Weatherford Global v Hydropath

MR JUSTICE AKENHEAD: The background to the defendant's application today needs to be explained by reference to the type of proceedings these are. I borrow this from Mr Culligan's skeleton argument for the hearing on 2 April 2014 before me.

Weatherford is an oil field services company. This claim arises out of the supply of equipment by the defendant, Hydropath, of certain products called hydroflow physical water conditioners. These products were intended to be mounted on pipes so as to prevent scale build-up. Hydropath manufacturers a particular variant of hydroflow product for the oil industry. These are called "Clearwell" products. They are intended particularly to prevent scale build up in well head pipelines. The products work by generating an electric field within the pipe and the liquid inside this field encourages scale bicarbonates to precipitate in the solution as opposed to against the pipe wall.

Products in this case were purchased by Weatherford under the terms of an agreement with Hydropath. At the same time the parties entered into a tripartite agreement with Clearwell International Ltd, which is a Hydropath affiliate and a holding company for the Clearwell intellectual property.

Essentially, the product in question is mounted on a section of pipe which will carry oil or related-type products. It is said to be common ground that the products provided are liable to produce sparks when a connection is formed between either side of the pipe on which the product is installed.

Weatherford say in these proceedings that this sparking makes the product unsafe and in breach of the supply agreement. They refer to what is said to be "an array of warranties" in the supply agreement, but this is substantively and substantially disputed by Hydropath.

There are various related third party type proceedings to which Clearwell is a party. It seems to be Weatherford's position that as a result of the dangers created, they say, by the facility, or possibility at least, that the products produce sparks, they can no longer market the products in that form. They have lost, they say, business as a result.

There is a counterclaim by Hydropath who suggest that the claimant has misused and abused their intellectual property in a number of respects. I am told that the claim may run to millions of pounds, although it has not yet been quantified. The counterclaim is, as far as I can tell, rather more modest than millions of pounds.

The proceedings have always been in the Technology and Construction Court. However, perhaps because of the experience of those advising the parties on each side, when the matter came up for the first main case management conference in February 2013 the court ordered a trial on 2 December 2013. Apart from orders relating to expert evidence, the court made, no doubt at the suggestion of one or more of the parties, provision for reliance on facts obtained by experiments.

In paragraph 6 of the order, the court ordered this:

There has been a certain amount of coming and going procedurally in this case, the rights and wrongs of which I do not need to go into, but in November 2013 the court (I infer reluctantly) adjourned the trial. It was agreed by the parties that the case by that stage would not be ready for a trial in December 2013, so a trial was fixed to start on 16 June 2014. The experiment provision was altered, so that paragraph 6(a) of the order was to be read as 24 January 2014.

For reasons which I do not need to go into, that was altered at another hearing before Stuart-Smith J on 13 February 2014, whereby the date by which the defendant and third party may serve the notice described under paragraph 6(b) of the order was to be extended to 4.00 pm on 7 March 2014. So the process, subject to court order, was to be concluded by 7 March 2014.

I hasten to say the parties have expert evidence experts lined up, who doubtless in the January, February, March period, were working hard towards producing their reports, which have arrived (but I think late) after the latest order.

The parties came before me on 2 April 2014. There was a discussion about experimental proof. In paragraph 6 of the order, having made various other orders in relation to various notices of experiments having been provided by the claimant to the defendant and to provide procedures in relation to that which enabled liaison between the parties and their experts in relation to such experiments, I ordered this in relation to the defendant:

It was clear that at that stage Mr Booth QC, on behalf of the defendant, was reserving his client's position. However, it was in relation to experimental proof which had not yet been implemented. The whole idea of that order -- I do not think there is any challenge to my recollection about this -- was that, if the defendant wanted to carry out some more experimental tests, because of the time constraints it would be done in liaison with the claimant's solicitors and experts who could attend, to obviate the need for repeat tests, if they were to be done, so that time would not be misspent.

Unknown to me (or if known I certainly was not consciously aware of it), shortly before that case management conference on 27 March 2014, the claimant's solicitors had written in relation to testing conducted under the supervision of the Health and Safety Executive, done by a company called Intertek UK in relation to the units in issue in the case.

