Contact (Print And Packaging) Ltd v Travelers Insurance Co Ltd

Contents

Introduction

This is a claim under a combined insurance policy in which the claimant seeks payment of monies said to be due under the physical damage and business interruption sections of that policy, arising from physical damage to and the failure of a Heidelberg Speedmaster CD 102 - 6LX printing press (“the Press”) at its print production facility in Stockport on 17 April 2013. The claimant claims £824,683.07 in respect of property damage and £434,139 in respect of business interruption. The defendant repudiated the claim in September 2013 on the ground that the claimant had not shown that the failure was due to an insured cause. The defendant has maintained that position and defends the claim on the same basis. The defendant also challenges the quantum of both claims.

The claim was issued in August 2016 and case managed in January 2017 for trial in November 2017. At trial I heard oral evidence over 7 days from: (a) 5 factual witnesses called by the claimant; (b) 8 expert witnesses called by the parties in the fields of printing presses, structural engineering, metallurgy and accountancy. I had the benefit of written closings followed by oral closing submissions on day 8 before reserving this judgment.

The case was very well prepared by the respective solicitors and also very well presented by leading and junior counsel for the claimant, Mr Plewman QC and Ms Shaw, and by leading counsel for the defendant, Mr Miller QC, to all of whom I am extremely grateful.

My conclusions in summary are that: (a) the claimant has established its case on liability; (b) the property damage claim succeeds in full; (c) the business interruption claim succeeds only as to £18,900; (d) the total of £843,583.07 is subject to a £10,000 deductible, with the result that the total amount payable is £833,583.07

My reasons follow in the sections which appear below. I have included a short explanation of all defined terms in the Glossary at the end of this judgment, such as “the Press” as in paragraph 1 above. I have also referred to pages of the trial bundle as [A/1/001], where A is the trial bundle, 1 is the divider and 001 is the page number and have referred to the relevant passages of evidence in the transcript as ^[1/001] meaning page 1 of the transcript for day 1.

The claimant

The claimant was at the time of the incident in April 2013 in business in the print and packaging industry, carrying on that business at a number of sites including factory premises in an industrial estate at Haigh Avenue, Stockport. Through his shareholding in its holding company the claimant is wholly owned and controlled by Mr Philip Smith. He was at the relevant time the chairman of the company, having divested himself of day to day involvement in around 2008 and having appointed a managing director, a Mr Mealyou, to run the business in his place along with the existing management team. He retained a strategic involvement and was not wholly remote from the business, being involved in the important decisions, but he did not have the detailed hands-on knowledge which he would have had when he was managing director. After the incident he instructed a loss assessor known as Mr Noel to deal with the insurance claim and, again, mostly left the detail to Mr Noel and the relevant officers and employees of the company. Again, he retained a strategic involvement and was involved in the major decisions but not in day to day management. The claimant sold its business in November 2015 to a company known as Glossop Carton & Print Limited but excluded the right to bring this claim from that sale.

It is worth making some reference at this point to the criticisms made by Mr Miller as to the scarcity of the claimant’s disclosure and the absence of some witnesses who he submitted ought to have been called by the claimant.

As to the former, the evidence is that the claimant operated three principal IT software systems: the first being a business management package designed for the print and packaging sector known as Shuttleworth; the second being a financial package which interfaced with Shuttleworth known as Access and the third being an email package provided by Gmail for both internal and external communications. The systems were run on a number of workstations and desktop computers. Following the business sale the claimant decided, for understandable financial reasons, not to renew the annual operating licences for Shuttleworth or Access. The claimant also failed, for less understandable reasons, to take any steps to investigate the possibility of ensuring continuing access to the relevant historic data for the purposes of this claim, whether from Glossop as the purchaser (by way of access either to the data or to the hardware from which the data was accessible) or from the suppliers of the relevant software. It would appear that the claimant gave no thought at all to the possibility that more relevant documentation might be required than had already been obtained in the event that this claim was pursued. This was despite the fact that the claimant had already instructed its previous solicitors to write a letter of claim to the defendant in September 2014, well before the business sale took place.

When the adequacy of the claimant’s disclosure arose, shortly before trial, the claimant discovered that although it would be possible to obtain access to the information from Shuttleworth and Access the time needed to do so would prevent the information from being made available before trial and that it would not now be possible at all so far as the Gmail emails were concerned. Mr Smith said under cross-examination that he did not think that any further information which Shuttleworth or Access might have would take matters any further and neither party pursued that further before me. However, it was clear that Mr Smith had little if any direct or detailed knowledge as to the sources of information which might have been available on Shuttleworth or Access or, indeed, what further relevant emails or attachments might have been available had access to those emails been preserved. In those circumstances the view I take is that where the claimant might reasonably have been expected to provide more documentation in relation to a particular issue but has not done so I should not give it the benefit of the doubt in relation to that issue in circumstances where it has failed to take proper steps to ensure that relevant electronic information was preserved for the purposes of this claim. Whilst I consider that this does apply in relation to documents which would have been of undoubted relevance in relation to quantum, I am not persuaded that there is any realistic likelihood that there are documents relevant to liability which existed and which were not but could have been disclosed had proper steps been taken. The most that the defendant can say is that there might, for example, have been some relevant internal emails recording faults with the Press or some relevant external emails with the maintenance company of a similar nature. In my view however there is no basis from the documentary and oral evidence which the claimant has adduced at trial for me to consider that this is likely to be the case.

As to witnesses, Mr Smith was the only witness called as a present or former officer or employee of Contact itself. He had limited direct knowledge of a number of significant matters relating to liability and quantum and there were several important respects in which he simply referred to what he had been told in circumstances where there was little or no hard evidence as to who had told him what and the reliability of that source. There were a number of witnesses who could have been called by the claimant to give relevant evidence but who were not called. I fully accept the difficulties faced by a company which has sold its business and no longer employs many of the employees who were involved at the time. However there has been no evidence as to what steps were taken by the claimant to locate and obtain statements from any number of potentially relevant witnesses other than what Mr Smith said when asked under cross-examination.

Nonetheless this is not a case where I consider that I must or should draw adverse inferences against the claimant on a particular issue as a result, since it is not a case (unlike Wisniewski v Central Manchester Health Authority [1998] PIQR P324, often cited in such contexts) where it can be said that the claimant knew or ought reasonably to have known that a particular witness had important evidence relating to a significant issue and, hence, ought either to have called that witness or provided an acceptable explanation as to why not. There is no suggestion that the defendant ever notified the claimant that its failure to call one or more specified witnesses to deal with one or more specified issues would result in the defendant making a submission along these lines at trial.

However I do accept that where the evidence the claimant adduced on a significant issue was limited to second hand non-specific evidence from Mr Smith and where the claimant might reasonably have been expected to take at least some steps to obtain a statement from a witness in relation to a particular issue I should not give it the benefit of the doubt if there is no evidence that it did take any steps and reason to believe that the witness could have been called.

As regards the application of that approach I must first consider the employees who were working on the Press before and at the time of the failure. The claimant was asked and agreed to make available those of its employees who the defendant might wish to interview in June 2013 and Mr Hill conducted recorded interviews with Mr Smith, Mr Hooley (the operations manager), Mr Grimley (a press operator), Mr Hackney (a night shift press operator) and Mr Norbury (the print machine minder) at that time. Mr Hooley, Mr Grimley, Mr Hackney and Mr Norbury were all present at or around the time of the incident and were all able to and did give evidence as to the events in question. In the first interim progress report on 25 June 2013 Mr Hill recorded that these statements and the records produced by the claimant are “a fairly consistent account of events”. The defendant never subsequently suggested that it contested the evidence of these witnesses or that it required the claimant to produce witness statements from these witnesses to confirm the truth of what they had said in June 2013. In those circumstances I reject the suggestion that the claimant ought to have called those witnesses at trial or that I ought not to treat their evidence as recorded by Mr Hill as anything other than reliable.

So far as other potential witnesses relevant to the liability issues are concerned, Mr Smith was asked about Jeff Faulkner, the production director who was primarily responsible for the project to construct the new premises at Haigh Avenue and the acquisition of the Press. However he left the business in 2000 and is unlikely in my view to have been able to provide any more information than is evident from the documents which are available and from the evidence of Mr Wardingly who was called as a witness, thus I do not think that anything of significance turns on his absence. The claimant was also criticised in closing submissions for failing to make any enquiries of the main contractor or piling subcontractor who were involved in the construction of the foundations and the base and plinths which supported the Press. I accept that it might have been sensible for the claimant to have at least approached these businesses to see if they had any further documentation available however, I doubt it is likely that: (a) they would have retained any material more than 12 years after they were last involved; (b) any specific individual might reasonably have been expected to have any particular recollection about what was, on Mr Wardingley’s evidence, an uneventful project. The defendant has never identified any crucial point of factual evidence which it needed to address. The claimant was also criticised in closing submissions for failing to call Mr Allen as the representative from the manufacturers Heidelberg to speak to the investigations his team undertook and the reports he produced or Mr Ridling the engineer at Clancy Consulting who undertook a ground investigation after the failure. However in my view the claimant was perfectly entitled to take the view that these documentary records spoke for themselves and that there was nothing specific in issue about which their oral evidence was obviously material. In any event having considered the reports in question no specific factual issues have been identified by the defendant in respect of which it could be said that witness evidence would have been of importance. Moreover, there was nothing to prevent the defendant from approaching any of these companies if they believed that they might have relevant documents or that the men mentioned might have important factual evidence. The claimant is not in the position of a prosecutor who is in some way obliged to tender any witness who might have evidence which might assist the defendant’s case.

There were also various other employees working in the production team about whom Mr Smith was asked and in respect of whom he said that he was no longer in contact. I do not consider that the claimant can be criticised for not taking specific steps to make contact with them even though I do accept that it was unsatisfactory that Mr Smith had in his witness statement made specific reference to two as explaining his source of knowledge when upon being asked it became apparent that he had no particular recollection of any particular conversation with either in relation to what was in his statement.

The defendant also complained about the failure to call all of the service engineers from the maintenance company, BBR Graphic Engineering, which maintained the Press in the 12 months prior to the failure. The complaint was made that although the claimant called the principal Mr Ross and the service engineer Mr Curran who attended both before and after the incident, they did not call other service engineers and in particular a Marc Verity who had attended in August 2012 and upon whose record the defendant placed some reliance. I consider this submission misconceived. The defendant saw the records on disclosure. In the same way as with the main contractor and piling subcontractor the defendant was perfectly entitled to approach the maintenance company and seek permission to interview Mr Verity (or anyone else for that matter). There is no basis for any suggestion that the maintenance company has such a close relationship with the claimant that it would have refused to assist the defendant. The defendant never called upon the claimant to ensure that Mr Verity provided a witness statement and was called. The defendant did not in its statement of case or expert evidence make it clear that in its view this witness was important. In any event having heard the evidence I am quite satisfied that with the benefit of the evidence of Mr Ross, Mr Curran and the experts I am able to make clear findings as to the relevance of that attendance and that visit.

I do however consider that the position is less impressive so far as the quantum of the business interruption claim is concerned. In particular Mr Smith was asked about Mr Harris, the finance director responsible for the print and packaging business at the time, who left the company recently but with whom Mr Smith was still in contact. It was clearly likely that he could have given relevant evidence about the detailed financial affairs of the company at that time, especially in circumstances where the claimant’s ability to give adequate disclosure of the relevant documentary records was so circumscribed. The same may be true about the then managing director Mr Mealyou. Although reference was also made to Mr Garsforth, the group finance director at the time, since Mr Smith said that he had since died his absence is not something about which the defendant can complain. Finally reference was made to Mr Walker who is the current financial director, in position since 2014, and who could clearly have been called to give evidence, however it is not immediately apparent what important evidence he could have given since he was not involved in 2013.

The defendant

The defendant is an insurance company. Although it was directly involved in the investigation of the failure it did not call Mr Neave the senior claims handler who was involved at the time to give evidence, preferring instead to rely on the evidence of its loss adjuster Mr Hill. No point was, however, taken as to the defendant’s failure to call Mr Neave or to explain the decision not to call him and it is not immediately obvious what relevant evidence he could have added to that given by Mr Hill.

The factual witnesses

I heard oral evidence from five witnesses of fact called by the claimant, all of whom were in my view plainly honest witnesses. I also received in evidence a witness statement from Mr Hill for the defendant who could not attend due to ill-health.

Mr Smith is the ultimate owner of the claimant and this claim is effectively his claim. He was, I accept, honest and generally reliable although I do not accept his uncorroborated evidence uncritically since: (a) he was not directly involved in the running of the business in or around 2013 and thus much of his evidence was of a hearsay nature from his general understanding and discussions with employees who had not been called; (b) he was plainly extremely aggrieved at what he regarded as the defendant’s unjustified and unheralded repudiation of liability, which he considered had caused the claimant serious financial difficulties ultimately leading to its forced sale and I so consider that the strength of his view adversely affected in part the quality of his recollection.

Mr Wardingley is a retired engineer who was a former director of the Furness Partnership, the engineering consultancy which designed the foundations for the Press. He was a knowledgeable and a reliable witness, doing his best to assist the court notwithstanding the effect on his recollection of the passage of time from his last substantive involvement in 1997-1998. I accept his evidence without any material reservation.

Mr Noel is a loss assessor whose practice was engaged by the claimant in relation to this claim. As might be expected his recall of the details was after this lapse of time a little hazy but he was in general terms reliable.

Mr Ross is a director and shareholder of BBR Graphic Engineers, the company which maintained the Press over the years prior to the failure and which sourced and sold a replacement press to the claimant after the failure, taking the Press in part exchange. He was a knowledgeable and reliable witness and I accept his evidence on matters within his own knowledge, although not in relation to those parts of his witness statement which strayed into opinion evidence in circumstances where he was not called as an expert nor did he have the same detailed knowledge of those who were called as experts.

