusive licence in clause 2.1.1.

First, the parties did not seek to define the Business, either generally or by reference to any particular sector or sectors. Nor did they seek to define it by reference to the clients for particular products or services. Instead, the scope of the grant was framed by reference to the business actually carried on as at 28 September 1995 by BEL and its subsidiaries.

Secondly, no attempt was made to define the content of that business by incorporating, or appending, a list of its component parts. The nature and content of the business must have been well known to both parties at the time, since BIG was in effect divesting itself of one of its five trading Divisions and granting the licence to a company which had until then been its own subsidiary. In the absence of any such definition, the parties must have contemplated that in the event of a future dispute there might have to be a factual inquiry about the nature and characterisation of the business carried on by BEL and its subsidiaries on the relevant date, with the question to be determined in default of agreement by an independent expert pursuant to clause 9 of the TMLA. In the event, neither side has sought to take advantage of this provision for expert determination; but in 1995 the parties may well have contemplated that this would, in all normal circumstances, provide a relatively quick and simple procedure for resolving any disputes about the nature of BEL’s business.

Thirdly, the concept of a business carried on at a particular date is in my judgment one which invites consideration of the question at a reasonable level of generality and within a reasonable time frame, rather than by reference to a “snapshot” taken of the particular products and/or services which BEL and its subsidiaries happened to be manufacturing, selling or providing on the day in question. So, for example, if BEL held itself out as carrying on business in a particular field, and if it had a record of business activity in that field, it would probably be right to regard that field as still forming part of BEL’s business on 28 September 1995 even if it had no current orders on its books. Similarly, part of a business may be in abeyance, perhaps due to a downturn in the relevant market, but it would normally be wrong to regard it as having been abandoned if the company still has the intention and resources to continue its operations in that area when market conditions improve.

Fourthly, the need to take a reasonably long term view of the business of BEL and its subsidiaries is in my view reinforced by the words “from time to time” in the definitions of “Products” and “Services”, while the need to allow for evolution and development of the business is catered for by the words “and any business of a substantially similar nature” in the definition of “Business”. Given that the licence was unlimited in point of time, and extended to the whole world apart from sub-Saharan Africa, it was clearly appropriate to allow a reasonable degree of latitude in this respect. Again, no attempt was made to define substantial similarity, but the parties must in my view have intended it to be interpreted in a commercially sensible manner having regard to the nature and salient features of the business concerned.

Finally, it should be noted that the licence extends to the whole of the business carried on by BEL and its subsidiaries. It is not confined to the core business, or to parts of the business which contribute more than a specified percentage of turnover. Subject to disregarding any parts of the overall business which may fairly be regarded as insignificant, or as too insubstantial to qualify as part of an identifiable business at all, I can see no good reason, as a matter of linguistic analysis, to exclude from the scope of the grant any part of the business of the Energy Division on 28 September 1995, however small it may have been in comparison with the whole. Unless, therefore, BIG can point to some compelling reason for implying such a limitation, or to some other contextual reason for construing “Business” in a restricted way, it is not enough for BIG to rely on the undisputed fact that the core business of the Energy Division has at all material times been in the field of conventional (i.e. non-nuclear) power generation.

The claimant’s witnesses

Three witnesses gave evidence on behalf of the claimant: Mr Ceri Green, Mr Danny McBride and Mr Paul McManus.

The claimant’s principal witness was Mr Green. He made two lengthy statements before the trial, and a third one in the course of the trial. He is now largely retired, and has spent his entire working life as an employee of the claimant since he graduated in chemical engineering from Imperial College, London in 1972. In the course of his career he has acquired extensive experience of the nuclear and conventional power generation industry, and he has worked at a number of nuclear power stations including Dounreay, Hartlepool, Heysham I, Dungeness A, Torness, Dungeness B, Sizewell B and the “THORP” nuclear reprocessing plant at Sellafield. His posts have included that of assistant commissioning engineer at Dounreay, assistant section engineer at Hartlepool and section/resident engineer at Heysham I. He also has experience in the project management of large scale construction works, including as site manager at Sizewell B where he was responsible for a construction contract worth over £100 million.

Between 1995 and 2005, Mr Green moved out of the nuclear operations of the Energy Division and spent ten years as its director of overseas services. In 2005 a new nuclear business stream was set up, and he was appointed nuclear business director of that business stream until 2010, when he was appointed vice president of European business development until March 2011. The only work which Mr Green now undertakes is as a consultant in relation to the Babcock mark. He is otherwise retired.

Mr Green’s written evidence was carefully prepared, and based on his extensive experience of the claimant’s business over a period of 35 years. He gave his evidence clearly and fairly, and I found him to be an entirely reliable witness.

Mr McBride is a chartered surveyor by background, who joined the claimant as chief quantity surveyor in 1985 and was subsequently appointed as a commercial director in 1992. He is still employed by the claimant in that capacity. His principal role has been to lead and manage the claimant’s commercial department at Renfrew in Scotland, with responsibilities which include reviewing commercial contracts, risk management, dispute resolution, and the development of commercial strategy. Like Mr Green, I found Mr McBride to be an entirely honest and reliable witness. He was only briefly cross-examined by Mr Bloch QC on behalf of the defendants, and his evidence was not challenged in any material respect.

Mr McManus is another employee of the claimant with formidably long experience, having worked for the Energy Division for substantially the whole of his career since the 1970s, following in the footsteps of his father who had worked for the Energy Division before him. The stated purpose of his evidence was to set out his experience of work done by the Energy Division in the civil energy sector, and specifically in both contaminated and non-contaminated areas of nuclear power stations. For a substantial part of his career he was based at Hartlepool nuclear power station, rising from the role of fitter to site manager, a position which he still holds today. As the title suggests, the site manager is at the top of the company’s on-site hierarchy.

Although Mr McManus has spent most of his working career at Hartlepool, there was a period of about six years between 1981 and 1986 when he worked for the Energy Division at a variety of other power stations, both conventional and nuclear. Most of his work during this period was at Berkeley nuclear power station, where he worked on what he describes as two or three significant contracts in replacing components in contaminated gas ducts.

Mr McManus’ evidence also contains a helpful description of the distinction between contaminated and non-contaminated areas of a nuclear power station, the former being contained within the so-called radiologically controlled area or “RCA”. In order to work within the RCA, it is necessary to be suitably trained, or “classified”. In paragraph 10 of his statement, Mr McManus explains that:

“Typically during the period 1986-1995, Babcock Energy Division employed a pool of around 1,500 to 2,500 hourly paid tradesmen and about 700 site staff across the totality of its conventional and nuclear site based work. The number engaged at any one time typically peaks in the summer months when power station outages take place. Of this total pool of tradesmen and staff I would estimate that about one third would have been engaged in nuclear related work. A proportion of those would have been required to work in RCAs. I believe that at this time, of the order of 10% of the workforce would have been classified to work in the contaminated parts of such controlled areas … there were 308 classified workers in 1995.”

Mr McManus further explains that his teams have previously worked, and still do work, on contaminated or potentially contaminated plant such as gas circulator machines, gas circulator linings of the reactors, carbon dioxide pre-cooler towers and reactor gas systems (paragraph 17 of his statement). Further, as long as Mr McManus has been at Hartlepool his staff have always worked in the cooling ponds (where radioactive fuel is cooled) and the Reactor Active Effluent Treatment Plant (RAETP), carrying out maintenance and repairs on the plant in those areas as well as installing new equipment. He estimates that over the course of a year about 50% of the work undertaken at Hartlepool by the Energy Division is in the RCA, and in particular during the outages of which there are four for re-fuelling purposes every year.

Mr McManus was not required to attend for cross-examination, so his evidence is in all respects unchallenged.

The defendants’ witnesses

The defendants rely upon the evidence of nine witnesses: Mr Alexander Marsh, Mr Frank Hart, Mr David Elvin, Mr Martin Austick, Mr Norman Harrison, Mr David Lewis, Sir John Parker, Mr Jonathan Liddle and Ms Beverley Grey. Of these witnesses, Mr Marsh, Mr Hart, Mr Austick, Mr Harrison, Mr Lewis and Ms Grey were cross-examined, although in the case of Ms Grey only very briefly. Mr Elvin was unfortunately unable to attend court to be cross-examined, having recently been diagnosed with a serious illness. The two remaining witnesses, Sir John Parker and Mr Liddle, were not required to attend court.

Mr Marsh is a marine engineer and naval architect by profession. He started his career in the shipbuilding industry, and by 1984 had become managing director of Swan Hunter Shipbuilders Ltd. In 1993 Swan Hunter went into receivership, and in 1994 Mr Marsh joined BIG as business development director of the Facilities Management Division (the FMD), based at the Rosyth Royal Dockyard. In that role, he led BIG’s efforts to acquire the Rosyth Royal Dockyard from the Ministry of Defence and this was successfully achieved in January 1997. His other key function as business development director was to obtain new business for the FMD, particularly in the civil sector. In 1997, Mr Marsh was promoted to become group business development director of BIG, and he remained in that post until 2006. He explains that, following the sales of the Energy Division in 1995 and the Process Division in 1997, BIG later also sold its rail care and materials handling businesses and the decision was taken to focus on support services. Building on the FMD as its support services core, BIG then extended its capability in this sector through a series of strategic acquisitions. Until 2004, these acquisitions were outside the civil nuclear field, but from 2006 onwards they included the major civil nuclear acquisitions which I have already mentioned in paragraph 13 above.

In 2006, Mr Marsh ceased his employment as BIG’s business development director. After holding various other posts, he is now semi-retired.

In general, I found Mr Marsh to be a careful, reliable witness, who gave his oral evidence in a straightforward and sensible way, avoiding speculation and recognising the limits of what he could recall 17 years after the sale of the Energy Division. There were times when I felt that Mr Marsh’s evidence was slightly partisan, or that he was too ready to rely on what he had been told by others where it would advance BIG’s case to do so; but these are only minor reservations, and I am sure that Mr Marsh was doing his best to help the court.

Mr Hart is now retired, having been a chartered mechanical engineer by profession. He joined Babcock & Wilcox Ltd (which later became BIL) on leaving school in 1956, was sponsored through university, and completed the graduate training scheme before joining the engineering design department of BIL. In 1963 he left BIL, and for the next ten years worked as a project engineer for Woodall-Duckham Ltd which carried on a worldwide business of process plant contracting. In 1973, the Woodall-Duckham business was acquired by BIL and the company was subsequently renamed Babcock Woodall-Duckham Ltd (“BWD”) and became part of what was then the Power and Process Division. Mr Hart then held a succession of senior posts in BWD as engineering director, technical director and director of marketing and sales, until in 1989 he was appointed chief executive of Babcock Contractors Ltd, the principal operating company of the Process Division. At this time, Mr Hart was also a board member of BEL which shared support services with the Process Division. Mr Hart explains that consideration was given to integrating the two Divisions, but after a close examination of possible synergies this was rejected and the two businesses continued to be marketed and operated separately. In 1990, Mr Hart left BIG to continue his career elsewhere.

Mr Hart gave his oral evidence clearly and confidently. I found him to be an entirely straightforward and reliable witness.