These tests had been done over a period in January to March 2013, although it appears they were initiated before that time. They resulted in a report dated July 2013 produced by Intertek which appears to confirm, based apparently on three successive test runs on the equipment and unit in question, that sparks generated did not cause ignition of the test gas mixture for 1,000 revolutions of the test equipment.

I have been shown that report. It actually shows 12 tests, apparently carried out over a period of time, with three failures out of 12 tests. But it may be that some of the tests were slightly different and so on. I am not qualified to go into the detail at this stage.

It is clear that this report was prepared for the defendant as the client of Intertek, albeit it may well have been prepared to procure or confirm its accredited certification for the equipment being tested.

This testing was referred to in the pleadings for instance in the Re-Amended Defence (and I will not go into the detail) at paragraphs 79(i).5 to 79(i).20 primarily, as well as paragraph 79(j). Reliance is placed on that by the defendant for a variety of reasons.

It is clear in the Amended Reply that, although there is no challenge as such that Intertek did perform spark testing, which is admitted, a number of challenges are made as to its reliability, so far as is relevant in respect of the case. So it was very much in issue, not that the tests were done and not that the report says what it does, to the effect that for a variety of reasons it is unreliable.

For reasons which have not, I am afraid, been adequately explained to the court's satisfaction, the defendant served what it has called its second notice of experiments on 17 April 2014.

There is no doubt that this service of a notice is in breach of the orders which were made. It is not a notice of the type that was envisaged by the order which I made in paragraph 6 of the order on 2 April; it is a notice which should have been served effectively two or more months before.

There is no doubt that the notice is late. There can be no doubt that, if the defendant wished to rely on the tests as such, then it was open to it to serve that notice of reliance, referring to the tests and experiments that were done apparently by Intertek the year before, and serve that notice in accordance with the revised and amended orders of this court. As I said, I do not think there is an adequate explanation as to why this was not done.

It does emerge that the defendant's expert, Mr Senior (whose report has now been exchanged), has simply assumed that the contents are reliable but making it clear that he himself has not done comparable experiments.

It seems to me that this has been put in exceptionally late. The claimant's reaction is to say they would want the opportunity, in accordance with the original procedure, of having the experiments repeated, possibly with variants to be doubtless discussed between the experts. However, there are now less than four working weeks before the trial. One of those weeks is the Whitsun vacation. Although these days not everyone takes the vacation, it is a half-term period for those who have children. So solicitors, clients and experts do have that time, sometimes at least, to plan some time off.

There are only three working weeks in that context before the trial. I am certainly not satisfied that there is anything like enough time, before a properly ordered and programmed trial, for any repeat test to take place.

Mr Vanhegan QC has explained the concerns his clients have and their understandable desire to seek further or repeat tests after consultations. I can understand the desire to do that, particularly since reliance is being sought to be placed on elements (not indeed all) in some of these tests, particularly tests 7 to 12, in which there was one failure, as opposed to tests 1 to 6 in which there were two failures. It may be for good reasons, I know not. But be that as it may, I can understand why repeat tests might be called for.

It is too late, it is too prejudicial, and the court should be slow to allow a procedure which has been established now for well over a year to be amended and altered in the last few weeks leading up to trial. I am therefore not prepared to allow this application, as such, to permit the defendant to rely on the Intertek report.

That said, it does seem to me that the court must, given that it is in the pleading, be able to consider that document. But it does seem to me that the purpose of the experiment regime is to enable, first of all, agreement to be achieved as to the results of certain types of tests. Of course, that is not now possible or practicable within the time available. If they are agreed, then they go in as agreed evidence for what they are worth, albeit that the experts in the case may interpret them differently.

However, here it is clear that the defendant has known for many, many months of these reports. It was the client. It knew the results. Indeed, it pleaded reliance on them. But for reasons which have not been satisfactorily explained to the court, it was not to be part of the experimental regime ordered by the court until just before Easter 2014.

It does seem to me that the documents do need to go into the bundle. For what it is worth, it does seem to me that experts can comment on them. However, it may well be that the weight to be attached to them must necessarily be limited because it is going to be a test which was never capable, as it has turned out, of being challenged or repeated following sensible (one hopes) expert liaison as to any further repeat tests that might be done.

I can see that there might be an extremely limited admissibility, but in that context it is part of what used to be called in criminal evidence issues part of the res gestae, as part of the story. The report says what it does, but the reliability of it cannot in itself be established.

On that basis the application is dismissed.