Finally Mr Curran is a print engineer who was an employee of BBR and had attended the claimant’s premises to maintain the Press on a number of occasions before the failure and who had also been called out after the failure itself. There were some minor inaccuracies in his witness statement and he had some difficulty in remembering the precise details of his inspections. On occasions during his cross-examination he became frustrated by difficulties in communicating his evidence both because of the difficulties inherent in giving that evidence by video link but also because he struggled to understand the lawyers’ inability – as he perceived it – to understand the detail of the technical matters. Nonetheless he was clearly knowledgeable about the Press and its operation and had a reasonable recollection of events and I accept the substance of his evidence albeit not in every last detail.

The printing press experts

The claimant called Mr Brian Sims and the defendant called Mr Julian O’Donnell. Mr Sims had been instructed in February 2014 and had produced an initial report in April 2014, addressing the question whether the Press failed due to a sudden and unexpected event or due to fatigue. Both he and Mr O’Donnell, who had only recently been instructed, produced reports in August 2017 and a constructive and helpful joint statement in October 2017.

Both experts had substantial practical experience of printing presses such as the Press. Although Mr O'Donnell had always specialised in Heidelberg presses whereas Mr Sims had, in the principal part of his career, greater experience of a different manufacturer’s presses I do not think that this afforded Mr O'Donnell any particular advantage in this case, since the issues they had to consider were not unique to Heidelberg presses.

Mr Sims had also, quite fortuitously and coincidentally, seen the Press and inspected samples of its products some 5 months before the failure. He had also seen samples produced shortly before the failure which Mr O'Donnell had not, which gave him a particular advantage when it came to considering the issue as to whether or not the products made by the claimant before the failure had showed any evidence of problems with print quality. Mr Sims’ reports were also rather more detailed and more closely reasoned than was Mr O'Donnell’s report.

There was little real dispute between them. Insofar as there was a difference I am inclined to prefer the opinions of Mr Sims on the basis that he had been able to and had, both in his reports and evidence, devoted a greater degree of time and thought to the issues in the case than had Mr O'Donnell.

The structural engineering experts

The claimant called David Cherrett and the defendant called Gary Brown. They were very different in their experience and in their approach, but both were capable witnesses, able to withstand skilful and forceful cross-examination from Mr Miller and Mr Plewman respectively.

Mr Cherrett is a structural engineer with great experience in the design and installation of foundations for printing presses, working at this stage of his life on a semi-retired consultancy basis. He appeared to me to have good experience of the practical side as well as in relation to the theory of structural engineering. Mr Brown is a structural engineer who has wide experience of structural engineering generally but none in the specialist field of printing presses. In general terms he appeared to me to be less strong on the practical side than was Mr Cherrett. Mr Brown did have the advantage of having been involved from an early stage and having inspected the site both whilst the Press was damaged but still in place and after its removal and having inspected the plinths. Neither however had conducted their own ground investigations and, thus, were largely reliant on the same material so far as the ground conditions and foundations were concerned. Accordingly it did not seem to me that Mr Brown had any particular advantage over Mr Cherrett in those respects.

Mr Miller submitted that Mr Cherrett had failed to start at the right point because he had begun by assuming – in fairness to him in accordance with his instructions – that there had been an apparent foundation failure or movement which had caused the failure of the Press, rather than by considering whether there was any evidence to support the assumption that there had been a foundation failure which had caused the failure of the Press. I consider that the criticism is justified to an extent; whilst Mr Cherrett cannot be criticised for proceeding in accordance with his clearly stated instructions he can be criticised for not making it clear in his report that ordinarily he would as an independent expert have wanted to consider the evidence for and against that assumption. Mr Miller also submitted that Mr Cherrett had failed to engage with the difficulties caused by the absence of positive evidence to support his conclusion that the assumed foundation had been caused by subsidence. I consider that this criticism is also justified to an extent; Mr Cherrett can be criticised for not addressing in any detail the reasons for and against subsidence having occurred as a result of any plausible external event. Subject to those caveats my impression of him was as an independent, knowledgeable and reliable expert witness with a wealth of practical experience in the particular field.

Mr Plewman submitted that Mr Brown had adopted a partisan approach to the case and made assumptions adverse to the claimant and favourable to the defendant in circumstances where neither of which were fully justified by the evidence available to him or by his experience in designing press foundations. He pointed to errors in Mr Brown’s pre-action report of August 2013, where a number of these assumptions were to be found. He also submitted that Mr Brown had adopted a partisan approach in giving evidence in that he had argued every point rather than making sensible concessions. He also submitted that it was ironic that Mr Brown had relied heavily in reaching some of his opinions on the absence of positive evidence in favour of subsidence which could have been derived from a full contemporaneous investigation when he had been in a position to have recommended to the defendant’s loss adjuster that this be undertaken had he thought it necessary at the time. Again I consider that these criticisms are all justified to some extent. I have formed the clear view upon re-reading Mr Brown’s reports and comparing them with what he said in cross-examination that his position has shifted in a number of significant respects over the course of his involvement in the case, always with a view to finding another argument to support the defendant’s case. In particular his criticisms of the Furness design appear to have evolved from an initial stance that there was no design other than the limited design details shown on the Furness drawings to a more detailed series of criticisms – which only emerged item by item through the course of the case – once he became aware that Mr Wardingley’s evidence would be and was that Furness had produced a specification which required the piles to be taken down to natural ground and would have measured compliance against piling logs during the course of the project. I therefore approach his evidence on these important issues with some scepticism. Subject to these caveats I accept that he was also generally independent, knowledgeable and reliable.

Where there are significant issues between these experts which I must resolve I do so based on my assessment of the weight of their respective opinions on those issues without preferring the evidence of one over the other in every such respect, save that for the reasons I have already given: (a) in relation to practical matters, where experience of the design and installation of foundations for printing presses in particular is concerned, I tend to prefer Mr Cherrett’s opinion; (b) I reject Mr Brown’s criticisms of the Furness design; (c) where I have to make a decision based on my overall assessment as to whose evidence I prefer I do so on the basis that I prefer Mr Cherrett’s evidence to that of Mr Brown.

The metallurgist experts

The claimant called Mr Michael Broadhurst and the defendant called Mr Miles Hammersley. Both were extremely impressive witnesses with undoubted expertise in the field of metallurgy. They clearly enjoyed a good working relationship and respected each other’s expertise and they had produced a detailed and helpful joint statement. Whilst they agreed on much they were unable to agree on a fundamental issue, which is whether or not the majority of the damaged gear teeth had been damaged as a result of overload or of fracture. The case was argued on the basis that a finding of overload would strongly support the claimant’s case whereas a finding of fatigue would strongly support the defendant’s case and, thus, it is an issue of considerable significance which I must resolve if I am able.

In the same way as with the structural engineers Mr Hammersley had been involved with the investigation from the outset whereas Mr Broadhurst had been brought in at a later stage. Mr Hammersley had the advantage of having seen the damaged gears in place before the Press was removed and had also inspected more of the gears than had Mr Broadhurst. However, Mr Broadhurst had inspected all of the important gears and where he had not inspected a particular gear he properly deferred to Mr Hammersley’s evidence in that respect. I did not think that Mr Hammersley’s having seen the gears in situ gave him much, if any, advantage over Mr Broadhurst given that both of their evidence was based on a close examination of the individual teeth of the individual gears, notwithstanding Mr Hammersley’s assertion in cross-examination^[5/113-4] to the contrary. Moreover, both had been able to conduct a detailed inspection of the most significantly damaged gears and had also broken open two of the cracked but intact teeth in order to inspect them under laboratory conditions.

Mr Miller submitted that Mr Broadhurst had unjustifiably assumed in [3.7] and [4.2] of his report that the reported misalignment of the plinths was due to subsidence and had caused the failure of the gears by overload whereas those were assumptions which he could not properly make on the basis of his expertise. I do not accept these criticisms. Mr Broadhurst had made it plain in [1.3 & 1.4] of his report that he was relying on the evidence of Mr Sims as well as the Heidelberg report that the plinths had subsided and his conclusion really amounted to his saying that his opinion was that the damage he had seen was consistent with that as the cause of the damage. I do accept that his report could have been better worded in these respects but I do not accept the criticism that his analysis was coloured by a wrong assumption that it had been proved that the plinths and the Press had subsided.

Mr Plewman emphasised that it was Mr Broadhurst who had first identified the one fractured gear tooth which both agreed had been subject to fatigue, whereas Mr Hammersley had not identified that tooth until the joint inspection. He submitted that this demonstrated Mr Broadhurst’s greater observational skill in this field. I agree and also consider that this is illustrative of a wider point, which is that whilst Mr Broadhurst’s expertise and experience, both in education and in practice, is and always has been almost entirely in the field of metallurgy (as he said in evidence “I spend all of my life doing failure investigations”) Mr Hammersley’s expertise and experience has extended to materials science and mechanical engineering as well as metallurgy with, more recently, a focus as an expert witness investigating a wide range of cases across such fields – see his cross-examination^{[5/115-117, 126-127]}. It seemed to me that Mr Broadhurst did have a depth of knowledge in the field of metallurgy and metallurgical failure investigations which Mr Hammersley could not quite match. As much was apparent by contrasting the rigorously detailed approach in the initial technical report which Mr Broadhurst had produced in July 2015 when compared with Mr Hammersley’s first reports to insurers in June and July 2013. Whilst I appreciate that one was in the nature of a formal report as compared with the more informal nature of the latter, nonetheless the comparison is significant not only by reference to the detail but also by reference to the consistency with the reports produced for this litigation, which I address later in this judgment.

I also considered that Mr Hammersley was a little prone to speculation, for example his theory as advanced in the joint statement at [2.3.2] that there had been separate and unrelated progressive fatigue of and damage to two individual gears with one happening to fail before the other, but in each case with no prior indicia of deterioration in print quality, seemed to me to be complete speculation based on no hard evidence and inconsistent with the clear evidence of no deterioration in print quality before the failure.

On balance therefore I prefer Mr Broadhurst’s evidence where there is a conflict between them which cannot be resolved on my objective assessment of the strengths and weaknesses of their respective opinions.

The accountancy experts

The claimant called Mr Donaldson and the defendant called Mr Cameron-Williams. Both were appropriately qualified and in general terms reliable independent witnesses. Although there were significant areas of disagreement between them in my view this was not because of any genuine dispute in their expert evidence but because of the instructions they were given or conclusions they had drawn in relation to disputed factual issues where both were hampered by the absence of relevant evidence from the claimant.

In cross-examination it transpired that Mr Donaldson had relied quite significantly on instructions provided to others in his firm in relation to some of the key issues which whilst not of itself objectionable meant that he had not had the opportunity to test or assess the source of this information. In general terms I accept the criticism that he had not conducted a detailed analysis in relation to the information available as to certain key customers whose business the claimant claimed it had lost due to the failure and nor had he made it plain in his report that his opinion in relation to those issues was based on instructions which were not evidenced in documentation or in witness evidence in anything but the most general of terms.

Mr Cameron-Williams was criticised by Mr Plewman as being partisan in his evidence. I regard him as substantially independent but I do accept the criticism that he was, in some respects, a little partisan. This was probably because, in the same way as Mr Brown and Mr Hammersley, he had also been involved with the case as an investigator and expert adviser for the defendant from the outset before being subsequently instructed to act as its independent expert albeit that his initial involvement was less extensive than those experts. One example was that the summary in his report of a meeting on 10 May 2013 was somewhat skewed in the defendant’s favour when compared to his contemporaneous notes. Another example was that under cross-examination – which admittedly was intensive and forceful – he was rather too ready to argue the case for the defendant rather than limit himself to giving non-partisan answers.

In the circumstances I do not accept the opinions of either expert uncritically and reach my conclusions in relation to areas of dispute on the basis of my assessment of their evidence tested against such reliable contemporaneous and other evidence as there is.

The Policy

There is no dispute as to the terms of the Techsure insurance policy, which was a type of policy specifically written for the technology sector, nor that it included cover for both property damage and business interruption.

The property damage section covered damage both to buildings and to machinery, plant and all other contents. Damage was defined as meaning “accidental loss or destruction of or damage” of the insured property.

Exclusions applicable to the property damage section included as relevant to this case:

However the subsidence exclusion was subject to endorsement PD01 which stated that notwithstanding exclusion 6(a) the cover was extended to include “damage caused by or consisting of subsidence … excluding (b) damage caused by or consisting of (i) the normal settlement or bedding down of new structures; (ii) the settlement or movement of made-up ground; … (iv) defective design or workmanship or the use of defective materials”.

It is rightly common ground in this case that the failure of the Press fell within the principal words of the breakdown exclusion. It follows that it is necessary for the claimant to prove that the damage resulted from another cause not otherwise excluded. The claimant’s case is that this was subsidence.

It also follows that if the damage to the Press was caused by subsidence then that damage is covered unless itself excluded by the specified exclusions appearing in PD01.

There are a number of issues of construction arising from the way the property damage section is worded.

The first is that there is no express definition of subsidence or settlement in the insurance policy.

The ordinary dictionary meaning of subsidence is to be found in the Oxford English Dictionary, which defines subsidence as including “4. The more or less gradual sinking or caving in of an area of ground due to geological forces, mining operations, etc.; (also) the sinking of a building or other structure into the ground”. The Oxford English Dictionary defines settlement as including “12. A sinking down or subsidence (of a structure, loose earth, etc.)”.

The expert structural engineers were asked to consider the two terms in their joint statement and said that:

“We agree and understand subsidence to mean the downward movement of a building and its foundations caused by a loss of support of the site beneath the foundations. For this to occur 14 years after construction can only be due to an external influencing factor on the ground.”