Mr Elvin is also an engineer by background. He started his Babcock career in 1968, when he joined the boiler-making business of the claimant (then B & W Operations). Between 1968 and 1989 he held various positions with the claimant in marketing and project management, including periods in Argentina and Hong Kong. In 1987, he took over responsibility for managing all of the claimant’s London-based projects, and in the following year he became general manager of BEL’s project department, with responsibility for all of the company’s project management activities in both London and Renfrew.

In 1989 Mr Elvin moved to the Process Division and was appointed director of contract operations at its principal operating company Babcock Contractors Ltd. He continued in that role until 1994, when he became director of services for the company (by now renamed Babcock King-Wilkinson Ltd). In that capacity he was particularly involved in the supply of labour and technical resources for the Process Division’s overseas projects. He retired in 1996.

As I have already explained, Mr Elvin was unfortunately too unwell to give oral evidence. I therefore need to bear in mind that the claimant has had no opportunity to test his evidence in cross-examination. That said, I see no reason to doubt that Mr Elvin’s evidence is substantially accurate in relation to matters of fact. I accept, however, that I need to exercise some care before relying on his evidence where it depends on inference or evaluation.

Mr Austick has a lifetime of experience in the nuclear industry. He is a chartered engineer by profession. He started his career in the nuclear industry as an engineering apprentice in 1969. After gaining early experience in the construction of advanced gas cooled reactor (“AGR”) plants at Hinckley B and Hunterston B power stations, he joined GEC in 1974 to work as a reactor systems construction engineer at Hatlepool. He remained at Hartlepool until 1983, by when he was site manager for GEC Reactor Equipment, responsible for the management of its activities on the site and a workforce of about 500 people. In 1983, he moved to GEC’s nuclear engineering headquarters in Leicestershire. He had various responsibilities, including involvement in GEC’s operations at Dounreay and Sellafield. In 1985, he moved to GEC’s manufacturing arm at Whetstone to gain experience of the manufacture of nuclear plant and equipment.

In about 1989, GEC and Alcatel merged to form GEC Alsthom, and in 1991 Mr Austick was appointed construction manager at GEC Alsthom with responsibility for the company’s site support activities at most of the UK’s nuclear installations. In particular, he was involved in the construction activities at Sizewell B between 1991 and 1995. In 1996, he became director of projects at GEC Alsthom, and in 1997 he became managing director of the nuclear business, which included all of GEC Alsthom’s nuclear operations, both civil and military. Following a flotation and subsequent management buy out, GEC Alsthom had by May 2000 become Alstec, of which Mr Austick was a management shareholder and operations director. The business operated in the nuclear, airports and defence markets, and Mr Austick was responsible for the business in all three sectors. It employed around 1,500 people with an annual turnover of about £100 million. Alstec continued to operate in these three areas until May 2006, when it was acquired by BIG. Following the purchase, Mr Austick stayed on as managing director of the Alstec business. He continued in this role until 2009, when he became chairman of the nuclear business. In May 2010, he retired from full time employment, taking up a non-executive directorship in the Support Services Division of BIG, a position which he still holds today. He also chairs the Civil Nuclear Assurance Board, which conducts regular reviews of the operations of BIG’s civil nuclear business to ensure compliance with various regulatory requirements.

In 2011, Mr Austick joined the EDF Energy Nuclear Generation Board as an independent non-executive member. This body is the current owner and operator of all seven of the UK’s operational AGR stations, and is the nuclear site licence holder for them. As part of his duties, Mr Austick visits these power stations on a routine basis, reviewing operational performance and licence and regulatory compliance. In this role, as in others during the course of his career, he has had many opportunities to become acquainted with the activities and personnel of BEL and BIG. He says that he has always enjoyed excellent personal relationships with employees of the claimant over a period of some 20 to 30 years.

Mr Austick gave his oral evidence in a measured and careful manner, which at times seemed to verge on defensiveness. I am satisfied, however, that this reflected his careful approach to giving evidence, and was not a sign that he had anything to hide. In general, I am sure he was doing his best to help the court. There are, however, some areas where his evidence needs to be treated with caution. One such area concerns the use of the word “nuclear” to describe a business or part of a business. There was a tendency on the part of Mr Austick, and indeed some of the other witnesses for the defendants, which Mr Mellor QC exposed in cross-examination, to use the word in a narrow sense when talking about the business of the claimant, but in a much broader sense when referring to anybody else or to the industry generally. The narrow sense would confine the word to description of business activities involving radioactive or contaminated materials. The wider sense, which I have already used several times in this judgment, encompasses all aspects of work connected with a nuclear plant, including for example its initial construction and work on areas outside the radiologically controlled area. I am satisfied that this is what people normally mean when they talk about civil nuclear business or the civil nuclear sector. Furthermore, I am satisfied that this is how those and similar expressions would have been understood within the industry at all material times. I therefore need to be on my guard against unnaturally limited uses of the terms “nuclear” by Mr Austick and other witnesses for the defendants, when applied by them to the business and operations of the claimant.

Another area where caution is needed relates to Mr Austick’s evidence about decommissioning, where again he seemed at times to adopt an unnaturally narrow meaning of the term when discussing the activities of BEL, but not those of anybody else. So, for example, in his second witness statement he said that, so far as he was aware, the claimant had no decommissioning capability at all in 1995. It was put to him, on the strength of Mr Green’s evidence, that this was not correct because BEL had removed and replaced contaminated gas ducts at Sizewell on various occasions. Mr Austick refused to accept this, on the ground that BEL had not “disposed of” the contaminated material. However, the evidence showed, as he accepted in cross-examination, that disposal of contaminated material could only be effected by the site licence holder. Thus Mr Austick appeared to be adopting a definition of decommissioning which would confine it to site licence holders; but again I am satisfied on the evidence that no such restriction would have been generally understood in the industry, nor would it have made any commercial sense, either in 1995 or subsequently.

Mr Harrison was the most senior employee of BIG called to give evidence. He has been director of strategic development at BIG since 2009, when UKAEA Limited and its subsidiaries were acquired by BIG. Mr Harrison had been chief executive of the UKAEA since February 2007, and he led its subsequent privatisation programme which involved the formation of UKAEA Limited. After the acquisition, he managed the integration of the businesses acquired with BIG.

Mr Harrison’s professional training was as a chemist. He first became involved in the UK nuclear industry in 1980, having before then worked for the Central Electricity Generating Board in various roles. Between 1980 and 1992, he was employed during the commissioning phases of the AGR reactors at Heysham I and II. In 1992, he moved to the AGR plant at Hartlepool, with responsibility for managing the day to day operation of the station. He then became the technical and safety manager at Hartlepool, before moving back to Heysham I in 1996 where he held the position of operations manager for about two years, before being promoted to station director with ultimate responsibility for the entire operation of the plant. In 2000, he moved to Sizewell B where he was also station director. Sizewell B was a pressurised water reactor, the only one built in the UK to date and the last nuclear power plant to have been commissioned in the UK in 1995.

Following the break-up of the CEGB and part-privatisation of the UK power generation industry in the 1990s, Sizewell B was allocated to the nuclear division of National Power, which later became Nuclear Electric Plc. Mr Harrison remained as station director at Sizewell B during this and subsequent changes of ownership until 2003, when he was approached by the UKAEA, which was then a non-departmental public body. He was then director at Dounreay from 2003 until 2006, when he was appointed as acting chief executive of the UKAEA, before become its chief executive in February 2007.

Apart from his position at BIG, Mr Harrison is also an industry expert on the Nuclear Liabilities Financing Assurance Board, the body appointed by the Government to oversee nuclear decommissioning and waste disposal funding arrangements. He is also a member of the Nuclear Research and Development Advisory Board, which advises the government on the UK’s nuclear research and development capability, and is the current president of the Nuclear Institute.

My comments on Mr Harrison’s evidence are similar to those which I have already made in relation to Mr Austick. In general, I am satisfied that he was a reliable and helpful witness, but he too was prone to adopt an unnaturally narrow definition of “nuclear” when discussing the business of BEL, and it became clear in cross-examination that his evidence on the development of the decommissioning market was mistaken in some important respects.

Mr Lewis is a chartered patent attorney and trade mark attorney, who first joined Babcock in 1956 as a technical assistant in the company’s patents department, working his way up to become manager of the department during the 1970s. He continued to work for the department on a full time basis until his retirement in 1996. Since then, he has been retained by BIG on a part-time basis as a consultant with responsibility for maintaining BIG’s worldwide trade mark portfolio and the provision of services relating to patent, design and copyright matters. He has also taken an interest in the history of the group, and examined material archived at the University of Glasgow.

Mr Lewis’ statement contains some helpful background material, but his account of the events leading up to the 1995 sale of the Energy Division, and of events since that date, amounts to little more than a partisan summary of some of the relevant documents. The partisan nature of the summary became clear in cross examination, when Mr Lewis readily admitted that he saw it as his function to support the defendants’ case and that he had applied a “filter” to the documents he quoted, citing the parts that he conceived would help the defendants’ case and ignoring anything that might point the other way. The unfortunate result of this is that Mr Lewis’ evidence adds nothing of value to the documents, and is at times positively misleading because it presents a view of them which is in every sense of the word partial. I bear in mind that Mr Lewis has been retired since 1996, but I nevertheless consider it regrettable that a trained lawyer should have so misunderstood the nature of his role as a witness of fact.

Ms Grey is the commercial director of BIG’s nuclear business, and has held that post since October 2009 when UKAEA Limited was acquired by BIG. She had joined the UKAEA in 2005, having previously worked in the defence sector after graduating as a company secretary in 1990. During her time at the UKAEA, she had been a commercial executive and then head of commercial when UKAEA Limited was launched as a separate entity in 2008. During these years the business all related to nuclear decommissioning work, and she was particularly concerned with its bidding, contractual and pricing aspects.

Ms Grey’s evidence is principally directed towards explaining the current developed state of the nuclear decommissioning market, and the categorisation in recent times of contracts into three tiers. Tier 1 contracts are awarded for the management and operation of the Nuclear Decommissioning Authority’s sites, while Tier 2 contracts are for major project delivery on such sites, and Tier 3 contracts are for consultancy and advisory services to Tier 1 and 2 contractors. As one would expect, the level of detail involved in tendering for Tier 1 or 2 contracts is very substantial indeed, and it is also necessary to comply with the requirements of EU public procurement law. Even Tier 3 contracts are typically tendered through the EU procurement procedure, although this is not essential for contracts worth less than £140,000.

A further theme of Ms Grey’s evidence is the sheer complexity of projects in the modern decommissioning market, and the use of “framework” agreements for the delivery of services and of integrated project teams in that market, as well as (increasingly) in areas other than decommissioning. She gives examples of some recent framework agreements which have involved the claimant and BIG working together in consortia, with each member doing the work for which it has the most appropriate skills and experience.

No challenge was made to the accuracy of Ms Grey’s evidence, but it needs to be borne in mind that it relates to the modern nuclear market, and that her first hand experience of the nuclear industry dates back only to 2005. She is therefore not qualified to give evidence about what the position was at the time of the sale of the Energy Division in 1995, nor (to be fair) did she purport to do so.