“We agree and understand settlement to mean the downward movement of the ground beneath foundations when the weight of a building is applied.”

In oral evidence they agreed that in practice subsidence is movement of structures due to the movement of the ground beneath due to the operation of some influencing factor other than the force applied by the structure itself, typically by some external influencing factor, an obvious example being the abstraction of water from clay due to tree root activity causing a loss of moisture and contraction of the clay.

In their joint statement they also referred to the definitions of subsidence and settlement contained within the Institution of Structural Engineers document entitled Subsidence of Low Rise Buildings and also as adopted by the Financial Ombudsman. As to the latter the Financial Conduct Authority, as the predecessor of the Financial Ombudsman, adopted a definition of subsidence as being “downward movement of the ground beneath the buildings other than by settlement” and a definition of settlement as being “downward movement as a result of the soil being compressed by the weight of the buildings within ten years of construction”. More detailed descriptions were also given by the Financial Ombudsman as follows:

“Subsidence is the downward movement of the site on which a building stands - where the soil beneath the building's foundations is unstable. The movement is not caused by the weight of the building”.

“Settlement is usually the downward movement of the site on which a building stands caused by the weight of the building. Occasionally it can also be “self-weight” - where the weight of material used to make-up the site compacts the soil beneath it”.

I have referred to this in some detail because there is a potentially important disagreement between the parties as to the breadth of the settlement exclusion at 6(d). The claimant’s case is that it has the same meaning as in endorsement PD01 so that it only excludes normal settlement of new structures as well as normal bedding down of new structures. The defendant’s case is that it excludes normal settlement regardless of whether it is of new or old structures. The argument for the defendant is that, in contrast to PD01, the absence of the word “the” at the beginning means that the former meaning applies. I have no doubt that this is wrong. An ordinary person would be surprised if the meaning of the same words in two clauses of the same insurance policy could differ significantly solely depending on whether the introductory “the” is present or absent. The obvious explanation for the difference is that in exclusion 6(b) the word “the” is omitted for consistency given the preceding exclusion whereas in PD01 it is included for the same reason. In my view the meaning of both is clear; it excludes damage caused by what is to be expected as the normal settlement or bedding down process when a new structure is erected on land. Damage caused by settlement from some other cause which would not be regarded as normal, for example settlement of a structure erected more than around 10 years ago, would not be excluded, unless it fell within another exclusion. The practical significance of this analysis in my view is as follows: if the failure of the Press was caused by ground movement it is not necessary for the claimant to demonstrate that the ground movement was due to some specific external factor; it is sufficient for the claimant to demonstrate that the ground movement was not due to normal settlement of a new structure or some other excluded cause.

There was also some debate as to the burden of proof. It is accepted that the burden of proof lies upon the insured to prove that the event or damage falls within the scope of the cover whereas it is for the insurer to show that the event or damage falls within the scope of any exception to that cover (save where it is not a true exception but a provision limiting the extent of the general cover). In other cases the insured might have been able to argue that once it had shown that the damage was accidental damage it was for the insurer to prove that it fell within an exception or, in a case of subsidence, within one of the exceptions to that endorsement. However in this case because, as I have said, it is rightly accepted by the claimant that the damage falls within the breakdown exception it follows that the burden lies upon the claimant throughout to prove that the damage results from a non-excluded cause.

As to the quantification of any claim, the specified basis of settlement provided that the amount payable would be calculated on the basis of “reinstatement”, which was defined as “the rebuilding or replacement of property sustaining damage which provided the liability of the [insurer] is not increased may be carried out in any manner suitable to the requirements of the insured” or “the repair or restoration of property insured lost or damaged” and in each case “to a condition equivalent to or substantially the same as, but not better than or more extensive than its condition when new”.

The debate in this case in relation to property damage is whether or not the claimant is entitled to claim the cost of a second hand replacement press or is limited to the cost of repairs to the damaged Press. It is common ground that the question is one of what was necessary and what was reasonable in all of the circumstances which, inevitably, is intensely fact-sensitive. Both counsel observed that this was also the test for claiming additional expenditure under the increase in cost of working cover provided as part of the business interruption cover. There was however a difference of emphasis, in that Mr Plewman for the claimant contended that: (a) the court should have regard to the claimant’s overriding entitlement to be reinstated by obtaining a press the condition of which was “equivalent to or substantially the same as” the insured press when new; (b) the court should not determine the issue with the benefit of hindsight, in the same way as it would not do so when determining an argument of failure to mitigate, whereas Mr Miller contended that the court should determine the issue on a purely objective basis. In my view the court should determine the issue: (a) by reference to the claimant’s contractual entitlement to reinstatement, but also by reference to the insurer’s contractual right not to be liable for the increased cost of carrying out reinstatement in any matter suitable to the insured’s requirements; (b) by reference to the information which was or should reasonably have been available to a prudent insured at the time of making the decision whether or not to repair or replace, but not otherwise. Insofar as relevant I do not consider that the principles applicable to mitigation – which of course only apply where the claimant has already been the victim of a breach of contract or tort and, hence, are understandably favourable to the injured party – should apply in full force to a claim under an insurance policy, when the insured is not in the position he is due to a prior breach by the insurer.

The business interruption section covered both reduction in turnover and additional increase in cost of working in the event of damage to property in consequence of which the business carried out at the business premises was interrupted or interfered with. In such circumstances the defendant agreed to pay the amount of loss resulting from such interruption or interference in accordance with the applicable basis of settlement which, in this case, was Code GP.

The reduction in turnover was to be ascertained by applying the rate of gross profit (being the rate in the financial year preceding the date of damage) to the amount by which the turnover during the indemnity period (of up to 12 months) fell short of the turnover during the equivalent preceding period in consequence of the damage in question. In ascertaining the rate of gross profit and the turnover in the preceding period such adjustments were to be made “as may be necessary to provide for the trend of the business and for variations in or special circumstances affecting the business either before or after the damage or which would have affected the business had the damage not occurred so that the figures thus adjusted shall represent as nearly as may be practicable the results which but for the damage would have been obtained during the relative period after the damage”.

It is clear, therefore, that what was required was an intensive enquiry into the performance of the business before and after the date of the damage to ensure that the claimant was indemnified against any loss of gross profit suffered as a result of the damage but not any loss of gross profit due to other unrelated causes.

The increase in cost of working was to be ascertained by reference to the “additional expenditure reasonably and necessarily incurred for the sole purpose of avoiding or diminishing the reduction in turnover which but for that expenditure would have taken place”, limited to the gross profit on the reduction avoided.

Finally, I should record that the defendant had pleaded an argument founded on general condition 5, applicable to both sections, which required the insured at its own expense to take all reasonable precautions to prevent or diminish loss or liability arising in connection with the insured risks. In opening Mr Miller said that he reserved the right to rely on that argument depending on how the evidence emerged, but that argument was not expressly advanced in written or oral closing submissions, rightly in my view since there was no evidence to support it and since I would not have accepted the argument even if it had been persisted with.

The design and construction of the Press foundations

In around 1996 the claimant took the decision to purchase land at what was then a derelict site at Haigh Avenue with a view to constructing a new 30,000 ft² purpose-built manufacturing unit on the site. It arranged for a company known as Easter & Beswick Construction to design and build the premises and arranged for the site to be surveyed by a company known as Geo-Research in order to ascertain the relevant ground conditions. Once the new unit was constructed it decided to buy a printing press to install and to operate in the unit. It chose the Press, which was an ex-demonstration printing press manufactured by Heidelberg, who enjoyed a good reputation for the quality of their products.

It was always known that the Press would need to be supported on a specialist base due to the need to ensure that the exacting performance criteria demanded of the Press were met. Accordingly, in 1997 it arranged for a specialist consultancy known as the Furness Partnership to design the foundations and base for the Press. There is no doubt that Furness had specialist expertise in the design and construction of heavy foundations, particularly those intended for large print presses such as the Heidelberg. They are only one of only two such consultancies recommended by Heidelberg. The process was undertaken by Mr Wardingley with assistance from others in the practice.

It has not been possible to establish a full picture of the design and construction of the premises and the Press foundations from contemporaneous documentary evidence. That is not surprising since the design and construction took place some 20 years ago and it is doubtless common to discard or, as Furness did, to “thin out” their files after 12 years. There is, however, sufficient documentary evidence, when read with the benefit of the oral evidence of Mr Wardingley and the assistance of the expert evidence, to enable me to make findings with reasonable confidence.

It is important to distinguish between the design and construction of the foundations for the premises as a whole and the design and construction of the foundations for the Press, which was to occupy a small part of the overall premises.

As to the former, beginning with the site and ground survey, the purpose of the survey by Geo-Research in early 1996 was to provide information for the planning, design and construction of the building as opposed to the Press. They arranged for 7 boreholes to be taken to enable them to obtain information about ground conditions, which revealed that across the site there was made ground of variable quality and to variable depths, between 1.7m and 5.1m: main report at [5.1]. Below that was natural ground comprising variable sands and clays. They noted that piled foundations could be used to transmit relatively light loads into stable subsoils encountered between 1.8m and 5.45m: main report at [6.3]. They recommended that vibro-compaction or similar techniques could be used to improve the variable made ground: first report at [6.4].

An issue has arisen as to whether the boreholes showed the ground water level in the made ground or the natural ground beneath. Standing water was found at depths between 4.2m and 6.2m in the boreholes - main report [5.2] - and, thus, predominantly in the natural as opposed to the made ground. However piezometers were also installed in 4 boreholes (including boreholes 6 and 7, closest to the eventual location of the Press) to monitor the long term variation of groundwater levels – main report [4.1.2] - and that the levels monitored over time in these piezometers as appended to the supplementary site investigation report revealed standing water levels within the made ground. When he was asked about this in cross-examination Mr Cherrett argued ^[4/35] that this did not reflect the natural water level and could be explained by water rising up through the piezometer under artesian pressure. In cross-examination ^[4/169] Mr Brown initially appeared to dispute that the 4 boreholes had identified the standing water levels, which was clearly incorrect, but then subsequently argued that this was only an “instantaneous result” on the day of the strike, whereas the subsequent three month level recording was more reliable. He did however agree with Mr Cherrett’s point that water can sometimes come up the boreholes once sunk.

Unfortunately, this is not an issue which was addressed by the structural engineers in their reports or in the joint statement. On balance I prefer Mr Cherrett’s opinion since: (a) Mr Brown had initially failed either to appreciate or allow that there was an earlier measurement of groundwater level; (b) Mr Brown accepted that the accuracy of the subsequent groundwater levels measurement might be affected by artesian pressure; (c) no groundwater was found by Clancy within the made ground in the July 2013 boreholes, in particular BH2 which went down to 3.5m.

As to the latter, Furness inspected the site and produced its report in December 1997. By this time the new premises had already been constructed.

It is clear from the report that Furness was able to obtain an overall layout drawing and the Geo-Research report as well as to discuss the construction of the ground floor slab with the structural engineer instructed in relation to the construction of the new premises. It is also clear from the report that Furness was aware that a 175mm reinforced floor slab had been constructed and that that the made ground underneath had been vibro-compacted to enhance its loadbearing capacity. There is no reason to consider that this information was incorrect or that the site under the slab had not been vibro-compacted at approx. 2–2.5m² centres as Mr Wardingley said was normal practice. An issue has arisen between the experts as to whether the vibro-compaction was limited to vibrating the existing made ground so as to compact it or whether it also included the insertion of stone columns into the existing made ground once vibrated so as to effect greater ground improvement. I accept Mr Cherrett’s evidence that the Geo-Research report did not recommend stone columns and that there is no positive evidence that stone columns were inserted. In particular I accept the evidence of Mr Wardingley and Mr Cherrett to the effect that if an attempt to insert a pile immediately above a stone column had been made it would have failed almost immediately so that the piling contractor would inevitably have asked for instructions from Furness which would have been to relocate the pile elsewhere, probably adjacent to the stone column. It can be seen from the photographic evidence that this had not happened. For the avoidance of doubt I reject Mr Brown’s view that the piling contractor might simply have abandoned the pile in such a case without having disclosed the failure at the time or it being observed and remedial steps directed by Furness on receipt of the piling logs. I also note that the Clancy boreholes taken in July 2013 did not apparently encounter any stone columns, albeit I accept that Clancy’s boreholes were limited in number.

It is also clear from the Furness report that Mr Wardingley was fully aware that the particular press which the claimant was proposing to install was “highly susceptible to differential movement on the foundations”. As Mr Wardingley confirmed in evidence he was fully aware of the Heidelberg specification which required amongst other things that the foundation should not distort in any direction, whether longitudinal or latitudinal, by more than 0.03mm per metre which is, as is common ground, an extremely demanding specification, significantly in excess of that for foundation distortion for normal buildings. It should be noted here that the specification made clear that subsequent minor planar uniform settlement of the base or substrate which did not distort the press loading points was tolerable. The experts agreed that uniform settlement along the plane does not in itself cause a problem, it is differential settlement causing distortion which is the problem.

The Heidelberg specification also required the surface finish of the base upon which the press was to be installed to be smooth with the surface level to be within +/-5mm of average over the entire length of the base and the surface regularity to be no greater than 5mm over 3m.

Taking this specification into account the conclusion of the report was that the existing construction was not fit for the purpose of carrying the Press without risk of deflection or settlement and that a substantial upgrading was required. Mr Wardingley’s evidence, which I accept, was that he considered that the existing fill was inappropriate to carry any of the load of the Press and its foundations so that a piled design solution was adopted to ensure that the Press loadings were carried by piles through the fill to the better natural ground below.

Mr Wardingley’s evidence was that it was impossible to install piling which could be guaranteed to limit the movement at the surface to the Heidelberg specified 0.03mm/m, which was why Furness never specified that limiting dimension as such. Nonetheless he confirmed that in his view Heidelberg’s requirements were achievable in practice because what he described as his empirical design had worked in practice in many equivalent cases, Furness having designed over 100 such foundations for Heidelberg and similar presses since the mid-1990’s. He was supported in this view by Mr Sims and by Mr Cherrett, both of whom also had direct experience of the demanding specification stipulated by Heidelberg and other similar press manufacturers and of these specifications being achieved in practice by use of similar empirical designs.

As to what the empirical design comprised Furness produced two drawings which it had retained through the thinning out process. They showed that the design involved removing the existing slab in the area where the Press was to be sited and installing two rows of 14 150mm diameter piles, each with a specified safe working load of 150kN, with a new reinforced concrete slab to be laid on top of the piles and two new reinforced plinths to be constructed on top of the slab upon which the Press would rest, the plinths being required simply to bring the Press up to a convenient operating height. Mr Wardingley’s evidence was that this specified safe working load produced a factor of safety of just under 5, so that each pile had a capacity of approximately 5 times the load it would need to carry. Additionally, he said, the piling contractor would build in its own factor of safety. Finally, he said, the reinforced construction of the base and plinths, with stirrups linking the slab and plinths in the form of inverted “T” beams, would operate as a stiffened structure intended to distribute the load evenly as between the piles so as to minimise any differential settlement which might occur as between adjacent piles.

As to this the structural engineering experts agreed that the specified safe working load would have produced a factor of safety of approximately 3 by reference to the most heavily loaded piles. Mr Cherrett agreed that it could reasonably be assumed that a pile designer would follow a recognised dynamic pile design formula and build in a further factor of safety typically of between 2.5 – 3.0, producing a true factor of safety of between 7.5 - 9.0. Although Mr Brown agreed with this – joint statement at [1.2] - he then appeared to discount the second factor of safety on the basis that a pile designer seeking to achieve the standard specification for foundation distortion for normal buildings would also build in this further factor of safety. I do not accept this point, since whilst it may well be true that a pile designer in such a case would also build in an equivalent factor of safety that is irrelevant to the point at issue, since what is relevant is the factor of safety applied to this construction not the factor of safety in comparison with the standard specification. This is one example of Mr Brown having become rather fixated on the difference between the standard specification for normal building and the Heidelberg specification – describing the latter as 66 times more exacting than the former – as opposed to concentrating on the adequacy of the Furness design in the real world.

The experts also considered in their joint statement at [19.4] the issue of the stiffness of the plinths and base. Mr Cherrett agreed that in the extreme event of the complete loss of one pile the foundation would distort in excess of the allowable limit, albeit not such as to cause physical damage to the plinth. He considered that a rigorous analysis demonstrated that the section was relatively stiff albeit that the slope in this extreme event would be “close to the limiting value”. He was not challenged on this evidence. It was consistent with Mr Wardingley’s evidence in cross-examination who was also not challenged by reference to Mr Brown’s opinions as set out in the joint statement. Mr Brown’s position as expressed in the joint statement was that a calculation using linear interpolation demonstrated deflection of 0.3mm/m as compared with the Heidelberg specification of 0.03mm/m and thus that the lack of a specific design specification to stiffen the base and plinth demonstrated a flawed design. However under cross-examination on this^[4/195-199] he agreed that: (1) he had not undertaken any assessment of the suitability of the beam design in his report, even though the drawing which showed the design was available to him; (2) linear interpolation was a “crude exercise” which did not calculate actual deflection; (3) the Concrete Society technical report stated that the calculation which Mr Brown had adopted should not be used to give estimates for deflection; (4) the British Standard for concrete design he relied on was not applicable to the Heidelberg specification; and (5) he had not undertaken a calculation to determine what the deflection of the beam would be in the event of the total loss of one pile. It seemed to me that he had not considered the design of the base and plinths in the context of the adequacy of the overall design on the assumption – contrary to his opinion – that the pile design was satisfactory in itself and built in a significant overall factor of safety and that the pile design had been faithfully executed so that the piles were founded in stiff natural clays. In the circumstances I prefer Mr Cherrett’s opinion - based upon: (i) his greater experience in practice in this area of foundation design; (ii) his more rigorous analysis; and (iii) his holistic analysis of the whole design, including the additional factors of safety applied to the piles - that although the plinths and base would not prevent distortion in excess of the Heidelberg specification in the extreme event of complete loss of one pile, nonetheless it was a relatively stiff structure which was close to that limit and that this, coupled with the design of the piles, meant that overall the design was satisfactory from an empirical perspective.

The drawings produced by Furness did not, however, provide any details as to the precise specification or depth or mode of driving of the piles. This was seized upon by the defendant’s side, including Mr Brown, as demonstrating the inadequacy of the Furness design. Had they approached Furness, as Mr Brown or the defendant would have been perfectly entitled to do, they would have discovered – as he said in evidence and as I accept – that Furness had also produced a specification which Mr Wardingley had only been unable to produce due to Furness’ document pruning policy. Indeed, it is ironic that in the first report produced by a colleague of Mr Brown’s in his absence it was suggested that information as to the allowable settlement of the piles might have been recorded in a specification, so that it was apparent to Mr Brown’s colleague if not seemingly to Mr Brown that this was a distinct possibility.

Although not stated in the report or specified on the drawings I accept Mr Wardingley’s evidence that his design intent was for the piles to extend down to the level comprising stiff clays in the natural ground and that this is probably (he was unable to be definitive, given the absence of the specification and the lapse of time) what the specification would have stated. As Mr Wardingley made clear, once it was known that there was variable made ground at variable depths below the site the foundation design for the Press would have proceeded on the basis that the piles would need to reach clay in the natural ground. His evidence was that he would not have specified any particular depth to which the piles would have to go. His evidence was that what was important was not the depth as such but that the piles would go through the fill and reach the clay in the natural ground at whatever depth it might be found. His evidence was that by specifying driven piles and by specifying the safe working load and by the main contractor providing the piling contractor with a copy of the Geo-Research reports (which he believed would have happened) the piling contractor would know very clearly from the resistance end values when the piles reached clay in the natural ground and that in his opinion no competent piling contractor would terminate a pile before that stage was reached.

His evidence was that there was no need for the specification to direct the piling contractor how it should achieve that design intent. His evidence was that it would always be for the piling contractor as a specialist subcontractor to design the piling system to meet the specification and that he would expect the piling contractor to produce its piling design and its piling logs on completion which he could then check to verify that all was in order and that the natural clay level had been reached. He said that if those details had not been provided he would have insisted that they were supplied before the slab or plinths were laid, failing which he would not have approved the completed works. This evidence was entirely consistent with the evidence of Mr Cherrett, operating in the same field, as to how he would have approached the design of the foundations and how he would have produced a specification, leaving the detailed piling design to the expertise of the specialist piling contractor. I am quite satisfied on the balance of probabilities that this is indeed what happened in this case. Whilst it is true that Mr Wardingley was giving evidence about his general practice rather than what he could actually remember having happened on this particular job, I accept his evidence that this was his general practice and I also accept that if the job had not proceeded satisfactorily that would have come to his attention and steps would have been taken to address it. There is no evidence of there being any such problems with the installation.

The most vigorous debate between the parties and the experts was as to whether what Mr Wardingley specified was sufficient to achieve his design intent and whether what was done achieved the intended result in terms of ensuring that the piles were indeed driven down into the natural clays. As I will explain later in more detail it is most regrettable that what would have been relatively simple and inexpensive tests which would have provided some if not all of the answers to these questions were not undertaken after the Press, plinths and slab were removed. The structural engineers agreed in their joint statement at [3.2] that testing of the piles would have provided valuable and most probably conclusive evidence.

A significant difference between the parties at trial was as to the difficulties likely to be experienced in installing piles through the made ground. Neither Mr Wardingley nor Mr Cherrett considered that it would have been particularly difficult for a specialist piling contractor to ensure that the 150mm top-loaded driven piles specified were driven down into natural ground of the required bearing capacity. In contrast Mr Brown considered that where, as here, the made ground was particularly dense in parts the piles specified by Furness were unlikely to penetrate to the natural soils below and he also emphasised that it was not sufficient for the piles simply to reach the natural soils below the made ground since the natural ground comprised less stiff sand as well as the stiffer clays: joint statement [1.4]. At [20.1] he suggested that the pile design should have included more consideration of the poor and variable nature of the ground conditions and “may have resulted in the selection of augured piles or larger piles with a heavier drop hammer”. When this was put to Mr Wardingley in cross-examination he was clear that in his view the use of the steel tubed end-driven piles was sufficient to penetrate the fill and that the use of augured piles would have been very difficult in those conditions^[1/149].

It was also suggested to Mr Wardingley in cross-examination^[1/47-9] that there was a risk of one or more of the piles not reaching the natural ground due to encountering one of the stone columns produced by the vibro-compaction process and that in order to address this problem bored as opposed to driven piles should have been used. Mr Wardingley rejected this suggestion on the basis that: (a) if, as appears from the plan, the piles underneath the Press were located at 1.00 - 1.25m² centres and the vibro-compaction was at 2.00 - 2.5m² centres there was no particular reason why the piles should encounter the columns, but (b) if they had done so, since the piles would have been unable to penetrate even the top of the columns the piling contractor would undoubtedly have sought and obtained instructions to install the pile in a suitable alternative location. When Mr Cherrett was asked about this^[4/78-82] he agreed with Mr Wardingley and also made the point that there was no evidence that the particular type of vibro-compaction employed in this case had actually involved the creation of stone columns anyway, so that it was only supposition that any were present.

In cross-examination Mr Brown maintained^[4/176] that the specification would have needed to be very prescriptive and would, for example, have needed to dictate the pile type, whether or not the piles should have been sleeved (to ensure that they did not take support from skin friction within the variable fill), the diameter of the piles and the weight of the drop hammer to be used. He accepted however^[4/179] that he had not referred to the need to specify a sleeved pile in his report or in the joint statement and indeed he had agreed in the joint statement that if the piles had extended down to the clay the piles would take support from that clay [10.4(c)]. There is no detailed analysis of the shortcomings in the pile design in the discussion or conclusions sections of his report; the views expressed in answer to issue 20 were as far as Mr Brown went where he simply said this:

“The pile design should have included more consideration of the poor and variable nature of the ground conditions to ensure that the piles were founded and took support from robust and stable soil strata to ensure that settlement was minimised as far as possible. This may have resulted in the selection of augered piles or larger piles with a heavier drop hammer.” (emphasis added)

On this I prefer the evidence of Mr Wardingley and Mr Cherrett as structural engineers with substantial experience in piling foundations for printing presses such as the instant Press and, in my view, with greater practical expertise than Mr Brown. In my view their evidence was consistent throughout and accorded more closely with what would happen in the real world, whereas Mr Brown’s evidence shifted from relying on the absence of any specification to seeking to be more prescriptive about what the specification should have contained once it became apparent that there probably was a specification as well as drawings.

An important question for me to decide is whether or not I can be satisfied on the balance of probabilities that the piles were taken down to the natural clays.

As to that, I accept Mr Wardingley’s evidence in cross-examination^[1/149-150], when asked whether he could say whether all of the piles had penetrated the made ground, that:

“I cannot, but it’s inconceivable that they wouldn’t penetrate the made ground into the clays below. A competent contractor would never finish the – I think I said earlier, the contractor can see quite clearly what the driving characteristics of the piles are and would be able to clearly spot the difference between made ground and the fills and the natural ground below the made ground.”

Moreover, since I am satisfied that Mr Wardingley would have been provided with the piling logs which would have revealed the depth to which the piles were actually installed and the strike rate actually achieved, I have to consider whether or not Mr Wardingley would have accepted piling logs which revealed either that the piles had not been taken down to at least 6m or where even after 6m they had still not achieved the required safe working load. In my view the answer to that question is firmly in the negative. Having heard Mr Wardingley give evidence I am quite satisfied that since he was fully aware of the variability of the ground conditions and, in particular, the possibility of made ground at depths of down to 5m he would not have accepted piles of less than 6m. Although I do not think he was asked that question in terms it is - I am quite satisfied - clear from his evidence as a whole that he was fully aware of the importance of achieving pile length sufficient to go down through the made ground and that he was also fully aware of the varying levels and qualities of the made ground as revealed by the Geo-Research boreholes. He was also fully aware of the fact that vibro-compaction had been undertaken. I have no real doubt that if the piling contractor had reported for example that one or more piles had been driven down only to 4m where they had achieved the requisite strike rate and then terminated Mr Wardingley would have been alert to the risk that there might have been a band of dense fill with the consequential risk that there was a further band of less dense fill or sand underneath and would have rejected them on that basis. I also have no real doubt that in the unlikely event that the piling contractor had produced a piling log that revealed that one or more piles had been driven down to 6m but terminated before the requisite strike rate had been met Mr Wardingley would have refused to accept that either. I have no doubt that in such circumstances he would have refused to approve the work proceeding to slab casting or plinths installation stage and that in such circumstances the main contractor would have insisted that the piling contractor undertake remedial works to ensure that the requisite depth and strike rate was achieved. Furthermore, if anything of this nature had happened I am fairly confident that Mr Wardingley would have recalled it even after this lapse of time and it is plain that he recalled no such problem or difficulty.

Moreover, this conclusion accords with the inherent probabilities. The piling contractor was appointed under a subcontract with Easter & Beswick, the main contractors, about whom nothing negative is known or has been said. The piling subcontractor, M&D Foundations & Building Services, was a specialist piling company known to Mr Wardingley and again there is no reason to believe that is was anything other than reputable. Given that both were at least potentially liable if the Press foundations failed within the defects liability period there is no reason to think that either would have wished to cut corners especially if – as I am satisfied would probably have been the case – they would have been entitled to additional payment had they needed to install piles deeper than tendered for.