Sir John Parker was chairman of BIG at the time of the 1995 split, having joined BIG as chief executive officer and deputy chairman in 1993 before becoming chairman in 1994. He then remained at BIG until 2000. Since then he has held other senior business posts, and is currently chairman of Anglo American Plc.

In his short witness statement, Sir John explains that from BIG’s perspective the principal reason for the sale of BEL was that it had become “a significant drain on our resources and its profit margins were, at best, very thin”. In his view this was primarily due to the lack of any major heavy engineering contracts in the UK in the 1990s, for which BEL’s expertise in boilers, steam generators and related equipment were needed. From his discussions with his counterparts at Mitsui, he understood that the reason for their interest in acquiring BEL was to gain access to the technology and reputation of BEL for their boilers and related products for use in coal-fired power stations in the burgeoning Asian market, and notably in China.

In relation to BEL’s work in the civil nuclear sector, he says:

“I was aware that BEL had in the past designed and supplied products to nuclear power stations and that it continued to maintain those products, but the new build nuclear station programme had come to a close and therefore that part of the business was largely historical. Certainly I cannot recall Mitsui expressing any interest to me in any nuclear capabilities of BEL, other than the maintenance services they provided to the nuclear power stations on the products supplied by BEL or one of their direct competitors.”

Sir John was not cross-examined, and I do not of course question his recollection of events in 1995. However, his evidence about the intentions of Mitsui needs to be treated with caution for at least three reasons. First, it is expressed at a high level of generality, without supporting details or documentary support. Secondly, insofar as it is evidence of the subjective intentions of Mitsui, it is inadmissible as an aid to construction of the TMLA. Thirdly, some of the contemporary documents, including in particular a detailed proposal for a joint venture between Mitsui and BEL in 1994, create an impression which differs in some significant respects from Sir John’s present recollection.

I come finally to Mr Liddle, who is now a deputy director in the support services division of BIG. Before 1 April 2012, he was strategic relations director for BIG’s nuclear business. He is an engineer by background, and began his career in the nuclear industry in 1990 working for GEC. He later worked for GEC Alsthom and Alstec, and was director of defence systems at Alstec when it was acquired by BIG in 2006.

Mr Liddle says that as a young nuclear engineer between 1990 and 1995 he was “generally aware” of the activities of BEL, although he never personally worked particularly closely with BEL. He claims to have retained this general awareness between 1995 and 2008, although he accepts that he was less familiar with the claimant’s activities during those years than he had been previously. He gives evidence of various collaborative projects in recent years in which the claimant has played a strategic role.

There is no challenge to any of Mr Liddle’s evidence, but in relation to the critical period in the mid-1990s it lacks particularity, because he had no first-hand experience of working with BEL, and for that reason it is inevitably less helpful than the more detailed first-hand evidence given by other witnesses.

I will begin with a brief sketch of the UK power industry, based on the evidence of Mr Green. As he explains:

“9.

At its simplest level, power generation from steam turbines, whether conventional or nuclear, involves the release and transfer of thermal energy, or heat. It comprises the key elements of heat production, the use of heat to generate superheated steam, the delivery of superheated steam to a turbine to produce rotation of a generator, and finally the operation of the generator itself to produce electricity. Steam generation and delivery systems are at the very heart of power stations producing electricity in this way.

10.

There are many similarities between conventional and nuclear power generation. The key point of distinction is the way in which heat is produced and subsequently transferred to water to create superheated steam. In conventional power generation, heat is generated by the burning of fossil fuels, whereas nuclear power generation utilises heat produced as a product of nuclear fission. Both processes, and the differing natural phenomena used to transfer the heat generated by them, place different stresses on the plant involved.”

There are at present around one hundred conventional power stations in the UK which remain operational. Most of these are gas-fired, although a small number are powered by coal or oil. The first nuclear power stations in the UK were Calder Hall and Chapelcross, both built in the mid 1950s. The building of new stations then continued until the 1990s, Sizewell B being the last station to be built in the UK. The construction of further new nuclear stations remains a controversial subject of political and public debate. No decisions have yet been taken, and in the meantime it may be necessary to take steps to extend the planned life of at least some existing nuclear power stations.

Since the inception of nuclear power in the 1950s, there have been three main types of design of nuclear power stations. The first generation were of the Magnox type, with graphite reactor cores cooled by high pressure carbon dioxide gas contained within massive pressure vessels. The primary purpose of the Calder Hall and Chapelcross stations was the production of plutonium for military use, but the primary purpose of the later Magnox stations was power generation. There were nine such stations (at Berkeley, Hinkley Point A, Bradwell, Hunterston A, Trawsfynydd, Dungeness A, Sizewell A, Oldbury and Wylfa), and they became the cornerstone of the British electricity industry for almost 40 years. The final Magnox station to be built, Wylfa, is still in operation. All the others are now in various stages of decommissioning. During the Magnox period, Dounreay was used as the site of various test and prototype reactors, including the Prototype Fast Reactor built by the UKAEA. This was a fast breeder reactor, cooled by liquid sodium and fuelled by mixed oxide fuel. It began supplying electricity in 1975 and stopped generating nuclear power in 1994.

The Magnox programme was followed by the construction of seven AGR nuclear power stations. AGRs are fuelled by uranium dioxide clad in stainless steel. As with the Magnox design, high pressure carbon dioxide is used as the primary coolant, and the reactors are contained in pre-stressed concrete pressure vessels. Following construction of a prototype AGR at Windscale, the design was then scaled up for commercial use, first at Dungeness B and then at Hunterston B, Hinkley Point B, Hartlepool, Heysham I, Heysham II and Torness. These stations were commissioned between 1976 and 1988, and they all remain operational today.

Meanwhile, following an enquiry into the need for a facility to reprocess spent oxide fuel from the AGR reactors, construction of the THORP reprocessing plant at Sellafield began in 1978 and was completed in 1994. The THORP plant continues to operate today, reprocessing oxide fuels from British AGRs and light water reactors from around the world.

The third type of reactor is the pressurised water reactor or “PWR”. Unlike Magnox and AGR reactors, PWRs are cooled by water. They are fuelled by ceramic pellets of enriched uranium dioxide, clad in a corrosion resistant zirconium metal alloy. In the mid-1970s there was considerable debate about the future of the civil nuclear programme. When the Conservative government came to power in 1979, it was decided that PWRs were the way forward and it was announced that ten would be built at the rate of one a year from 1982. In the event, however, only one PWR nuclear power station was ever built, at Sizewell B, and construction did not begin there until 1987 after a two-year planning enquiry. The construction of further PWRs was brought to a halt by the privatisation of the electricity industry in the 1990s. The risk and capital costs involved in the construction of nuclear power plant were unsurprisingly too great to attract private financing. Thus Sizewell B, commissioned in 1995, remains the first and, to date, the last PWR station built in the UK. Worldwide, however, the PWR design has become the most prevalent one, and a majority of all western nuclear power plants are now of that type.

Nine nuclear power stations remain operational today in the UK. The others are all in the process of decommissioning. Mr Green describes this process as follows:

“27.

… Once a Magnox design reactor ceases generating power, the fuel is removed and taken to Sellafield for reprocessing. Following this, non-reactor plant and structures are removed. The reactor building is then made secure and left in a safe state of “care and maintenance” for a period of about 60 years to allow the radioactivity of the reactor components to decay. The reactor and associated plant are then dismantled and the site cleared. The whole decommissioning process takes in the region of 80 to 90 years and is longer than the operational life of the station.”

Decommissioning is, of course, the final stage in the life of a nuclear power station. The earlier stages are also helpfully summarised by Mr Green:

“45.

… The construction of a nuclear power station is a vast undertaking, typically taking some five to ten years from inception to commissioning, at a typical cost of £2 billion in today’s terms. A nuclear power station can have an operational life of up to 40 years, sometimes even longer. Most are designed with a 25-year lifespan and then undergo a “life extension” process. After commissioning, power stations require huge service provision to enable them to continue to operate safely and maximise their operational life and productivity. Even once energy production has ceased, sites continue to require care and maintenance throughout the process of decommissioning …

46.

… the lifecycle of a nuclear station … can be broken down into the following six identifiable phases:

(a)

Project Definition

(b)

Plant Design

(c)

Plant & Component Supply

(d)

Plant Construction and Commissioning

(e)

Operation

(f)

Decommissioning”

With this introduction, I will now trace the main stages in the development of BEL’s business, again mainly drawing on the substantially unchallenged evidence of Mr Green.

Despite the complex corporate history of the UK Babcock Group, the energy business sold to Mitsui in 1995 had been in continuous and uninterrupted operation from 1891. The development of this business before the advent of nuclear power is summarised by Mr Green, but I need not repeat it. It is enough to quote his conclusion, in paragraph 38 of his first statement, that:

“… the mainstay of the business of Babcock Energy Division has always been conventional power generation with the original core business of Babcock & Wilcox Limited being the technology, products and services relating to steam generation and delivery systems.”

Mr Green then says that this core business was diversified in response to the rise of the nuclear power industry from the late 1950s, beginning with the Energy Division’s initial involvement at Calder Hall and Chapelcross and then continuing down to the construction of Sizewell B in the 1990s.

In 1988, BEL produced a promotional brochure for the nuclear power sector headed “Babcock Energy Nuclear Engineering”. The summary on the first page of this brochure reads as follows:

“Babcock Energy Limited is a British company whose leadership in the design and construction of power generating plant has established it as one of the world’s major engineering enterprises. In nuclear engineering and the development of nuclear power, Babcock had played a leading role since the first days of the nuclear power industry in the late 1940s. Projects with which the company has been involved include the world’s first commercial nuclear power station at Calder Hall; Magnox gas-cooled reactors; advanced gas-cooled reactors (AGR); pressurised water reactors (PWR) for both Marine and Land based applications; fast reactors; and the European research JET and NET programmes.

Today Babcock is engaged in design and engineering across a wide field of nuclear power within involvement in consultancy, r & d, design, manufacture and construction, plant installation and commissioning, procurement, repair and maintenance, and project management. These services are offered both separately or in combination.

Babcock’s resources and experience cover many areas of nuclear engineering, including:

Reactor Pressure Vessels

Primary Coolant Circuits

Steam Generators

Heat Exchangers

Steel Containment Vessels

Liners and penetrations

High-grade structures and fabrications

Pipework systems

Remote manipulators and handling systems

Radioactive waste treatment

Welding development

Non-destructive examination

Instrumentation and control systems

Inspection Services

Consultancy”

Later on, under the heading “Construction and Repair”, there is this statement:

“On site mechanical and electrical installation services are supplied by Babcock Construction which is one of the largest international construction organisations in Britain, enabling the company to provide a complete manufacture and plant construction service, with associated quality control. The company has many years’ world-wide experience in the site construction of major fossil-fuelled and nuclear power plant, industrial and municipal process plant, defence and offshore equipment. A comprehensive plant inspection, maintenance, rehabilitation and repair service is supplied through regional offices.”

As this date Mr Green was site manager at THORP, and had previous nuclear-related experience working for the claimant since 1972 at Dounreay, Hartlepool, Heysham, Dungeness and Torness. He had also been BEL’s deputy head of overseas maintenance services from November 1983 until February 1987. No doubt drawing on this experience, he says of this brochure that “it contains an accurate description of products and services offered by Babcock Energy Division both before and after its sale to Mitsui”. He then qualifies this with the comment that, in relation to radioactive waste management, the Energy Division was “fully prepared and willing to undertake such services”, although as far as he was aware no such services were being performed by BEL in 1988.