Finally, there is independent evidence which tends to show that the piles were founded in natural clays, which is that after the failure the slab under the Press was seen to be at a higher level than the slab in the premises generally (as Mr Brown noted in his August 2013 report). This indicates that whilst the slab founded in the made ground had suffered from settlement of the made ground the slab under the Press had not suffered to the same extent, despite the greater loads transmitted to the slab by the Press. This tends to suggest, as Mr Cherrett explained in evidence and as I accept, that the piles are founded in dense natural ground and thus not affected by settlement of the made ground.

The Press itself was purchased as an ex-demonstration unit from Heidelberg. There was a feeder system at one end. Each sheet of card to be printed passed through 6 separate print units (“PUs”), PU1 through to PU6, with each applying a different colour ink from an inking unit to the sheet as it passed through the unit by means of a print roller, before entering a finishing station where it was lacquered or varnished. In each print unit the impression and transfer rollers (also referred to as drums or cylinders) were housed within a cast iron frame and base, which supported the rollers on either side, with stretcher bars keeping each side frame in an accurate geometric position. The card was passed between print units secured by a series of “grippers” which ensured that it was maintained in the correct position. The Press would typically produce around 10,000 impressions per hour.

The Press had an integrated gear train drive system running from PU1, where the main drive motor was located, through to PU6. Each print unit was driven by a helical spur gear and had four gears. The two largest, which are most relevant to this case, are the triple transfer gear (“TTG”) which was connected to the transfer roller and the impression cylinder gear (“ICG”) which was connected to the impression roller. These meshed with each other through the interlocking of their respective teeth and the gears of each separate print unit interconnected with the gears of their neighbours in the same manner. The ICGs would typically rotate at around 2.8 revolutions per second.

It was vital for the proper operation of the Press that the position of each card as it passed down the line remained in the precise same position as it entered each print unit, otherwise there was the risk of ink being applied in the wrong position with the result that the finished product suffered from what was referred to as “double imaging” or “doubling” (“double imaging”).

In order to ensure the proper operation of the Press it was important to ensure that the clearance gap between each meshing pair of gears when mated together (“backlash”) was between 0.02mm and 0.05mm. This clearance gap was necessary to ensure that the meshing teeth did not bind and potentially lock together and also to ensure that the oil used to lubricate the gears could form a thin film between the teeth thus avoiding excessive wear. The exacting specification for backlash was achieved by the use of spacer pieces between the adjoining print units and maintained by the bolts connecting the print units having a tolerance limited to 0.01 - 0.02mm. It was also necessary to ensure that the base of each print unit was perfectly aligned with the adjacent print unit(s), achieved by each print unit resting not directly on the plinths but on four levelling feet which could be adjusted upwards or downwards as required to obtain the correct level.

The need to ensure that these tolerances were achieved and remained explained the very demanding Heidelberg specification. The installation of the Press was undertaken by Heidelberg. Heidelberg summarised the installation procedure in its letter to the claimant dated 8 November 2013, confirming that the process involved ensuring that the individual units within the Press were fully level as were the gear backlash readings. It was recognised that the load applied by the Press on installation might lead to some initial settlement of the plinths which supported it, so that the process of bolting the print units together and then using the spacer pieces and levelling feet to ensure that the tolerances were achieved was undertaken and confirmed once some time had been allowed for any initial settlement to take place and the tolerances were checked again after allowing some further time to ensure that no further settlement had taken place. All this is consistent with the agreement between the structural engineers that the vast majority of any settlement will occur shortly after the new structure is constructed or installed with only minute further settlement being expected to occur after this in the absence of some external influencing factor.

Whilst as Heidelberg explained it no longer had the contemporaneous documentary records confirming that the installation was undertaken and completed in accordance with its set procedure, there is no reason to consider that it did not adhere to its procedure in this case, as is evidenced by the lack of any evidence of significant problems with the Press during the initial Heidelberg guarantee period or, indeed, subsequently as I refer in the next section.

Installation to failure

The Press was installed and became operational in around April 1998. The Press was used by the claimant for printing cardboard based food and pharmaceutical packaging, including cardboard sleeves for ready meal containers. It appears that by the time the incident occurred the Press had printed around 280 million sheets.

In or around 2004 the claimant decided to acquire and install a second Heidelberg press of the same model to operate alongside the Press. This was a second-hand reconditioned press with a double coater. It gave the claimant extra production capacity and a guarantee of continued production in the event of a failure of one press. Because the two presses were almost identical it was possible to benefit from using interchangeable components and also to apply the know-how gained on one press to the other.

As at the date of the incident the claimant operated 5 days a week working from 6am to 9pm on a three shift basis with overtime working as necessary. That overtime working could be night working or weekend working. Employees were paid at overtime rates. I accept that employees were not obliged to work overtime and that not every employee would always want to work overtime but, equally, I am satisfied that there is no evidence of any widespread reluctance or refusal to do so.

The business was seasonal, with the beginning of the year being quiet, with business usually picking up from June onwards and busiest from August to December.

The claimant operated an in-house maintenance regime involving weekly checks by its press operatives which were recorded in monthly sheets which have been disclosed for the 2 years preceding the incident.

Heidelberg also offered a maintenance service as part of its guarantee of the Press but, once the guarantee period expired, the claimant began to use the service of BBR as a more local maintenance company. There is no doubt that BBR were a specialised and reputable consultancy and were approved by Heidelberg to service its presses. They were not instructed to undertake regular inspections or preventive maintenance under an annual service contract. They were instructed to attend as and when problems arose. A number of timesheets and invoices have been disclosed beginning in February 2012.

The defendant points to a number of timesheets from August 2012 which refer to “image” problems. This appears to have coincided with reports of problems with oscillation of the duct and vibrator rollers. The defendant particularly points to a timesheet for 29 August 2012 made by a BBR maintenance engineer known as Mark Verity referring to such problems and which also, under the heading of “further action required”, says “re-level machine 6+LX”. The subsequent timesheet for 4 September 2012 made by Mr Curran records that he attended for 3 hours and, under “action taken” had entered “check levels on machine and report”. There are no records of any further attendance by BBR for anything said to be material to this case from that date up until the date of the incident.

Mr Curran was cross-examined at some length about these events. He was very clear, and I accept his evidence on this, that there was no question of the Press being re-levelled in the sense that the levelling feet were adjusted to alter the levels of the print units relative to each other in the same way as happened on installation. He accepted that he would have checked the levels but denied that he would have re-levelled the units. He said that Mr Verity must have suggested that the levels were checked simply because the cause of the problem was not apparent.

The print experts agreed in the joint report that re-levelling is not something which would be expected to be done after installation by way of normal maintenance. They also agreed that this would be an “excessive intervention” (as Mr Sims said it would involve splitting the Press down into its separate units and re-assembling it again) and there is no evidence whatsoever that this in fact took place. If it had it would certainly have been recorded and invoiced. They also agreed that re-checking the levels was something which would only be done if other checks and repairs had failed to resolve a problem. Mr Sims’ evidence in cross-examination was that he would simply have assumed that this was a reference to checking the levels to satisfy the engineer that this was not a possible cause of the reported issue with the roller train. He explained that there were two possible causes of imaging problems, the first being a possible mechanical problem and the second being a possible ink application problem, and that his reading of the notes made by BBR indicated that what was being reported was the latter. He said that there was no evidence to suggest that as at this point in time there was a mechanical problem due to the Press being out of level. He explained in answer to a question from me that it would make sense to him that the BBR engineer might wish to ensure that a reported problem with the vibrator rollers was not caused by a problem with the levels, which would explain the entry in the notes. I accept that evidence and conclude that Mr Verity was not suggesting that the Press was out of level and needed to be re-levelled, merely that the levels needed to be checked to rule that out as a possible cause of the problem, which is what Mr Curran did.

Mr Sims had also, by coincidence, inspected the Press in November 2012 on behalf of a company which was involved in assisting the claimant to print to a particular industry standard and, having inspected the Press and its product, had declared himself satisfied with both, saying that “On the whole the printed sheets inspected were of above average quality given the age of the equipment”. That is in my view cogent evidence from a reliable source with no foreknowledge of what was to happen 5 months later that there was no evidence of problems with the levels of the Press causing printing problems persisting from September into November 2012.

Mr Smith had also confirmed that no issue was taken by the claimant’s customers with the quality of the products produced in the days leading up to the failure. Mr Sims had inspected samples taken from the production list for the 3 days preceding the failure and confirmed that they were all of good quality with no doubling being apparent, notwithstanding that the products were either demanding in terms of their printing or in the particular client specification or both. He was cross-examined on the basis that he had only been able to inspect a limited number of samples and not the whole printed sheet, which he accepted would have been preferable. He had however also been able to inspect whole sheets printed in March 2013 which were of good quality. As he said, it would not be expected that anything other than these samples would be retained in normal circumstances. I also note that Mr Hill as the author of the first interim progress report on 25 June 2013 recorded that the print dockets for April 2013 did not identify anything other than routine problems and that the three print samples taken immediately prior to the incident “appeared perfectly in registration”.

In the circumstances I am satisfied that there is no evidence of there having been any significant or persistent problems with the print quality of the product caused by the Press either specifically in the 12 months or so prior to the failure or more generally over its lifetime.

The failure

There is no real dispute as to the circumstances of the failure. As I have already said (section 2 above) the claimant agreed to the relevant employees being interviewed by Mr Hill after the failure and there has never been any challenge to their accuracy or reliability of their account, so that I take the following account largely from those interviews as accurate and reliable contemporaneous accounts.

The failure occurred on 17 April 2013 after a print run of around 85,000 sheets. The evidence of Mr Grimley, the Press operator working on that day, as recounted to Mr Hill in June 2013, was that the print run before the incident ran without any problems in circumstances where it was a “particularly demanding print run … where any loss of registration would have produced a colour shift in the picture”. Mr Norbury, the Press machine minder also working on that day, confirmed this account.

Mr Norbury said that whilst the Press was performing its wash-up cycle prior to beginning the next print run he noticed a rhythmic knocking sound which did not trouble him unduly. I interpose to comment that it is at this stage, when the print cylinders are being prepared for a new run, that the direction of the Press and, hence, the gears, is reversed. Mr Norbury said that when he began the first run the print registration was out a lot. The evidence of Mr Hackney, the night shift Press operator, as recounted to Mr Hill confirmed Mr Norbury’s account, saying that upon starting the next print run it was making a noise and the print registration was out and could not be adjusted so that he alerted Mr Hooley as operations manager. Mr Hooley sought assistance from external engineers and, the first firm having attended but declined to assist due to the apparent magnitude of the problem, contact was made with BBR who arranged for Mr Curran to attend to inspect the Press.

Post-failure investigations

Mr Curran said that he was asked to attend site to inspect the Press as an emergency. According to Mr Hammersley’s record of what Mr Curran told him - see [4.4] of his main report - he began by running the Press. This confirmed the reported vibrations and noise which, he said, was very obvious. He removed the guard cover on one of the units, turned the gears over manually (which he was able to do since they were not inextricably jammed together) and saw the broken teeth. In his witness statement he said that a number of the print units had become raised above the plinths and were left unsupported. In cross-examination he clarified that in his recollection all of the print units other than PU1 and PU6 were in that state on both sides and that this was because they were no longer in contact with the levelling feet which should have been supporting them. He explained that he could tell this because it was possible to turn the levelling jack which should never be possible if the levelling feet were supporting the units. He assumed that this was because the plinths had moved relative to the Press, but it is clear that he would not have had any way of knowing which had moved relative to the other. He made clear that his decision to adjust the levelling feet was taken purely with a view to restoring support to the print units with a view to averting a risk of further damage rather than with a view to attempting to re-level the print units. It was suggested to him that he could not have got underneath the Press to inspect the levelling feet but I am satisfied that he was able to do so, as he said.

It was clear from this very early stage that the Press had suffered a catastrophic failure and could no longer be operated until there had been a full investigation and diagnosis. Mr Curran advised the claimant to make contact with Heidelberg as the manufacturers of the Press. Having done so, Heidelberg attended site and conducted a detailed investigation over 3 days from 30 April 2013, producing a report on 13 May 2013 to which I shall refer shortly.

In the meantime the claimant had also made contact with its insurance brokers who recommended Mr Smith to Mr Noel as a loss assessor who he duly appointed to act on the claimant’s behalf.

The defendant, having been notified of the incident, appointed Cunningham Lindsay the well-known loss adjusters to represent its interests, with the main point of contact being Mr Hill.

A meeting was held on site on 10 May 2013 attended by representatives of the claimant, including Mr Smith, Mr Noel, Mr Mealyou and Mr Dearden, by a representative of the defendant, by Mr Hill and a Mr Challoner of Cunningham Lindsay and by Mr Cameron-Williams whose firm had already been instructed to provide preliminary advice on the business interruption claim. There are three records of the meeting: (a) handwritten notes made by Mr Hill; (b) handwritten notes made by Mr Cameron-Williams; (c) a typed-up note made by an unidentified person but likely to have been Mr Challoner of Cunningham Lindsay.

The meeting discussed matters relevant to the issues of liability and quantum and I shall refer to what was said about each at the relevant point. I should however say immediately that insofar as Mr Smith took issue with the accuracy of notes made by Mr Hill or Mr Cameron-Williams I have no hesitation in rejecting those challenges. The notes are contemporaneous and do not differ in any material respect and there is no reason to doubt their essential accuracy. In comparison neither Mr Smith nor Mr Noel nor anyone else from the claimant’s side appear to have taken or retained any notes and neither Mr Smith nor Mr Noel had a clear recollection of the detail of what was discussed. I accept that Mr Cameron-Williams produced in his report a summary of what was said which varied in some respects – and was slightly skewed in favour of the defendant – from what was in his contemporaneous notes and, hence, that it is safer to rely on his notes rather than his independent recollection where materially different.