In 1994, BEL produced a further brochure in substantially similar terms, and Mr Green relies on this as an accurate reflection of the underlying continuity in the business.

In May 1994, the trade association of the UK nuclear industry, the British Nuclear Industry Forum, published a Nuclear Business Directory describing the activities of its approximately 70 members. The entries were supplied by the members themselves, and allowance must therefore be made for the possibility of exaggeration or wishful thinking. That said, however, it seems to me inherently unlikely that BEL would deliberately have overstated the scope and nature of the nuclear work which it undertook in a trade directory containing entries for all its major competitors, and upon which buyers in the market were intended to rely. The risk of reputational damage would have been far too great, especially in a field where safety considerations were paramount.

The entry for BEL in the directory includes the following:

“Babcock Energy Limited is one of the major operating units of the Babcock International Group Plc, which has a turnover of approximately £800 million and employs 12,000 people worldwide. Babcock has had an extensive and influential role in nuclear power generation, originating in the mid 1950s when it supplied the steam generators for the first UK commercial power station at Calder Hall. Its contribution to the industry grew through design and supply of steam generators, cranes, pipework, fuel handling equipment, ducting, remote inspection equipment, NSSS [i.e. Nuclear Steam Supply Systems] support systems etc for Magnox, AGR … and PWR power stations. The PWR experience was initiated in the early 1960s through the manufacture of reactor pressure vessels for nuclear submarines. Babcock developed the design of these vessels to meet increasing safety and inspection requirements and in parallel, pioneered computerised ultrasonic inspection and analysis for in-manufacture, pre-service and in-service inspections. The Company has successfully completed major orders for Sizewell B PWR covering the engineering and manufacture of the steam generators, reactor coolant loop pipework, seismic supports and restraints for primary circuit components, emergency boration tanks and the engineering, manufacture and site installation of the safety-related pipework.

In addition to power generation, Babcock has contributed to the fuel cycle technology by the supply of spent fuel transport flasks and the development and supply of pressure vessels, tanks, pipework and remote manipulators to BNFL.

…

The company’s design, engineering, manufacturing and construction skills are applied to a wide range of special heavy engineering, high quality projects throughout the world. In addition to conventional fossil and nuclear fuelled power plant, Babcock Energy’s product range includes environmental control systems, combustion equipment, defence equipment, pipework, valves, petrochemical and offshore components. Construction activities include the installation of new plant, refurbishment of existing plant and total outage management. The main offices and manufacturing plant of [BEL] are located at Renfrew, Scotland … The nuclear design and engineering staff are based on this site, creating close links with the manufacturing engineers and hardware production … Techniques and procedures have been developed for plant life extension and have been successfully applied to many areas of nuclear, petrochemical and offshore facilities … ”

Appended to the directory was a “Buyer’s Guide” which listed a total of 285 products or services under 13 headings, and showed in a table which of them were offered by each of the members. BEL was shown as a supplier in 68, or just under one quarter, of the listed categories. The thirteen headings, and the number of entries for BEL under each, were as follows:

It is worth noting that there were four categories (Instruments – nuclear, Electrical Plant, Ancillary Plant and Laboratory Equipment) under which there were no entries at all for BEL, out of a total maximum of 53, while under two other headings (Fuel Cycle and Instruments – non nuclear) BEL had only six entries out of a possible 62. I would also comment that the existence of this trade association, with a membership of some 70 companies, and the publication of a Directory and Buyer’s Guide of this type, are to my mind clear indications that by 1994 the civil nuclear power industry had become an established business sector in which BEL operated as a major participant. Furthermore, no support can be found here for the artificially narrow use of the term “nuclear” espoused by Mr Austick and others on the defendants’ side. As Mr Green says in his second statement, while some of the products and services listed in the Buyer’s Guide involved the handling of radioactive materials, “many of them certainly did not”.

I have already referred to the fact that a possible joint venture between BEL and Mitsui was under discussion in 1994/95. In the event, the proposed joint venture came to nothing, but continuing discussions led instead to the 1995 sale to Mitsui of the Energy Division. However, a substantial volume of material was exchanged and discussed in the course of the joint venture negotiations, including a proposal running to over 550 pages which was put in evidence by Mr Lewis. This document contains full details of BEL’s activities, products, sales forecasts, and so on as at September 1994. I was taken through much of it in opening by Mr Mellor QC, with a view to showing that it contains numerous references to BEL’s nuclear business and capabilities, even though such business was then at a low ebb due to the virtual cessation of new-build activity in the UK market.

The first stated rationale of the proposed merger was the “creation of a discrete world class boilermaker of sufficient size to finance its marketing and development work and to secure in the longer term its own contract financing and bonding”. This indicates, as one would expect, that the primary focus was on the core boiler-related business of BEL. However, the document as a whole could in my view have left Mitsui in no doubt about the existence of a significant civil nuclear component of BEL’s business. This was reflected not only in BEL’s work in progress, but also in its current tenders and sales forecasts. I should add that the document had been prepared by a joint working party of BEL and Mitsui personnel, with the assistance of KPMG.

Thus, for example, the commentary on BEL’s sales forecasts included these passages relating to Japan and South America:

“11.

JAPAN

BEL sees no prospects for tackling the market for utility boilers here by itself. In the past the company has sold Nuclear Design work direct and there may be possibilities for nuclear reactor inspection. No work has been forecast.

…

13.

SOUTHAMERICA

Over the last ten years the financial position of all the countries in this continent has been so bad that it was not possible to contemplate selling large boiler projects there. There are now some signs of this changing. BEL has just signed the first ECGD backed contract in Argentina since the Falklands war for £8 million of Nuclear Reactor inspection …”

There then followed lists of tenders in preparation and target projects, each of which included a number of nuclear items. For example, the list of tenders included a tender for pipework and steam generators at Lungmen nuclear plant in Taiwan, and a tubing contract for a nuclear dry store with GEC Alsthom. Mr Lewis comments dismissively that so far as he is aware neither of these tenders was successful, but in my view that misses the point. What matters is that in the ordinary course of its business BEL was submitting such tenders.

In the section of the document dealing with BEL’s current order book, one of the sub-headings under “Small Contracts” is “Nuclear/Defence” with the observation “These orders tend to be fairly low value with a maximum value of £1 m. BEL are currently providing 13 separate components for the Trident submarine programme …”; while under the sub-heading “Construction” there is this comment:

“BCL [i.e. Babcock Construction Limited] has also been affected by the slowdown in the nuclear industry but are well regarded in the market and should be able to take advantage of any upturn in the sector in the future.”

Again, the proposed joint venture organisation structure included a UK engineering department which would draw staff from other sections and would have “specific responsibility for Nuclear and Defence work”, while one of the identified threats to the joint venture business was “The loss of our existing market share of the UK Nuclear repair and maintenance business”.

It is convenient to note at this point that Babcock Construction Limited had been established in 1990 following a hive-down of assets from the Energy Division, and between 1991 and 1993 it was grouped (for reporting purposes only) with the Process Division. However, the Construction Group was then brought back into the Energy Division, and it is common ground that it formed part of the Energy Division’s business at the time of the sale to Mitsui in 1995.

I now move on to consider the evidence relating to the involvement of BEL in the stages of the life cycle of a power station identified by Mr Green.

Project Definition

Mr Green gives as an example Sizewell B, where the Energy Division was involved in determining acceptance criteria for pre-service inspection of the reactor pressure vessel and other key components being delivered to CEGB. In cross-examination Mr Green explained that these criteria predominantly related to welding standards.

Plant Design

Over the years, the Energy Division had been involved in the design of the majority of nuclear power sites in the UK. This involvement included, in particular cases, the design of steam generators, reactor pressure vessels, high pressure pipework and major cranes, for example at Hinkley Point A, Sizewell A, Wylfa, Hartlepool and Heysham I. At Windscale, it was responsible for the design, manufacture and installation of the secondary containment sphere (the “golf ball”). It was also responsible for the design of spent fuel handling equipment and dry storage facilities, for example at Hinkley Point A, Sizewell A and Wylfa. None of this evidence was challenged, but Mr Green readily accepted in cross-examination that most of it related to the 1960s and early 1970s. Mr Green also explained that the cranes to which he was referring were, in the main, electrical overhead travel cranes which the Energy Division ceased manufacturing in 1975 after losing a number of tenders.

Plant and Component Supply

Mr Green said that, having been involved in the design stage, the Energy Division would then go on to manufacture and supply the relevant plant, and would also be responsible for its safety testing both before and after installation. BEL supplied non-destructive testing and pre-service inspection services for plant and components manufactured both by it and by third parties. For example, it was responsible for the pre-service inspection of the reactor pressure vessel installed at Sizewell B; and in 1995 BEL won the contract in Argentina to provide similar services for the Attucha II nuclear power plant.

Plant construction and commissioning

The construction of a nuclear power station typically involves a workforce of 2,000 to 3,000 skilled personnel. On sites where the Energy Division was engaged, between 300 and 600 of those personnel would typically have been employed by the Energy Division, working over a period of approximately five to ten years. At some sites, the construction phase took significantly longer than this. For example, at Dungeness B design difficulties delayed construction of the station with the result that the Energy Division’s involvement lasted for some 16 years. The Energy Division constructed the main elements of the steam generation and delivery systems for Calder Hall, Chapelcross, Dounreay, Hinkley Point A, Sizewell A, Wylfa, Hartlepool and Heysham I. Nor was its work always confined to the construction of steam generation equipment. For example, it was responsible for the installation of major cranes and spent fuel handling equipment at a number of sites; for the construction of dry storage facilities at Wylfa; for the installation of the high integrity secondary containment structures at THORP; and the “golf ball” at Windscale as mentioned above. It would also sometimes install plant manufactured by third parties, such as the thermal shield at Torness which had been manufactured by Darchem Engineering Limited.

Plant operation

Given the long operational life of a nuclear power station, the importance of maintenance is self-evident. Ongoing maintenance generally involves a full-time dedicated workforce, and secondments of over a decade are commonplace. Maintenance services are categorised as “ongoing operational”, where the work can be completed without switching the reactor off, and “managed outage”, where the work can only be done when the reactor is shut down. During a planned outage, as much maintenance work as possible is undertaken during the period of closure. Such outages typically last for eight to ten weeks, and take place at 12 or 18 month intervals. There may also have to be unplanned outages, for example where defects are discovered.

Mr Green’s evidence is that the Energy Division has undertaken repair and maintenance work at all the UK nuclear power stations to varying degrees. In many instances, it has had “a continuous repair and maintenance presence, with key personnel based on-site, full-time, for many years”. The provision of such services has also become increasingly important as the scheduled operational life of power stations has been extended. An indication of the value of this stream of work around the time of the 1995 sale is provided by the monthly accounts of Babcock Construction Limited at March 1995, which show the turnover for nuclear repair and maintenance for the year 1994/95 as £7.7 million. The same accounts record a turnover figure for repair and maintenance of conventional plant, for the same year, of £32.6 million. Similar accounts for March 1996, the year after the sale, show the equivalent nuclear figure for the year 1995/96 as £17.6 million (nearly four times the forecast for that year of £4.6 million) while the corresponding conventional figure is £30.9 million.

Nor was the Energy Division’s nuclear repair and maintenance work confined to steam generating plant. Mr Green gives the following examples from in and around 1995, none of which was challenged:

Decommissioning

The first UK nuclear power stations to close down were Berkeley in 1989, followed by Hunterston A in 1990 and Trawsfynydd in 1993. It follows that by the mid 1990s very little decommissioning had taken place on UK nuclear power stations, apart from the removal of nuclear fuel at those three sites. Nevertheless, it was already well understood in the industry that massive civil decommissioning projects would need to occur at the end of the operational life of each of the UK’s nuclear power stations, and the expectation was that those who had been involved in the construction of plant at the stations would take the lead in its decommissioning. The Energy Division had the capability to provide such services, and had already carried out some work of this nature by the time of the 1995 split. Between 1988 and 1990, it removed and replaced all eight contaminated top duct bends in the reactor gas circuit at Sizewell A, and it had done similar work at Berkeley in 1982. Further, in 1993-94 the Energy Division tendered for a decommissioning contract at Berkeley, again for gas duct removal. The Energy Division lost this contract on price, but work of this nature clearly formed part of its business.

On behalf of the defendants, Mr Harrison gave evidence that there was “no real market for decommissioning” in 1995. He accepted that de-fuelling operations had taken place at Berkeley and Trawsfynydd, but he sought to characterise such de-fuelling (which alone can take two to three years) as “just the initial step” in the decommissioning process, and to distinguish it from decommissioning “proper”, in the sense of dismantling of a power station, which typically takes between 30 and 80 years, depending on the methodology adopted. I did not find this suggested distinction a convincing one. I agree with Mr Green that decommissioning covers a spectrum of activities, and although de-fuelling occurs at a relatively early stage of the process, it is nevertheless part of decommissioning as understood within the industry.

It is common ground that the decommissioning market was still a nascent one in the mid 1990s, but it does not follow that it was non-existent, or that the Energy Division did not participate in it. A good indicator of the still undeveloped nature of the market is the fact that decommissioning rated only one entry (out of 265) in the 1994 Nuclear Industry Directory. By the same token, however, it was already a recognised and distinct area of work within the civil nuclear market. Although this was not a simile used by the witnesses, it may perhaps be visualised as a sapling which has subsequently grown into a mature and vigorous tree with numerous branches. It was in order to allow for this kind of organic development, as it seems to me, that the definition of the Business in the TMLA included the words “and any business of a substantially similar nature”, and the definitions of “Products” and “Services” included the words “from time to time”. If, as I am satisfied is the case, the Energy Division carried on business in the civil decommissioning market when it was still at the sapling stage in 1995, I see no good reason to doubt that the fully developed modern market, the mature tree, should in principle be regarded as essentially the same market, and as falling within the concept of the Business as defined in the TMLA.

I now turn to consider the development of the nuclear-related business of the other divisions of BIG before the sale of the Energy Division in 1995. I will deal with this topic in less detail than I have dealt with the development of BEL’s business, because it has no direct relevance to the extent of the exclusive licence granted to the claimant in the TMLA. As the claimant rightly submits, the scope of the licence is defined by the business of BEL on 28 September 1995, not by the business of any other party, and in particular not by the retained businesses of the defendants. It follows that, if and to the extent that there was any overlap between the two businesses, then the claimant was granted exclusivity in relation to the area of overlap. That would not, of course, have prevented the defendants from continuing to carry on business in the overlap areas, but it would have prevented them from continuing to do so under the Babcock name.

I also agree with the submission of the claimant’s counsel that there is nothing surprising about this. While the Energy Division was part of the wider Babcock group, there would have been little if any reason for concern about potential confusion between one part of the group and another. Once, however, the Energy Division was sold off and in different ownership, there then had to be “clear water” between businesses operating under the Babcock mark, because otherwise there would be the potential for damaging confusion. The way in which this demarcation was achieved was by granting priority, in the case of any overlap, to the business carried on by the Energy Division.

The divisions of BIG which had a history of work in the nuclear field, apart from the Energy Division, were the FMD and the Process Division.

As Mr Marsh explains in his evidence, the FMD had extensive and ongoing experience in the naval nuclear field. In 1987, the Rosyth Royal Dockyard was “contractorised” under a government initiative whereby private industry was invited to operate the naval facilities on behalf of the Ministry of Defence for a fixed term. The contract to manage the Rosyth Dockyard was awarded to Babcock Thorn Limited (“Babcock Thorn”), a joint venture consisting of BIG (which owned 65% of the shares) and Thorn EMI (which owned the balance of the shares). The formation of this joint venture was, in effect, the origin of the FMD, and many of the Babcock engineers who were to work at Rosyth had in fact come from the Energy Division. When BIG later bought out Thorn EMI’s share of the joint venture in 1994, the company was renamed Babcock Rosyth Defence Limited (“BRDL”). The contract to manage the Rosyth Dockyard was due to expire in the spring of 1996, and by 1993 the government had also announced its proposed privatisation. In the event, BIG was successful in acquiring the Rosyth facility in 1997.

Babcock Thorn (and later BRDL) were obliged under their contracts with the Ministry of Defence to carry out a certain amount of non-military work. This commitment increased over time, and ultimately accounted for approximately 10 to 15% of total revenue. Mr Marsh explains that since the contractor carried the risk of not winning the necessary commercial contracts, there was a very strong incentive for the FMD to obtain non-military work during this period, and this was a key reason for the Division’s diversification into rail care in the early 1990s. This led to the formation of Babcock Rail Limited in 1991, which became an approved supplier for both British Rail and London Underground.

The need for the FMD to diversify had become still more pressing by 1995. The Rosyth contract was due to expire in the following year, and the proposed privatisation was already well under way, but it was not clear who would win any privatisation contract. The Ministry of Defence had also decided to transfer all nuclear submarine fitting to a single site at Devonport. Coupled with the general decline in UK defence expenditure, this meant that the FMD had to find other means to maintain profitability. To that end, Mr Marsh conducted a strategic review in early 1995 and produced a divisional marketing plan for the FMD. By 1995, the non-military business of the FMD was doing well.

The main evidence about the nuclear-related work of the Process Division was given by Mr Hart and (in his absence) Mr Elvin. It is abundantly clear from this evidence that the Process Division, mainly through its then principal operating company Babcock Woodall-Duckham Limited, had a very substantial nuclear business from the mid-1970s onwards, which peaked in the 1980s but had largely disappeared by the mid 1990s. In particular, the Process Division carried out extensive work for the Atomic Weapons Establishment at Aldermaston and was heavily involved in the construction of the THORP plant at Sellafield. The Sellafield contract was to carry out the detailed engineering, purchasing and project management services for the Head End Plant at THORP, including all of its mechanical and chemical processes. According to Mr Hart, the Head End Project involved over 1.5 million man-hours and included process engineering, layout and piping design, mechanical handling, and various other types of design. The project was completed and the Head End facility was commissioned in about 1990.

By the time of Mr Hart’s departure from BIG in 1990, the amount of nuclear-related work carried out by the Process Division had evaporated to almost nothing. The main reason for this was the general downturn in the demand for nuclear-related services in the UK. The only such work that the Process Division continued to undertake over the next few years was a certain amount of small scale follow-up work at Aldermaston. Before he left, Mr Hart had identified the need to replace the vanishing nuclear work with something else, and with that in view he had instigated the acquisition of King-Wilkinson Inc in 1990. King-Wilkinson was mainly active in the oil and gas sectors, and carried on substantial business in Saudi Arabia. Accordingly, growth in these areas became the primary focus of the Process Division from about 1990 onwards. Nevertheless, the Division retained its personnel who had nuclear-related experience so that it would be able to participate in any future opportunities in the nuclear field that might arise. As Mr Hart emphasised in cross-examination, the primary asset of the Process Division was its people and their accumulated expertise.

I now come to an important internal meeting within BIG which took place on 14 March 1995. It was attended by representatives of the Energy, Facilities Management and Process Divisions, and the purpose of the meeting was to discuss the nuclear capability within the BIG group. The meeting took place at Rosyth Royal Dockyard. Those present included Mr Elvin of the Process Division and Mr Marsh of the FMD. The two representatives of the Energy Division were Mr Bill Bryce, director of nuclear sales, and Mr John Prosser, who was executive director, sales and marketing. The purpose of the meeting, according to Mr Elvin, was to see whether, by combining the services of the three Divisions, BIG “could try to improve its chances of being able to take advantage of nuclear-related business opportunities (such as decommissioning) when they came along in the future”. For his part, Mr Marsh described the meeting as a “symposium” to discuss the nuclear capability within BIG. He says in his evidence that there were “clear overlaps in customer base and the markets in which each division had supplied nuclear-related services”, and that “the three divisions clearly recognised that they each had relevant experience and expertise which could be used to win new business in both the civil power plant and defence markets”.

The minutes of the meeting record that Mr Marsh began by providing a brief outline of the proposed agenda, “confirming the need to understand the respective activities, capabilities, aspirations and strategies of each Division in the nuclear market place”. He said it was essential to build on the strengths of each organisation, and not to exploit weaknesses; it was equally essential to present “a clear picture of Babcock’s capability to the prospective Customer”. A co-ordinated approach was needed in respect of information, market intelligence and other key areas. These views were endorsed by Mr Prosser and Mr Elvin on behalf of their respective Divisions.

The next section of the minutes is headed “Divisional Overviews and Summaries”. The Energy Division overview included the following summary of BEL’s nuclear capability:

“The BEL Nuclear Capability can be summarised as follows:-

i.

Engineering Services

•

Structural & Thermal Design,

•

Design Validation & Analysis,

•

Engineering for Manufacture,

•

Advanced NDE [Non-Destructive Examination],

•

Lifetime Extension Studies,

•

Experimental analysis.

ii.

Manufacture and Installation

•

Steam Generators,

•

Naval Reactor Pressure Vessels,

•

High Pressure Pipework,

•

NSSS [Nuclear Steam Supply Systems] Components,

•

Submarine Pressure Hull Sections,

•

Fuel Stores, Flasks etc.

iii.

After Sales Services

•

Outage Management,

•

Repair and Maintenance,

•

Project Management,

•

Plant Refurbishment,

•

Plant Upgrade Studies,

•

Technical Services.

iv.

Decommissioning

•

Design and Methods,

•

Planning,

•

Implementation,

•

Project Management,

•

Special Tools and Equipment.

In the conduct of its nuclear-related business, BEL has established very close relationships with Nuclear Electric (especially through the Sizewell “B” Project) and US-based Westinghouse Electric (with which BEL is closely involved in the supply of power stations to China). These relationships are of major strategic importance to BEL for the successful development of nuclear business in the future.”

The FMD overview concentrated on the work undertaken by BRDL, and listed that company’s nuclear engineering capability under the four headings of Production, Support Service, Facility Management and Design Engineering. It concluded:

“BRDL has had approaches from the nuclear industry in recent times in respect of nuclear decommissioning, including Scottish Nuclear, Nuclear Electric, AEA Technology, BNFL, Rolls-Royce and James Howden. BRDL is perceived to be a leader in this market and in the area of site licensing.”