Heidelberg’s report dated 13 May 2013 confirmed that the drive gears on all units had been subject to a “catastrophic incident” the cause of which they had been unable to identify. They recommended further enquiries both as to any previous relevant history and also by involving a structural engineer to “assess the plinths, floor and foundation”. (It is plain from what is recorded as having been said at the meeting on 10 May 2013 that this advice must have already been given orally and that the claimant had already engaged a local engineering consultancy known as Clancy Consulting to do so.) Insofar as the claimant has suggested that this report provides any independent support for their case as to the cause of the incident I am satisfied that it does not.

Having reviewed matters Heidelberg provided a proposal to repair the Press which was set out in some detail in the report. In short, it involved the removal of the Press offsite to be cleaned, repaired and a new gear assembly installed, following which the Press would be re-installed and re-commissioned with testing and balancing. The estimated duration was 29 days, excluding the time for removal and cleaning, and the estimated cost was £233,128, although this excluded cleaning but included for a second round of testing and balancing if needed. It also excluded the time and cost implications of any remedial works to the plinths, floor or foundations and was subject to alteration in the event of additional information coming to light. Very significantly, on the claimant’s case, it concluded by saying: “I am sure you will appreciate that given the age of the press and its current condition we can repair the machine but cannot guarantee the repair in returning the press back to its full specification”. Moreover the field service report stated: “Due to the overall condition of the machine in my opinion [it] may not be cost effective to repair the press”.

The claimant provided the Heidelberg report to the defendant and on 22 May 2013 Mr Hill replied asking for some further information but making it clear that the defendant was fully reserving its position and expected the claimant to take steps to mitigate loss, for example by overtime working or outsourcing.

Mr Hill recommended to the defendant that it should instruct a metallurgist and a structural engineer to investigate and provide advice and, the defendant having accepted this advice, Mr Hammersley and Mr Brown were appointed.

Mr Hammersley first visited site and inspected the Press on 16 May 2013, also taking the opportunity to examine some of the fractured gear teeth. It is clear from the handwritten notes of his conversation with Mr Hill on 20 May that he was already of the view that the teeth he inspected were showing signs of fatigue. He produced a preliminary report on 12 June 2013 giving further details of his findings. He inspected again and in more detail on 19 June 2013.

Mr Hill also asked the claimant to allow him access to a number of the claimant’s employees to speak to and take statements from them. The claimant agreed and Mr Hill did so in early June 2013, taking the statements to which I have referred as well as a statement from Mr Smith,

It is clear from emails of 11 June 2013 sent by Mr Hill to Mr Smith and Mr Brown that Mr Brown was already considering a number of investigations, including “a potential load testing technique for the plinths/piles”. This however was not taken forwards; the investigatory proposals submitted by Mr Brown to Mr Hill by email dated 12 June 2013 and forwarded to Mr Noel and Mr Smith the same day comprised a more restrictive scope of investigatory works in order to determine whether or not the plinths had subsided. On 13 June 2013 one of Mr Brown’s colleagues attended the site to undertake an inspection whilst the Press was still in place, however he reported that he was unable to measure the distance between the plinth and the underside of the Press and on 14 June 2013 he issued a report of his findings, from which it appears that his recommendation was only to undertake further ground investigation works if the press and plinth measurements showed plinth movement outside tolerance, even though he was fully aware that it was possible that this would not be conclusive. On 19 June 2013 Mr Brown had attended site and measured the distance between the plinths and the underside of the Press and also inspected the plinths and concluded that there was no evidence of recent cracking. He returned to inspect the site after removal of the Press.

On 24 June 2013 Mr Hill emailed Mr Noel, referring to the fact that although Thomasons had been instructed to carry out investigations to ascertain whether or not the plinths had subsided “they have not so far been asked to carry out any core samples and that it would be sensible for [the claimant] to carry this out separately at this stage, although the information would be helpful to all of us”. Mr Hill did not provide further clarification as to the purpose of this core sampling. The defendant places significant reliance on this email as showing that the claimant was, or ought to have been, fully aware that it would need to undertake such testing of the piles and/or ground as was necessary in order to establish that the incident was due to subsidence as opposed to an excluded cause. Whilst I will consider this point later, it is worth commenting at this stage that if this was the purpose it was not spelled out in the email.

On 10 July 2013 Clancy produced a report on the claimant’s instructions. It is clear from the note of the 10 May 2013 meeting that Clancy had already been instructed by the claimant at this point and were already taking core samples throughout the site. Neither Mr Smith nor Mr Noel could assist as to precisely why Clancy had been involved at this point or as to what its instructions were and no contemporaneous documents have been disclosed. Mr Smith’s oral evidence on this point was particularly confused and confusing. However the report itself states that Clancy was instructed to “provide geotechnical information relating to ground conditions in the location of [the Press] which, we understand had suffered a small amount of settlement … to assist in determining the reason for settlement and to provide information for new foundation design” and I see no reason for disagreeing with that as an accurate contemporaneous record.

Clancy undertook four boreholes, three of which were directly adjoining the print machines, although only one was able to penetrate the very well compacted sub-base material laid immediately under the concrete slab. It recorded that there was a layer of very dense made ground from 0.6 to 1.4m, below which there was weak made ground with a band of peaty material to 3.5m where the borehole had to be terminated without ascertaining the depth at which natural ground was found or its composition and without encountering groundwater. Clancy recommended that the construction design drawings (which they said should indicate the pile length and design) and pre-construction site investigations be obtained for review before commenting further about a remediation strategy. They did not specifically recommend any further site investigations. There is no indication that anyone asked Clancy to undertake any further investigations or that they had any further involvement. The most likely explanation for this, I am satisfied, is that since those involved with the supply and installation of the replacement press acquired by the claimant did not recommend that any different foundations were needed for the replacement press base and since there was no suggestion emanating from the defendant (who had been provided with a copy of the Clancy report) that this was necessary the claimant – reasonably enough in the circumstances - did not see any need to go down this route.

By July 2013 Mr Hammersley had undertaken an examination of some of the fractured gear teeth which confirmed his opinion that the single detached tooth from PU4 TTG had suffered an overload failure. This more detailed investigation did not provide specific evidence to support his preliminary view that the other teeth had suffered from and failed due to fatigue, such as striations, although he did say that these were rarely found anyway in the cast iron material from which the teeth had been made. Nonetheless, he maintained his view that the remaining teeth had suffered from and had failed due to fatigue rather than an overload event.

By August 2013 Mr Brown of Thomasons had completed his further investigations and produced a further report, which took into account the further investigations and the findings of the Clancy report. He recorded that the measurements taken along the plinths recorded a relative difference in level between the two plinths and relative unevenness along the plinths themselves. He said that this demonstrated that some settlement of the piled foundations had occurred, although well within acceptable tolerances for standard foundation design. He noted that there was no evidence to indicate that this was recent as opposed to historic settlement and no evidence of step changes or cracks in the plinths consistent with the step changes in the Press or recent differential settlement of the plinths. He noted that because the depth of the existing piles was not known and due to the lack of detailed ground conditions he was unable to report or give definitive advice on the mode of cause of any settlement. He said that in his opinion sudden differential settlement of the plinths after many years was “most unlikely”. He did not recommend any further investigations.

Mr Plewman referred to a number of errors in the report, including:

Having referred at some length to the investigations which were undertaken I must now address and make findings as to the damage to and displacement of the Press and the plinth.

The damage to and displacement of the Press and the plinth

The damage to the Press was exclusively to its gears. In summary, the damage caused to the gears during the incident was as follows:

As regards displacement, post-failure Heidelberg undertook a levels check which revealed that overall the Press was high on the operator side although there were some variances, so that: (i) PU1 was level; (ii) PU2 was high by 0.5mm; (iii) PU3 was 0.16mm high on the drive side, which the print experts agreed was likely explained by the gear failure between PU3 and PU4 forcing the side frame of PU3 upwards, (iv) PU4 was so high that it was recorded as being “off the scale”; (v) PU5 was 0.14mm high; (vi) PU6 was only 0.02mm high and hence, said Mr O'Donnell in his joint report, still within tolerance.

It was also discovered by Heidelberg that PU3 and PU4 were out of level relative to each other, so that PU4 was 1.3mm lower than PU3. They also discovered that there was some degree of displacement between all of the print units, with the least being 0.03mm between PU1 and PU2. Neither Heidelberg nor any of the experts later instructed had any means of ascertaining how or why this displacement had occurred and, in particular, whether it pre-dated and in some way caused or contributed to the failure or whether it was caused by or resulted from the failure. Thus the structural engineers agreed that this relative displacement could have taken place at the time of the failure rather than beforehand. It is common ground that the latter explanation is plausible, since the forces exerted by the gears becoming jammed together due, for example, to a detached tooth falling into the mesh between the gears would be sufficient to move the print units relative to each other.

The plinths were examined by Mr Brown and his findings, which were not disputed by Mr Cherrett, were that in general terms the drive side plinth was higher than the operator side plinth by some 3 – 5 mm, with a difference in levels of up to 8.6mm along the length of the plinths and some very minor cracking in each. Again however the structural engineers agreed that it was not possible to say whether these differences in levels had occurred immediately before the failure or had occurred much earlier on initial construction or in the course of or shortly after the initial loading of the Press, which is when such initial settlement or bedding down might have been expected to occur. They agreed that the plinths showed no physical evidence of subsidence or any sudden movement that might have occurred in the period prior to 17 April 2013. However they also agreed that plinth distortion that might cause distortion of the Press beyond that specified by Heidelberg of 0.03mm/m might take place without exhibiting cracks visible to the naked eye. Thus whilst they agreed that the absence of evidence of significant new cracking to the plinth demonstrated that no recent significant step movement of the plinths had taken place such as would obviously explain in particular the 1.3mm displacement between PU3 and PU4, they also agreed that it did not establish that lesser step movement of the plinths sufficient to cause lesser displacement of the Press which would put it outside the Heidelberg specification had not taken place.

In short, although at first blush these findings appeared to have been of considerable relevance, the further consideration given by the relevant experts has revealed that in fact they are of very little if any positive assistance one way or another in determining the cause of the failure. That is because the experts are agreed that it is not possible to say whether or not these differences in levels occurred many years before the failure at or around the time of initial construction and installation, or in the intervening period, or immediately before the failure or in the course of or immediately after the failure. In short, it is not possible to say whether these failures were causative of, or caused by, the failure. As the print experts said in their joint report at [5] in the absence of pre-failure measurements of the levels of the Press and the plinths there is no way of knowing by how much the plinths or the Press had moved before or during the failure.

Repudiation of the claim

The defendant repudiated the claim on 5 September 2013 on the basis that their investigations did not support a finding that there had been a catastrophic failure or sudden displacement of the concrete plinths. The defendant provided the claimant with copies of its initial reports in February 2014 and in September 2014 there ensued correspondence between solicitors instructed by the respective parties. That correspondence not having achieved any resolution, the current proceedings were issued in August 2016.

The cause of the damage to the Press

For convenience, I have decided to address the fundamental issue of the cause of the damage in two separate sections, the first being whether the cause was sudden ground movement or gradual teeth fatigue and the second being whether if sudden ground movement that was due to (a) subsidence, or to (b) (i) normal settlement or bedding down or new structures, (ii) settlement of made ground or (iii) defective design, work or materials, before setting out my conclusions. Nonetheless I remind myself that it is my task to stand back and to consider all of the evidence and arguments as regards cause before reaching a final conclusion and this is what I do in the final conclusions section.

In that respect I also remind myself that although the claimant has invited me to treat this as a binary choice between two alternative causes, fatigue or ground movement, before proceeding to decide whether the cause of the ground movement was subsidence, the fundamental question for me to decide, as emphasised in a number of cases beginning with the much cited case of Rhesa Shipping Co v Edmunds [1985] 1 WLR 948 (also known as the Popi M case), is whether or not the claimant has proved the cause for which it is contending on the balance of probabilities.

I have to consider all of the available evidence and all of the other possible causes and, making due allowance for the absence of evidence which might have assisted in resolving the question, decide whether or not the claimant’s cause is more probable than not, independent of my conclusions in relation to the other possible causes. If there remains some very real uncertainty about the relevant factual background or where the evidence remains unsatisfactory the court is entitled and may be obliged to decide the case on the basis that the claimant as the party bearing the burden of proof has not proved his case: see The Popi M [1985] 1 WLR 948 as explained by Thomas LJ in Ide v ATB Sales Ltd [2008] EWCA Civ 424 at [3] – [4].