The overview of the Process Division began by stating:

“The Process Division entered into the nuclear market place in the mid-1970s and in ten years, nuclear-related business constituted approximately 85 per cent of the total. However, by the 1990s, this had reduced to a very small percentage.”

The principal areas of business in which companies of the Division were currently engaged were said to be: Oil and Gas, Petroleum and Refining, Petrochemicals and Organics, Chemicals and Pharmaceuticals, Industrial and Environmental, Metallurgical and Inorganics, Operations and Maintenance, and Water and Waste Water. In only one of those areas, Industrial and Environmental, did the Division still have any nuclear business, which was conducted by Babcock King-Wilkinson Limited. Details were then given of the main areas in which Babcock King-Wilkinson had previously been “a principal consultant and contractor to the nuclear industry”.

In the next section of the minutes, headed “Review of Nuclear Business Opportunities & Agreed Responsibilities”, it was suggested that nuclear-related activity could be broken down into the following sections, with the lead being taken by the Division shown:

Following the meeting, Mr Marsh sent a copy of the minutes to BIG’s chief executive, Mr Nick Salmon, under cover of a letter dated 28 March 1995. In his letter he said that Mr Salmon might wish to use the document to formulate a group policy. As it turned out, however, the proposals were not taken any further and were soon overtaken by events leading up to the sale of BEL. Despite its abortive outcome, however, and despite its purely internal nature (there is no evidence that the minutes of the meeting were ever disclosed to Mitsui before the sale), the meeting and the record of it are in my judgment highly significant in helping to resolve the present dispute.

In the first place, those in attendance at the meeting were engaged in an exercise with many similarities to that which the court now has to perform. It was necessary for the Energy Division to set out a realistic and comprehensive list of its own products and services in the nuclear field, in the context of the business of the group as a whole, and at an appropriate level of generality to enable demarcations of nuclear business to be identified, and potential overlaps or complementarities to be discussed. It was not suggested to Mr Green in cross-examination that any parts of the BEL nuclear capability as summarised in the minutes were merely aspirational, or that the Energy Division would in fact have been unable to provide them.

Secondly, in relation to the key issue of decommissioning, it is notable that this was adopted as one of the four sub-headings of the BEL nuclear capability, and that it encompassed the supply of both services (design and methods, planning, implementation and project management) and products (special tools and equipment). Furthermore, it was agreed that the Energy Division would take the lead in the decommissioning of power plant, and that at least one decommissioning business opportunity (at Trawsfynydd) should be conceded to BEL. I agree with the claimant’s submission that this could only have happened if the decommissioning of power plant was indeed part of the Energy Division’s business.

Thirdly, and reflecting the points which I have already made, the summary of BEL’s nuclear capability formed the basis of a fall-back position which the claimant articulated, and obtained permission to plead, in the course of the trial. It was clear from the statements of case as they stood at the start of the trial, and from the parties’ opening submissions, that each side had adopted an extreme position. The claimant argued that it was entitled to use the Babcock name for any products and services which it might provide across the whole of the civil nuclear power industry, while the defendants contended that the claimant only had the right to use the Babcock name in relation to its core business relating to boilers and related pipework. It seemed to me that there were obvious difficulties with the extreme positions espoused on each side, and that the right answer might well lie somewhere in between. It was unsatisfactory that neither side had formulated a fall-back position, and I considered that it would assist the court, and help to clarify the issues, if this omission were rectified, even at such a late stage. The parties were also in negotiation more generally, and there appeared to be a reasonable prospect that, if allowed a little more time, they might be able to settle all their differences.

I discussed the way forward with counsel on the morning of day three of the trial (Thursday, 31 January 2013), by when the claimant had provisionally formulated its fall-back position. Having heard counsel, I decided that the appropriate course would be to allow the defendants until 2.00 pm on the following Monday (4 February) to serve draft amendments to the defence together with any further evidence they might wish to rely upon in the light of the claimant’s fall-back position; the case would then proceed, at least provisionally, on the morning of 5 February. In the event, that is substantially what happened. The court sat again at midday on 5 February, when I allowed the amendments on both sides and deferred the consequential question of costs until the conclusion of the case.

As I have said, the claimant’s fall-back position was closely based on the minutes of the meeting on 14 March 1995. The opportunity was also taken to make it clear that the area of dispute between the parties lies in the civil nuclear industry, and that all descriptions of the claimant’s business as set out in the re-amended particulars of claim are to be understood in that context. With that clarification, paragraphs 46 and 47 of the re-amended pleading read as follows:

“46.

In the premises, the Claimant’s Business in the disputed area as at the 1995 Split can be properly summarised as the provision of products and services (including decommissioning services) to the civil nuclear power industry.

47.

In the alternative, the Claimant’s Business as at the 1995 Split within the civil nuclear power industry comprised:

•

New plant design, supply and installation

•

Engineering, technical and site services

As follows:

[There then follows substantially the same list as in the description of the BEL nuclear capability quoted in paragraph … above, but omitting “Submarine Pressure Hull Sections” and the word “Naval” before “Reactor Pressure Vessels”]

Excluding any such products or services as applied to (i) turbine generators (which for the avoidance of doubt does not include turbine auxiliary plant); (ii) the reactor core; and (iii) the fuel route (which for the avoidance of doubt does not include fuel stores and flasks).”

The descriptions at the head of this list (“New plant design, supply and installation” and “Engineering, technical and site services”) were themselves taken from the minutes of the March 1995 meeting, where they were used to introduce a shorter list of the specific areas in which BEL carried on its nuclear business. The purpose of the exclusionary proviso at the end of the pleaded list, as I understand it, was to acknowledge that none of the listed capabilities in practice extended to the provision of products or services relating to (i) turbine generators, (ii) the reactor core and (iii) the fuel route, subject to the specific exceptions which were mentioned “for the avoidance of doubt”.

The defendants’ response to the claimant’s alternative case on its business was pleaded in annex A to the amended defence and counterclaim. This took the form of a schedule showing the defendants’ answer to the items listed in paragraph 47 of the re-amended particulars of claim. In short, the items listed under headings (i), (ii) and (iii) were accepted, but only in relation to “the Accepted Goods”. None of the items under heading (iv), that is to say “Decommissioning”, was accepted, so even as a fall-back the defendants maintained the stance that BEL carried on no decommissioning work at all. The Accepted Goods were those listed under heading (ii) (“Manufacture and Installation”), subject to certain qualifications. Thus “Reactor Pressure Vessels” was accepted for steel vessels and liners for concrete ones, but not (presumably) either for concrete vessels or liners for steel ones. “High Pressure Pipework” was accepted only in relation to such pipework comprising the primary circuit and the secondary circuit, the latter “being the steam supply system to the turbines and the auxiliary pipework that provides the water treatment services to the boiler water”. “Fuel Stores, Flasks” was accepted “in relation to spent nuclear fuel shipping flasks for shipping fuel between a nuclear power station and an off-site reprocessing facility”, but again no further.

I must now state my conclusions in relation to the nuclear-related business of BEL in September 1995. I do so in the light of the evidence of all the witnesses, including (but not confined to) that which I have reviewed in the preceding sections of this judgment.

To begin with, I have no hesitation in rejecting the defendants’ primary pleaded case that the claimant had no specifically nuclear business at all, and that it merely supplied goods and services in its core area of expertise (basically boilers and pipework) to a variety of clients, most (but not all) of whom operated in the field of conventional energy generation. It is common ground that the conventional, non-nuclear market had always been the mainstay of BEL’s business, and that it provided the bulk of the Energy Division’s turnover. It by no means follows from this, however, that the products and services which BEL supplied, or held itself out as willing and able to supply, to clients operating in the nuclear sector did not form a separate and identifiable part of BEL’s business. In my judgment the existence of a civil nuclear market, and BEL’s active participation in it at the relevant time, are put beyond any reasonable doubt by (in particular) the detailed and substantially uncontradicted evidence of Mr Green, the May 1994 Nuclear Business Directory, the joint venture discussions with Mitsui in 1994/95, and the internal “nuclear capabilities” meeting held at BIG on 14 March 1995.

On the other hand, I am equally unconvinced by the claimant’s primary case that its operations in the civil nuclear field were so extensive and multi-faceted that it would be right to regard BEL’s nuclear business in September 1995 as embracing the whole of the civil nuclear market. In my view such a claim is inherently implausible, given the huge complexity of most civil nuclear projects and the relatively limited scope of many of the nuclear-related areas of business in which BEL operated. It is revealing in this context that in the Buyer’s Guide appended to the Nuclear Business Directory, when BEL would naturally (so to speak) have put all of its goods in the shop window, it nevertheless ticked the boxes for only about one quarter of the identified categories of goods and services. There were major areas of business, including notably those relating to turbine generators, the reactor core and the fuel route, where I am satisfied that BEL had no, or no significant, presence in the market, and which (except in some relatively marginal respects) fell outside its area of expertise. Furthermore, if it had been the intention of the parties to the TMLA to grant BEL an exclusive licence to use the Babcock name across the whole of the civil nuclear sector, it would have been the easiest thing in the world to say so. They did not do so, however, but instead adopted a definition of the Business which focuses attention on the business actually carried on by BEL at the relevant date.

One of the main difficulties in this case, as it seems to me, is to identify the appropriate level of generality at which to examine that business. On the one hand, I think that a reasonable degree of latitude is called for, not only as to the period to be examined but also to allow for the future growth and development of particular parts of the business as they were then carried on. The focus of the inquiry should therefore be relatively broad. On the other hand, it should not be so broad as to permit identification of the claimant’s nuclear-related business as the provision of products and services to the civil nuclear power industry tout court. Apart from anything else, if that were the appropriate level of inquiry, it is hard to see what scope would be left for “any business of a substantially similar nature”.

These general reflections lead me to think that the answer is indeed to be found at a level of generality similar to that which the Energy Division put forward for discussion with the FMD and the Process Division at the meeting in March 1995, only a few months before the sale of the Energy Division to Mitsui. This classification of BEL’s nuclear business has the great advantage of being almost contemporary with the sale, and of having been prepared in the context of the past and present nuclear business of the other two Divisions. In my judgment it provides as good a starting point as can now be found, more than 17 years after the event, for identifying the nature and extent of the civil nuclear business carried on by BEL on 28 September 1995.

The next question is whether, in using the March 1995 classification as a guide to the extent of BEL’s Business as defined in the TMLA, its ambit should be restricted to the Accepted Goods, and to the provision of engineering and after-sales services in relation to the Accepted Goods, as pleaded by the defendants in their response. I take first the products listed under heading (ii). In my view they should all be treated as falling within the Business without the qualifications proposed by the defendants, because of the expansionary force of the words “and any business of a substantially similar nature”. So, to take a simple example, if (as is undisputed) BEL had the capability in September 1995 to manufacture and install steel reactor pressure vessels, I consider that the manufacture and installation of concrete reactor pressure vessels would be a business of a substantially similar nature. Similarly, the manufacture and installation of high pressure pipework need not in my view be strictly confined to pipework forming part of the primary and secondary circuits, even if those were the only civil nuclear contexts in which BEL had in fact supplied such pipework at that date.