The claimant accepts that it is unable to adduce any direct evidence which conclusively determines that the cause of the failure was subsidence. It submits that there is no objection in principle to a court finding a case proved on the basis of circumstantial evidence, so long as the court conducts the enquiry by looking at the whole picture and all of the potential causes and, stepping back at the end of the process, focussing on the crucial question which is whether or not the claimant has established its case on the balance of probabilities. In that regard I was referred to dicta from two Court of Appeal authorities by the claimant which I accept as correctly stating the law whilst recognising of course that all cases of this nature are intensely fact specific:

There has been much debate about what further investigations could have been undertaken to ascertain whether or not foundation movement was responsible for the failure of the Press and, if so, the cause of that foundation movement. Both Mr Cherrett and Mr Brown were of the view that following removal of the plinths and exposure of the piles, testing of the piles would have provided valuable and most probably conclusive evidence. In answer to questions from me Mr Cherrett explained that he would have considered: (a) measuring the pile length ultrasonically, which would have demonstrated any possible irregularities in length; (b) set load testing the piles to determine their performance under load and to identify any possible anomalies; (c) undertaking cone penetration testing to determine the relative stiffness of the ground in the area of the piling. He noted that it could have cost £20,000 and taken two or three weeks to conduct these investigations. When Mr Brown was asked the same question he did not disagree as to the three tests suggested by Mr Cherrett, although he did not agree as to the costs or the timings. In short, his preference would have been to measure pile length first, which would have been a quick, cheap and easy means of checking whether or not all piles were uniformly and sufficiently deep or not. If not, then he would have proceeded to set load testing as referred to by Mr Cherrett, which would have identified any discrepancies in the performance of the piles and hence any risk of differential settlement. If he found any discrepancies he would have proceeded to cone test any weaker pile(s) to establish the strength of the material through which it passed. He accepted that even this would not identify the precise cause of any loss of capacity and that to establish the cause it would have been necessary to insert a borehole next to the weaker pile(s).

Both sides have criticised the other for failing to undertake these further investigations at the time. In my view the position is as follows.

So far as the claimant is concerned, it was suggested by Mr Hill that it should take core samples and this is precisely what was done by Clancy acting on the claimant’s instructions. Clancy’s report did not recommend any further investigations and nor did the defendant suggest to the claimant that it should carry out any further investigations before the replacement press was installed. In the circumstances there is no basis for any criticism of the claimant for not undertaking these further investigations at the time.

So far as the defendant is concerned, it was clear to Mr Brown as its structural engineering adviser from early June 2013 that the plinths were being supported by piled foundations. It is also clear from an analysis of the reports dated 14 June 2013 and 8 August 2013 that Mr Brown was fully aware of the need to ascertain the details of the piling and the ground conditions in the vicinity of the piles in order to understand definitively why any ground movement had occurred. Mr Brown accepted in cross-examination^[4/128-129] that if he “was provided with the opportunity to look at the piles independent of the slab and the plinth, then I would have recommended investigations into the piles”. His explanation for not recommending this to Mr Hill was his opinion that the plinths were not showing signs of significant recent movement. However, it is clear that Mr Brown was aware that the tolerances were such that there might have been recent ground movement causing movement of the plinths and movement of the Press which would not result in visible evidence of recent cracking of the plinths. It follows, I am satisfied, that he could not reasonably have concluded that there would never be any need to inspect or to test the piles and surrounding ground conditions on the basis that the existing investigations had conclusively ruled out any question of the failure having been caused by ground movement. I am also satisfied that he would have known that once a new base was constructed over the existing piles to allow the replacement press to be installed the opportunity to inspect or to test the piles and surrounding ground would be lost.

Furthermore, it is also clear from Mr Hill’s first interim progress report that he was fully aware, as would be expected, of the policy terms and exclusions. There is no evidence adduced by the defendant as to why it did not either instruct Mr Brown to undertake further ground investigation works or alert the claimant of the advisability of doing so before the works to install the replacement press were begun. The conclusion I draw is that the defendant had taken the view that since its investigations had demonstrated no positive evidence of recent movement of the plinth and thus no positive evidence of a causative link between the damage to the Press and any ground movement there was no basis so far as it was concerned for undertaking further ground investigation works at its expense whether to prove or disprove the cause of the failure. I do not think that it would be right for me to draw any inference that it deliberately kept quiet in order to ensure that the claimant did not undertake any such investigations itself so as to obtain an evidential advantage in the event that there was a subsequent dispute. Apart from anything else the defendant had no way of knowing what if any further investigations the claimant might commission Clancy to undertake or, indeed, what if any groundworks might be necessary to support the replacement press.

There are two further principles potentially engaged here as well as the principles expounded in the Popi M and subsequent cases referred to above. The first is that if a party fails to call a witness at his disposal who could have evidence relevant to an issue in the case, that party runs the risk of an adverse finding being made against him in relation to that issue. The second is that a party who has, in breach of duty, made it difficult or impossible for a party to adduce relevant evidence runs the risk of adverse factual findings being made against him in relation to the issue to which the evidence is relevant. See the judgment of Longmore LJ in Keefe v Isle of Man Steam Packet Company Limited [2010] EWCA Civ 683 at [19].

On any view I am satisfied that the claimant cannot be blamed for the absence of information relevant to the piles and surrounding ground. The claimant did what the defendant suggested it should do by instructing Clancy to undertake and report on borehole information and did not disregard any suggestion by Clancy or anyone else that further investigations should be conducted. It obtained and disclosed such documentation as Furness retained and called Mr Wardingley. There is no credible suggestion in my view that it could or should have approached other businesses or individuals or called other witnesses, for the reason I give in section 2 above.

A non-lawyer would be justified in regarding the defendant’s conduct as more blameworthy. Through its advisers it knew that these investigations might be carried out and that they might produce information of real relevance to the cause of the failure. The documents do not record why it chose not to undertake any further investigations or why it did not suggest to the claimant that since it was not going to do so the claimant might wish to do so. In my view it is deeply unattractive for the defendant now to maintain as a significant plank of its defence that because of the absence of such investigations the claimant cannot surmount the burden of proof of showing that the failure was due to an insured cause. The difficulty however in terms of the law is that it cannot be said that the defendant in its capacity as insurer owed some positive duty to investigate further or to warn the claimant that if it did not do so the defendant might seek to rely on the absence of material evidence should there be a subsequent dispute. There is no basis, pleaded or argued or otherwise, for treating the defendant as in some way estopped from relying on the absence of information in this respect. There is no basis for drawing adverse evidential inferences against the defendant.

In my judgment the position therefore is that it would be wrong to draw adverse inferences against either party so far as the absence of evidence which would have emerged from the ground investigation works is concerned. The position remains as it would do so in normal circumstances, which is that it is for the claimant to prove its case that the damage was caused by a non-excluded cause and that when reaching my conclusions I must have regard to the evidence which is available and must not speculate as to what further evidence there might be, although I must also have regard to the absence of relevant evidence as well as to such evidence as there is.

In his closing submissions at [9] Mr Miller contended that in the absence of these further investigations there may be possible causes of the failure of which the Court is unaware. I accept that in theory that is so. However in practice it is quite clear in my judgment that the parties, assisted by their experts and with the benefit of evidence about ground conditions, have been able to – and in the defendant’s case have been assiduous to – identify and explore every possible cause for the failure. This is not a case where the gaps in the evidence are so wide that the Court cannot realistically even rule out the possibility of “unknown unknown” causes let alone “known unknown” causes.

I shall refer to the evidence of each set of experts on this issue in order.

(a) The metallurgist experts’ evidence

There is a very significant dispute between the metallurgical experts which has been characterised as a dispute as to whether or not the cracking and fracturing of the teeth of the gears was due to a sudden overload event or to gradual fatigue. This is an important dispute which I must resolve if I can because it is relevant to the competing arguments as to the cause of the failure. The definitions of fatigue and overload which appear in the glossary are taken from the joint statement. In cross-examination Mr Broadhurst gave a good illustration of the difference by reference to a wire coat hanger. One could break the wire by repeatedly bending it back and forwards. Each time the wire is placed under tension by being bent a small crack is initiated in the area of bending which spreads across the diameter of the wire until eventually the final remaining ligament is fractured and the wire is broken. The load applied by each bending movement is far less than the load which would be needed to pull it apart without prior bending for example by placing it between a vice. An overload fracture would occur if the wire was placed between a vice and sufficient force was applied to break it in two. However, the final fracture of the remaining ligament of the wire in the case of fatigue due to repeated bending is itself properly described as an overload, even though no more load is applied than previously, since the amount of load needed to fracture a wire is proportional to its width. Moreover, using the same example, the load applied each time the wire is bent would dictate how many bending movements it would take to break it. It has to be a sufficient (or “abnormal”) load to lead to even a small crack initiation. However, beyond that there is a range from low abnormal loads right through to overloads. A distinction is drawn in cases of fatigue between a “low load high frequency” breakage (in this example the repeated application of bending load at a level much lower than the ultimate tensile strength of the wire) or a “high load low frequency” breakage (in this example using a vice to bend the wire a small number of times until it breaks). In this case Mr Broadhurst considers that this was not a single overload incident but a small number of applications of high load due to a few revolutions of the gears and hence one which strictly speaking falls within the category of high load low frequency fatigue failure: see his report at [4.4.10]. In contrast Mr Hammersley considers that it is a low load high frequency failure, being the culmination of a long term problem. Thus, and to be precise, the issue is not whether or not the failure was due to overload or fatigue but whether the failure was due to a sudden event on 17 April 2013 or a long term problem originating well before then.

One very significant piece of evidence which Mr Hammersley relies upon as supporting his case is that one of the detached teeth from PU4 ICG (referred to as the “suspect tooth”) clearly does show evidence of fatigue, as Mr Broadhurst agrees. The defendant’s case is that it is inherently unlikely that only one such tooth would suffer from fatigue and that it is also inherently unlikely that if one or more teeth suffered from fatigue nonetheless and – on the claimant’s case – entirely coincidentally they were all damaged due to an unrelated incident leading to overload.

There is much on which the metallurgy experts were agreed. Thus they were agreed that:

The experts were also agreed that the suspect tooth could be seen to have suffered from fatigue due to the presence of two apparent “thumb-nail” regions of fracture extending one from each flank of the tooth, with two triangular shaped areas of seemingly “fresh” overload fracture at each end of the tooth. The edge of a thumb nail denotes where a crack has arrested and these semi-circular ‘thumb-nail’ areas of apparent pre-existing cracking on a fracture face are usually the result of a progressive cracking mechanism such as fatigue or – which is not said to be the case here - stress corrosion cracking.

The key disagreement between the experts is that Mr Broadhurst’s view is that the suspect tooth was the only fractured or damaged tooth on the PU4 ICG which could be said to have suffered from fatigue whereas Mr Hammersley’s view was that all of the fractured and damaged teeth could be said to have suffered from fatigue.

Mr Hammersley’s view, as set out in detail in the joint statement at [2.4.1] is that there was a consistency between the fracture faces of the detached teeth which satisfied him that they had all suffered from fatigue. Mr Broadhurst disagreed, giving his reasons in the same section.

Mr Hammersley’s view was that there were discernible thumb-nail like regions on some of the other detached teeth from the PU4 ICG, although he accepted that the suspect tooth exhibited the most obvious evidence of thumb nail regions of any of the detached teeth. Mr Broadhurst’s view is that only the suspect tooth evidenced this thumb-nail pattern.

Mr Hammersley’s view was that in the same way as the suspect tooth all of the fractured teeth exhibited a straight boundary in a similar shape and position, with the majority also having curved ends. In his view the presence of curved boundaries was indicative of fatigue and was not consistent with overload. Mr Broadhurst however considered there to be only a couple with a suggestion of curved ends and that the general shape of this boundary was not consistent with fatigue or other progressive forms of cracking. He argued that the boundary was far too straight and was not typical of thumb nails commonly associated with fatigue or other progressive forms of cracking. He suggested that this “straight boundary” could be a result of the teeth being subject to a reversed bending load. He said that the nature and form of the cracking observed in the metallographic section taken through the intact but cracked teeth supported this scenario. By this he explained in cross-examination^[5/54-59] that he had taken two such teeth and broken them in the laboratory to be able to inspect the crack closest to the recent breakage to look for signs of fatigue and found none. He said that this action would also explain the “gap” between mating crack faces and the “plastic smearing” of the fracture faces he noted during the detailed fractographic examination. He argued that the straight boundary between the cracks initiating at the flanks of the detached teeth other than the suspect tooth was clearly different and not typical of a progressive fracture mechanism such as fatigue.

In cross-examination^[5/176-77] Mr Hammersley accepted that this testing, which he had replicated, demonstrated a classic brittle fracture, similar to the overload fracture which it was agreed had occurred to the single detached tooth on TTG PU4. However he relied upon the lack of small, flat, faceted regions associated with overload over the majority of the fracture face of each tooth in those which he subjected to an overload bending test when compared with the fracture surface of the tooth from PU4 TTG which it is agreed suffered an overload fracture.

In my view the examples identified by Mr Hammersley at [6.9] of his report are far less obvious than those of the suspect tooth at [6.10] and I agree with Mr Broadhurst’s evidence in cross-examination^[5/60] that they show no more than a straight border and slight curvature on the lower thumb-nail and, more significantly, that they do not show the same shiny triangular end sections which, as Mr Broadhurst explained in cross-examination^[5/65], are the areas of final overload fracture. In cross-examination^[5/94] Mr Broadhurst made the further point that if these areas did represent existing fatigue then – given his analysis of the absence of shiny triangular end sections compared to the suspect tooth – it was difficult to explain how all of the other teeth which had less unfractured area remaining had not fractured completely at the same time as the suspect tooth if not before. This seemed to me to be a good point.

Overall I was more convinced by Mr Broadhurst’s analysis than by Mr Hammersley’s analysis on this particular point and, insofar as in the end it turned on whose assessment I preferred as to the relevance of what is visible on the teeth in question, for the reasons given earlier I prefer that of Mr Broadhurst.