I now turn to the engineering and after-sales services listed under headings (i) and (iii). Should they be confined to the provision of such services in relation to the products identified under heading (ii)? In my view they should not. Such an approach would again be unduly restrictive, for at least three reasons. First, most of the listed services are at least potentially independent areas of business in their own right, and need not be purely ancillary to the manufacture and installation of products by BEL. This is borne out by the detailed evidence of Mr Green and Mr McManus, for example in relation to the work carried out by Energy Division staff during outages, or the instances given by Mr Green of repair and maintenance work performed by BEL around 1995 which did not relate to steam generating plant. Secondly, if the services in question had all been purely ancillary, they would not have been listed as separate capabilities under separate headings for the purposes of the March 1995 meeting. Thirdly, it is again necessary to allow reasonable scope for the words “and any business of a substantially similar nature”.

It does not follow from this, however, that there should be no restriction at all on the scope of the relevant services. This is indeed recognised by the claimant, with the addition of what I have called the exclusionary proviso at the end of paragraph 47 of the re-amended particulars of claim. In my view this strikes an appropriate balance, by excluding the provision of services in the specified categories where they relate to three major areas in which BEL had never operated to a significant extent, namely turbine generators, the reactor core and the fuel route. I would regard any expansion into those areas as falling outside the scope of the Business, even allowing for the flexibility built into the definition of that term in the TMLA. It is also worth noting that the scope of these exclusions was briefly considered by Mr Austick in his third statement, where he commented that the reference to the reactor core should generally “include all the associated instrumentation, control systems and inspection equipment”, and that the fuel route was “essentially everything from the receipt and inputting of new fuel to the dispatch of spent fuel to, e.g. THORP at Sellafield (and would include, e.g., the storage ponds)”. This was put to Mr Green in cross-examination, and he agreed with Mr Austick’s comments.

I come finally to the decommissioning services listed under heading (iv). Here again the claimant is content for the three exclusions to apply, and I agree that this would be appropriate. Further than that, however, I would not go. As I have already explained, I consider that decommissioning was already established as a separate sub-sector of civil nuclear business in 1995, and that BEL carried on business within that sub-sector. The modern decommissioning market is far more extensive and sophisticated than it was in 1995, but it has grown organically from those early shoots, and in my judgment the claimant is entitled to use the Babcock name in relation to the whole of it, subject to the three exceptions.

I should also make it clear that nothing in my review of the evidence leads me to think that any special meaning should be given to the concept of the Business in the TMLA, or to any other of the relevant definitions. Nor do I see any reason to qualify any of the preliminary observations on the construction of the TMLA which I have made in paragraphs 33 to 38 above.

For these reasons, I conclude that the claimant’s alternative case on the scope of its civil nuclear business at the time of the 1995 split succeeds, and that the claimant is therefore entitled to use the Babcock name and marks in the Territory as defined in the TMLA on or in relation to the products and services in the civil nuclear power industry as set out in paragraph 47 of the re-amended particulars of claim.

If I am right in my conclusions about the extent of the claimant’s civil nuclear business in September 1995, I do not understand it to be seriously disputed by BIG that it has infringed the exclusive licence to use the Babcock name and marks granted by the TMLA. BIG’s case is that the claimant’s right to use the name and marks is confined to the BEL Business, as narrowly defined in paragraph 7 of the defence. BIG does not seek to argue that there has been no infringement of the licence, particularly since the major re-branding exercise which took place in 2010, if the claimant’s case on the existence and scope of its nuclear business succeeds in either its original or its alternative form.

Thus, for example, it is admitted in paragraph 44 of the defence that BIG has used the plectrum device with the name Babcock in relation to its business activities, “including the goods and services supplied to its clients involved in the nuclear industry”. Again, it is admitted in paragraph 47 of the defence that BIG has offered the services comprised in the business of Alstec which it acquired in 2006 under the web address “babcock.co.uk”. Those services were described by Alstec on its own website, shortly before the acquisition, as “a complete range of engineering services from initial engineering studies, through to turnkey projects to the management of outages, plant operations and decommissioning services”, and they were “provided to a wide range of nuclear industry clients with interests in power generation, defence, fuel reprocessing, waste management, fusion research and decommissioning”.

In paragraph 46 of the defence it is pleaded that Alstec’s business “related to the radioactive/nuclear components of nuclear power stations, such as reactors, fuel rods and radioactive waste systems”. This contention, however, reflects the unnaturally narrow meaning of “nuclear” which I have found to be unsustainable. If “nuclear” is given its normal meaning, it is obvious that there is a considerable area of overlap between the business which BIG acquired from Alstec, now carried on and marketed by BIG under the Babcock name, and the areas of civil nuclear business for which the claimant enjoys the exclusive right to use the Babcock name.

It is unnecessary for me to multiply examples. In my judgment the claimant is prima facie entitled to an injunction to restrain future breaches of the TMLA, and to an enquiry as to damages for breach of contract. The court is not asked to quantify any loss at this stage. The precise terms of the relief to be granted can be discussed after this judgment has been handed down.

I now turn to the claimant’s passing off claim, which Mr Mellor QC described in argument as a subsidiary but still significant part of the claimant’s case. Assuming that the use of the Babcock name by BIG will be regulated for the future by an injunction (or equivalent undertakings offered by BIG), the main focus of the passing off claim is on the use by BIG of the Babcock name in the period between the 2010 re-branding and today. What is said, in essence, is that the goodwill attaching to the claimant’s use of the Babcock name for its products and services in the civil nuclear power industry has been damaged by BIG misrepresenting to the relevant public that the experience and expertise of the claimant in that field is in fact the experience and expertise of BIG or its group companies.

The classic requirements of a successful passing off claim were stated as follows by Lord Oliver in the “Jif lemon” case, Reckitt & Colman Products Ltd v Borden [1990] R.P.C. 341 (HL) at 346:

“First, [the claimant] must establish a goodwill or reputation attached to the goods or services which he supplies in the mind of the purchasing public by association with the identifying “get-up” (whether it consists simply of a brand name or a trade description, or the individual features of labelling or packaging) under which his particular goods or services are offered to the public, such that the get-up is recognised by the public as distinctive specifically of the [claimant’s] goods or services.

Secondly, he must demonstrate a misrepresentation by the defendant to the public (whether or not intentional) leading or likely to lead the public to belief that the goods or services offered by him are the goods or services of the [claimant].

Thirdly, he must demonstrate that he suffers or, in a quia timet action, that he is likely to suffer damage by reason of the erroneous belief engendered by the defendant’s misrepresentation that the source of the defendant’s goods or services is the same as the source of those offered by the [claimant].”

As the editors of Kerly’s Law of Trade Marks and Trade Names, 15^th edition, (2011), note at paragraph 18-005, footnote 8, the requirement that get up is distinctive specifically of the claimant’s goods or services does not mean that it must be distinctive of the claimant’s goods or services to the exclusion of all others: see, for example, Associated Newspapers Ltd v Express Newspapers [2003] F.S.R. 51.

In the re-amended particulars of claim, it is alleged that the claimant has built up valuable reputation and goodwill in the business conducted by the Energy Division, BEL and the claimant under the Babcock name or mark. It is said (paragraph 71) that the goodwill in this business “vested in and was owned by BEL at the date of the 1995 Split, and now vests in and is owned by the Claimant”. Further or alternatively, reliance is placed on a Transfer Agreement dated 20 October 1978 under which BIG (then Babcock & Wilcox Ltd) transferred the whole of the “boiler-making” undertaking to the claimant (then B & W Operations), including all goodwill in the Babcock mark. Paragraph 71 continues:

“This transfer was of the whole of the undertaking of what was to become the Energy Division and included all the goodwill accrued as at the date of the transfer generated by reason of the business conducted prior to that date and in particular the business conducted in the civil nuclear industry. Further, by reason of the business undertaken by the Claimant between the Transfer Agreement and the 1995 Split, all the goodwill generated by such business, including the business in the civil nuclear industry, accrued to the Claimant. By reason of the business conducted by the Claimant subsequent to the 1995 Split under and by reference to the name or mark BABCOCK, the goodwill generated by such business has continued to accrue to the Claimant.”

The necessary misrepresentation is then said to be established by the marketing materials relied upon in support of the breach of contract claim. In particular, and by way of example, the following extracts from BIG’s website are said to be references to the expertise and experience of the Energy Division and/or BEL:

“For over 50 years Babcock’s expertise and technical capacity has ensured that our solutions are delivered safely, on time and within budget to the following nuclear markets:

Nuclear Site Management Services

…

Babcock’s construction capability is demonstrated by the breadth of its engineering, installation and refurbishment experience at nuclear facilities, ranging from erection of reactor cores and major fuel handling equipment, through pressurised pipe-work systems, to the commissioning of reactor control and instrumental systems.

…

New Build

With the largest nuclear experienced workforce of any UK contractor and an internationally renowned supply chain, Babcock has an exceptional track record in the design, engineering, construction and delivery of major civil nuclear facilities.”

The claim then continues:

“74.

BIG thereby falsely represents to the public that the experience and expertise of the Claimant is the experience and expertise of BIG or its group companies. Such a representation is not dependent upon, but is exacerbated by, the use of the BABCOCK name in connection with the aforesaid representation.

75.

The relevant public are likely to engage the services of BIG or its group companies in reliance in whole or in part on the basis of the experience and expertise of those companies. Furthermore it is to be inferred that the same is the intention of including references to such expertise and experience in the advertising materials of BIG.

76.

If and insofar as the relevant public engages the services of BIG or its group companies in circumstances where those services compete with those of the Claimant (which they do as set out above), then the Claimant will suffer damage thereby.

77.

Accordingly BIG is passing off.”

The amended defence takes a number of points in answer to this claim, of which the following may be noted.

First, the scope of the alleged goodwill is said to be unclear, and in any event it is averred that goodwill generated by the claimant’s use of the name Babcock passes to BIL as the proprietor and licensor of the marks. Further, it is alleged that the claimant has never traded under the name Babcock alone since the 1995 Split, and it has recently changed its name, dropping the Babcock mark altogether and calling itself “Doosan Power Systems” and/or “Doosan”.

Secondly, at the date of the 1995 Split there were various entities other than BIG using the name Babcock in relation to the provision of goods and services similar to those provided by BIG and BEL, including The Babcock & Wilcox Company, Deutsche Babcock AG and Babcock Hitachi KK. Furthermore, the defendants trade under and by reference to the name Babcock on its own, and they too supply services and products to power stations, including nuclear power stations, around the world and have acquired experience and expertise accordingly.

Thirdly, it is denied that when a member of the relevant public sees or hears the name Babcock in relation to products and services supplied to nuclear power stations, they believe those products and services to originate from the claimant and nobody else: “The customers who buy the products and services of either the Defendants or the Claimant are sophisticated buyers who know the competencies of both groups”.

Fourthly, the marketing materials relied on by the claimant are true, and do not involve any misrepresentation, because of the history of BIG itself and of the businesses it has acquired. Nor would any member of the relevant public be likely to be deceived as a result of any of the statements complained of, because the market is a highly specialised one and any purchase would be the result of extensive discussions and negotiations. Accordingly:

“If, which is denied, a member of the trade or interested public had been deceived by the alleged misrepresentation, any such deception would be dispelled soon after contacting the Defendants and prior to any negotiations let alone contractual agreement.”

Finally, it is said (in my view correctly) that the amended particulars of claim do not support any claim for relief against the second defendant, BIL, in relation to passing off.

In its reply, served on 1 September 2011, the claimant sought to clarify its case on goodwill, and said in answer to the point about the sophistication of the relevant market and the lengthy negotiations which would precede any contract that reliance would if necessary be placed on the doctrine of “initial interest confusion”.

The doctrine of initial interest confusion, also known as switch selling, was considered by Arnold J in Och-Ziff Management Europe Ltd v OCH Capital LLP [2010] EWHC 2599 (Ch), [2011] F.S.R. 11 at [155] to [157], where he rejected a submission that initial interest confusion was not actionable and endorsed the discussion of the question by Professor Wadlow in The Law of Passing Off: Unfair Competition by Misrepresentation, 3^rd edition, (2003), at paras 5-22 to 5-24 and 7-37 to 7-40. The passage cited by Arnold J from Wadlow includes this passage, in para 7-39:

“The success of switch selling as a business practice depends on a potential customer for the claimant’s goods being sold the defendant’s by a process in which the making of the misrepresentation is an essential step, and damage may therefore be said to arise from the misrepresentation even though the customer has ceased to be misled by the time the transaction is concluded. The general principle is that if the defendant successfully induces the public to do business with him by making a misrepresentation then it ought not to matter that the falsity of the representation would become apparent at some stage … ”

In agreeing with this analysis, Arnold J said that in his view the points made by Professor Wadlow in this passage hold good “even if the misrepresentation is innocent rather than deliberate”.

Against this background, I will now consider the ingredients of the passing off claim.

Goodwill

I can deal with this aspect of the claim quite briefly, because I am abundantly satisfied on the evidence that by the date of the 1995 Split BEL had an established and substantial reputation in the name Babcock in relation to the business which it carried on, including its civil nuclear business. The goodwill engendered by that reputation derived in part from the express assignment in 1978 to the claimant of the whole of the undertaking which was later to become the Energy Division, including all the goodwill of the business then carried on by the vendor, Babcock & Wilcox Limited: see clause 1 of the Transfer Agreement dated 20 October 1978. The goodwill also derived from the business carried on by BEL under the Babcock name between 1978 and 1995, extensive details of which are provided in the evidence of Mr Green and Mr McManus.

As to the claimant’s business since 1995, Mr Green’s evidence is that it continued to provide products and services to the nuclear power generation industry, deriving from that business an average annual turnover of approximately £30 million in the ten years from 1995. Over the last five years, this turnover has grown to more than £100 million per annum. While the claimant was owned by Mitsui, the relevant business was mainly carried on under the name Mitsui Babcock; and after the sale to Doosan, under the name Doosan Babcock. Furthermore, the name “Babcock” alone would often be used to designate the business, for example in presentations to clients.

Mr Green deals in his evidence with the suggestion that the claimant no longer uses the Babcock name. His uncontradicted evidence is that the name is still used extensively throughout the claimant’s group, and although it was at one time suggested, after the claimant changed its name to Doosan Power Systems Limited, that the Babcock name should be dropped altogether, this suggestion “was quickly vetoed at the very highest level within DPS”. The present position is that “Doosan” is the umbrella brand, used to designate the Doosan business around the world, while Doosan Babcock is used, in conjunction with the umbrella brand Doosan Power Systems, to designate the group’s energy business. According to Mr Green, the Doosan Babcock name remains “an important aspect of our branding and helps to identify our energy business to the market at large”.

Mr Green also explains that, when presentations are made to clients of the claimant, reference is often made to the “Babcock” heritage, meaning in this context the civil nuclear heritage of the Babcock Energy Division dating back to the period before the sale to Mitsui. In view of the subsequent changes of corporate ownership, the name Babcock “is a constant and a very important part of the Claimant’s identity and heritage”.

Meanwhile, following the sale of BEL in 1995, BIG continued to use the Babcock name in relation to its retained business, including its work in the military nuclear sector. There is no evidence, or at least no evidence of any significance, that this parallel use of the Babcock name by BIG in relation to its retained business generated any confusion, because with the exception of the continuing military work both the Process Division and the FMD had almost entirely diversified away from nuclear business, while in the civil nuclear field the claimant had the benefit of the exclusive licence and the non-compete covenants contained in the TMLA. Thus there was no, or no significant, dilution of the Babcock brand in relation to the claimant’s civil nuclear business, and it was only when BIG embarked upon its programme of major acquisitions of companies active in the civil nuclear sector that appreciable areas of overlap began to emerge.

I am also satisfied that there is no substance in the contention that, as a matter of law, the goodwill attached to the Babcock name was in some way retained by BIL under the TMLA. Mr Bloch QC did not develop this point in his oral submissions, and no authority for it was cited to me. The existence and extent of the goodwill acquired by BEL in relation to its civil nuclear business are in my judgment questions of fact, to be determined in the usual way on the basis of the evidence before the court.

Misrepresentation

It is common ground that misrepresentation is an essential ingredient of the tort of passing off. As Jacob J said in Hodgkinson & Corby Ltd v Wards Mobility Ltd [1994] 1 WLR 1564 at 1570A:

“At the heart of passing off lies deception or its likelihood … Never has the tort shown even a slight tendency to stray beyond cases of deception. Were it to do so it would enter the field of honest competition …”

What, then, is the misrepresentation of which the claimant complains? It is, in short, that BIG has misleadingly claimed for itself the experience and heritage of the Energy Division in the civil nuclear field. The claimant does not seek to suggest that BIG has in any way sought to pretend that its existing business is the claimant’s, or that anybody entering into a nuclear contract with BIG would do so in the mistaken belief that they were engaging the claimant. Any such suggestion would be absurd, as the claimant readily acknowledges. But the case which the claimant does advance is of a different nature, and more subtle.

In their written closing submissions, counsel for the claimant explain the nature of the case which is advanced by an analogy. Solicitors and lay clients who wish to retain senior counsel in an important case are usually very sophisticated, and well aware of the various options available to them in a particular field. There is no possibility that a client will employ Mr X QC in the belief that he is Mr Y QC, or vice versa. But if Mr Y were to put on his website a list of cases in which he had appeared, and if that list included cases which were not his own, but were cases in which Mr X had appeared, there would be a real risk of clients being misled about Mr Y’s experience. They would not, of course, be misled about his identity, and they would not mistakenly believe that he was Mr X; but they would mistakenly have attributed Mr X’s experience to Mr Y. Accordingly, there is passing off, because Mr X’s goodwill – the attractive force which brings in custom - includes his impressive list of cases and accumulated experience, and Mr Y is not entitled to claim that any of that goodwill or experience belongs to him.

Once the nature of the claimant’s case is properly understood, it seems clear to me that the extract from BIG’s website set out in paragraph 157 above does indeed involve a misrepresentation of the type alleged in paragraph 74 of the re-amended particulars of claim. The 50 years of expertise and technical capability there claimed by BIG as the expertise and technical capability of “Babcock” would in my view be reasonably understood, in the absence of explanation or clarification, as laying claim to the goodwill of the claimant attaching to the Babcock name in the same areas of business. Nor, in my judgment, is it open to BIG to claim that any representation to that effect is true, on the ground that the accumulated expertise of companies acquired by BIG over the last decade does indeed stretch back for 50 years or more. That may well be literally true, but the crucial point is that the pre-acquisition expertise and experience of those companies was never marketed under the Babcock name, whereas during the same period the claimant did carry on its own nuclear business under that name.

It is well established that a description of goods or services which is literally true may be framed in such a way as to convey a false impression: see Kerly at paragraph 18-142 and the authorities there cited. So, for example, in Reddaway v Banham [1896] AC 199, Lord Macnaghten said at 218-219 that the “whole merit” of the description “camel hair belting” as used by the defendant lay “in its duplicity”, and continued:

“I venture to think that a statement which is literally true, but which is intended to convey a false impression, has something of a faulty ring about it; it is not sterling coin; it has no right to the genuine stamp and impress of truth.”

Furthermore, I am unable to accept the defendants’ submission that a misrepresentation of this nature could have had no causative effect. True, the civil nuclear market is one of great sophistication in which the process of tendering for contracts is both protracted and highly regulated. But the effect of the misrepresentation is likely to be felt at the very earliest stage, in attracting a customer to BIG on the strength of half a century’s relevant expertise under the prestigious Babcock name. It seems to me improbable that a purchaser, even in such a specialised field, would always seek to verify a claim of that nature, but he might well be influenced by it in deciding to open negotiations with BIG in the first place. The deception is thus akin to the type of initial interest confusion discussed by Arnold J in the Och-Ziff case, and it matters not if the truth is subsequently discovered by the purchaser. From the point of view of the claimant, the damage has already been done, and the distinctiveness of the goodwill has been eroded.

It is also worth making the obvious point that BIG is unlikely to have made the misrepresentation on its website unless it considered it material to do so, and hoped that it would help to generate business.

Damage

It will be apparent from what I have already said that the misrepresentation on BIG’s website has in my view caused damage to the claimant’s goodwill, and this would be so even if I were prepared to assume in BIG’s favour (which I am not) that any confusion would always have been dispelled by the time a contract was entered into. It is well established that there is damage for the purposes of a claim in passing off where the effect of a misrepresentation is to erode the distinctiveness of the goodwill attaching to a particular name. As Laddie J said in Irvine v Talksport Ltd [2002] EWHC 367 (Ch), [2002] 1 WLR 2355, at [38]:

“If someone acquires a valuable reputation or goodwill, the law of passing off will protect it from unlicensed use by other parties. Such use will frequently be damaging in the direct sense that it will involve selling inferior goods or services under the guise that they are from the claimant. But the action is not restricted to protecting against that sort of damage. The law will vindicate the claimant’s exclusive right to the reputation or goodwill. It will not allow others to so use goodwill as to reduce, blur or diminish exclusivity … Of course there is still a need to demonstrate a misrepresentation because it is that misrepresentation which enables the defendant to make use or take advantage of the claimant’s reputation.”

See too Och-Ziff at [158] to [160].

It follows that in my judgment the passing off claim also succeeds, although only on the comparatively narrow basis of the pleaded misrepresentation on BIG’s website. Mr Mellor QC did not argue, and I do not find, that any similar misrepresentation can be found elsewhere in the evidence before me. The primary objection to the use by BIG of the Babcock name in relation to its civil nuclear business is not that BIG thereby represents its business to be the claimant’s, but simply that it is prohibited from doing so by the terms of the TMLA. I would accept, however, that the damage inflicted by the misrepresentation on the website is likely to be exacerbated by BIG’s unauthorised use of the Babcock name to designate its civil nuclear business.

For the reasons which I have given, I conclude that this claim succeeds both in relation to breach of the TMLA (on the alternative basis formulated during the course of the trial) and in relation to passing off (albeit only on the comparatively narrow basis which I have indicated).