Mr Hammersley’s view was that there was evidence of serious wear related damage to the flanks of each of the detached teeth that could be associated with the cause of their failure by fatigue, whereas Mr Broadhurst’s view was that there were no signs of distress to the flanks of the gears to suggest that there was a lubrication or wear issue with the gears. In particular Mr Hammersley identified a wear induced step and two bands of scuffing, scoring and surface smearing damage on both flanks of each detached tooth which he considered showed the teeth to have been worn and damaged before the failure and which were indicative of a lack of oil lubrication itself the result of insufficient backlash such as would also result in an elevation in loading leading to fatigue. Mr Broadhurst considered that the steps were no more than polish marks indicating the edge of the meshing teeth of the opposing gear which was entirely unconnected with the failure and also that the surface damage was no more than he would expect of a press of this age. In cross-examination^[5/84] he said that if he had been inspecting gears which had showed nothing other than this level of wear he would have had no qualms about the gears continuing to be used. He suggested later in cross-examination^[5/99-101] by way of analogy that it was the equivalent to the wear one might see in the gearbox of a 15 year old motor car and that it was evidence only of surface deformation as opposed to surface material loss which would have concerned him. The point was put to Mr Hammersley in cross-examination^[5/210-212] that this evidence would only have been significant if there was evidence that it was unusual when compared with an equivalent 15 year old press which had not suffered an equivalent failure. Mr Hammersley countered that the extent of the wear was significant by reference to the agreed backlash tolerance. However, as he said^[5/211], if this was the case it would be necessary to do something about it to “get your print quality back” so that, once again, there is the difficulty from the defendant’s perspective that there is no evidence of such a problem prior to the failure. He also said^[5/219-223] that in his view the surface damage was indicative of insufficient oil lubrication due, he believed, to the gears being too close together to allow the oil to lubricate them properly. This would also imply that the backlash had been out of tolerance for some time as well but without any evidence of a problem with print quality.

I also note that in his first report to insurers dated 12 June 2013 Mr Hammersley had not made any mention of wear to any of the teeth on PU4 ICG and had simply observed, without comment, that the faces of one of the fractured teeth from PU1 “did not exhibit any indentation or deformation damage but did appear to have suffered some degree of wear”. Nor did he make any reference to any wear related damage in his later email of 12 July 2013 in which he reported on his high magnification examination of the teeth using a scanning electron microscope [“SEM”].

In my judgment the failure to refer to what is now said to be significant evidence undermines the weight I can place on his evidence on this point and again I prefer Mr Broadhurst’s analysis, which is also consistent in my view with the absence of reported problems with print quality. Indeed as a further point it is noteworthy that none of the others with long experience in the print industry who saw the Press within the months before or after the failure and who did or may have seen the gears (such as Mr Sims, Mr Curran, Mr Ross and the Heidelberg engineers) make any documentary report or gave evidence to the effect that in their view the gears were unacceptably worn, in circumstances where Mr Hammersley said that the wear related damage could be felt just by handling the teeth.

Mr Hammersley also relied upon the presence of fine secondary cracks both above and below the fracture extending from both flanks. Mr Broadhurst explained in cross-examination^[5/91] why he believed nothing could be gained either way from this evidence and his explanation seemed compelling to me.

Mr Hammersley also relied upon the fact that many teeth had cracked almost all the way through from both flanks but had remained in their original position without suffering distortion. The experts disagreed about the failure mechanism of the teeth of PU4 ICG. Each expert propounded a theory which explained the damage consistent with their suggested cause. Thus Mr Broadhurst suggested that the initial overload caused the teeth to crack on the driven flank and it was the consequence of the Press being stopped and then reversed – as to which there is evidence - which caused the teeth to crack on the other flank and which: (a) produced the straight line fracture effect already observed, and (b) explained why very few teeth were drawn into the mesh. Mr Hammersley suggested that the cracking from both sides happened over time in the same way as suggested by Mr Broadhurst (i.e. cracking to each flank would occur depending on whether the Press was being operated forwards or in reverse) and that it was the final detachment of teeth which were drawn into the mesh which caused the gear crash and print unit misalignment. In cross-examination^[5/190-192] Mr Hammersley argued that Mr Broadhurst’s suggestion was inconsistent with the laboratory testing which showed the teeth to be brittle, since in his view any overload applied in one direction would cause the teeth to fracture immediately. He did however also agree under cross-examination^[5/205-207] that Mr Broadhurst’s theory as to reversing might explain why so few of the teeth indicated evidence of having gone through the mesh after fracturing. In short it did not seem to me that this evidence clearly supported one or the other side of the argument.

Mr Hammersley also relied upon the presence of step-like or ridge-like features extending across the fracture surface from both flanks of the tooth that were consistent in appearance with fractographic, fatigue-related features known commonly as “ratchet marks. Mr Broadhurst considered that these marks simply showed multiple site crack initiation which were characteristic of how this type of cast iron fractured and were not solely associated with fatigue fracture. He pointed out that the bend test (overload) which he completed demonstrated this characteristic of SG iron. He maintained his view in cross-examination^[5/97]. In cross-examination^[5/192] Mr Hammersley accepted that these ratchet marks were not unique to fatigue. This in my view was a significant concession because in his June 2013 report it was the presence of these ratchet marks and the “faint curved markings” which he relied upon as justifying his conclusion of fatigue.

Mr Hammersley also relied upon the evidence of plastic smearing of the regions of the fracture face thought to be due to fatigue but not those thought to be due to final overload. In contrast Mr Broadhurst argued that the evidence of only slight deformation and smearing found in the fractured teeth was not consistent with Mr Hammersley’s theory of long term fatigue loading, where he would have expected significant damage to the fracture surfaces close to the initiation sites diminishing towards the crack tip. He also said that cast iron of this type when overloaded showed little or no evidence of plastic deformation/ductility (bending, necking etc) at or leading into the fracture. Accordingly, he said, the lack of such deformation associated with the detached teeth was not in his view a characteristic of fatigue as Mr Hammersley believed. In cross-examination^[5/197] Mr Hammersley accepted that he did not rely on the lack of deformation in support of his conclusion that the teeth had failed due to fatigue.

Mr Hammersley also pointed to the similarity in the position of the boundary line on each of the fractured teeth. Mr Broadhurst’s opinion was that this would be where the maximum pressure would be exerted on the teeth in the case of an overload event so that he did not regard this as consistent only with fatigue. In cross-examination^[5/201] Mr Hammersley countered that the sole fractured tooth on PU4 TTG had not fractured in the same position, but since the debate related to the fractured teeth on PU4 ICG that did not seem to me to assist one way or another.

Mr Broadhurst pointed to the absence of what are referred to as “beach marks”, which are macroscopic crack progression marks which evidence significant changes in loadings in a fatigue initiated fracture such as the Press stopping and starting. He also pointed to the absence of striations, which are microscopic crack progression marks denoting a single cycle of stress. Mr Broadhurst’s evidence was that beach marks merely show a progressive mechanism of failure, whereas the presence of striations positively characterises fatigue. He did however accept that it would be difficult to identify striations in the SG cast iron used to make these gears given its inherently brittle nature. Mr Hammersley agreed that neither beach marks nor striations were found on examination of the gears in this case although agreed with Mr Broadhurst that it would be difficult to identify the latter in any event. In my view therefore this evidence is by itself inconclusive although the absence of positive evidence to support the presence of fatigue is of at least some relevance.

Mr Broadhurst also pointed to the relatively flat uniform fractures which suggested that the loading applied to each tooth was similar, producing similar fracture at the same position which was almost certainly around the position of maximum applied stress on the teeth. He observed that the fractures were not truly flat and undulated, as would be expected as the fracture zig zagged following the path of least resistance across and between the graphite nodules in the microstructure.

The experts also disagreed as to the likelihood of the suspect tooth being the only tooth to have suffered from fatigue. Mr Broadhurst considered that this was plausible and that it was within his experience for a single component of nominally identical components, under identical load regimes, to have failed by fatigue, although he did agree in cross-examination^[5/61] that it was “improbable”. He noted that in such cases fatigue cracking was found to have initiated at some form of anomaly such as a defect in the surface of the component. Mr Hammersley however did not consider it plausible that only one isolated tooth could have cracked by fatigue because the loading conditions required to cause such cracking would have been expected to be experienced by many teeth not just one. He also said that the fact that the teeth on either side of the suspect tooth were also cracked indicated that they too had most probably sustained fatigue. He suggested that the fatigue must have been the result of loading on that tooth arising from the condition of the gears and/or the alignment of the print units that had been present for an extended period, in which case the same loading would have been applied to the other teeth in those gears. He also pointed out that he had examined the suspect tooth at high magnification in a scanning electron microscope and found no evidence of a defect or damage to explain why that tooth might have behaved any differently to other teeth under equivalent loading conditions. However he also accepted under cross-examination^[5/186-190] that he had not conducted a destructive analysis of the suspect tooth in order to ascertain whether there was anything about it which had caused it to fatigue and, when pressed why not, his answer was because he did not believe that there was anything suspicious about that tooth to justify that course. It follows in my judgment that the defendant has not conclusively demonstrated that the suspect tooth was not defective in some way which the others were not.

In my view the fact that the teeth either side of the suspect tooth cracked but remained intact also provides some support for Mr Broadhurst’s view, as he noted in cross-examination^[5/62]; otherwise there would be no good reason why they should not have broken off as well if they had also been suffering from fatigue in the same way as had the suspect tooth.

In the circumstances, whilst I accept that the presence of one tooth which is agreed to have been suffering from fatigue is a point which supports Mr Hammersley’s position I do not regard it as conclusive on the point.

The experts also disagreed about the relevance of the absence of plastic deformation to the fractured and cracked teeth and the presence of plastic deformation to the non-fractured and non-cracked teeth on PU3 ICG and PU5 ICG. Mr Hammersley’s point was that the absence of such damage indicated that they must already have been fatigued otherwise the forces acting upon them sufficient for them to fracture through overload would also have caused plastic deformation, especially since there were teeth on PU3 ICG and PU5 ICG which had suffered plastic deformation damage but had not fractured or cracked and hence, on this analysis, were not fatigued. Mr Broadhurst’s response was that if the teeth had been overloaded through being meshed together he would not necessarily expect to see plastic deformation, especially given the limited ductility of the SG cast iron. He also believed that the damage to the teeth on PU3 ICG and PU5 ICG was localised and thus entirely consistent with foreign object damage from another fractured tooth. In cross-examination^[5/95] Mr Broadhurst also made the point that the cracked but not fractured teeth he had broken off and inspected showed no sign of mechanical damage which, he said and I tend to agree, shows that significant cracking damage could occur without mechanical impact. Notwithstanding that – as Mr Hammersley agreed - there was no evidence of permanent deformation or distortion damage in the laboratory tests undertaken by Mr Broadhurst, Mr Hammersley maintained under cross-examination^[5/177-182] that if the failure had occurred as a result of a sudden displacement of 1.0mm to 1.3mm between PU3 and PU4 there would have been deformation damage as a result of the “massive” loads being applied. Whilst I accept that the lack of damage is not consistent with a sudden displacement of that order, or as Mr Hammersley described it a “catastrophic over load event that occurred almost instantaneously”, it does not seem to me that the same objection applies when considering Mr Broadhurst’s analysis of this failure as a high load low frequency.

The experts disagreed about the length of time over which the cracks had developed, with Mr Hammersley considering that the relatively large area of fatigue crack regions indicating an extended period of low load high cycle conditions over months, although accepting that there was no evidence such as striations to prove this, whereas Mr Broadhurst considering that there was insufficient evidence to allow any such conclusion to be drawn. In my judgment it is not possible for Mr Hammersley to draw the inference he seeks to draw from the physical evidence and I prefer Mr Broadhurst’s evidence in this respect. He accepted in cross-examination that there was “certainly a degree of speculation” in his assessment.

In that respect Mr Hammersley considered it to be possible that the two teeth detached from PU1 ICG prior to the teeth becoming detached from PU4 ICG. He had to argue this because, as Mr Plewman put to him in cross-examination, otherwise there would be no reason why teeth on gears which were not physically connected should fracture at the same time if the cause of the fracture was low load high cycle fatigue. Although the print experts agreed that it is possible that the Press could have operated with two non-adjacent fractured teeth missing, the difficulty with this hypothesis is that it would involve two separate fatigue-causing events on two separate occasions in two separate parts of the Press. If, as I conclude later, the only realistic cause of the fatigue is inadequate backlash due to some vertical displacement of the Press, then on Mr Hammersley’s analysis there was initially some vertical displacement of the Press at PU1/PU2 causing the fatigue problem at this location followed by some subsequent vertical displacement of the Press at PU3/PU4 causing the subsequent fatigue problem at that location. My first impression is that this, although theoretically possible, is far less likely than one event causing vertical displacement at both locations. However, the defendant seeks to meet this by contending that the claimant has been unable to provide a convincing explanation as to how one event could have led to movement of the plinths under PU1/PU2 and PU3/PU4 sufficient to cause vertical displacement but not to movement of the plinths under the remainder of the Press which would have caused vertical displacement in those locations.

In responding to this the claimant ripostes that the defendant has failed to demonstrate through expert or other evidence why movement of the plinths could not have led to vertical displacement in non-adjoining sections of the Press. When this point was addressed with Mr Hammersley in cross-examination^[5/148] he said that he could not accept that a twisting of the plinths could cause damage only at PU1 and PU4 but not between. However in answer to further questions he accepted that he was not qualified to look at the plinths and their behaviour. Moreover, although he said that he was qualified as a mechanical engineer to give evidence as to how the Press was assembled and how it would behave under loads and how a failure might progress, that was not the expertise in which he was permitted to give evidence nor was it something which was covered in his report. When it was suggested to him that it would have been necessary to model the particular plinth displacement in order to prove or disprove his point he initially attempted to deflect the question by suggesting that this would be unnecessary if – as he suggested - the plinth had dropped in level between PU1 and PU6. However that was no more than a suggestion which was only one possible (and extremely simple) mode of displacement. When the question was put to him again he accepted that it was “relatively complex and there’s quite a bit which would need to be considered to get a true understanding”. When it was also put to him that it was conceivable that the relative levels of the print units as found after the failure were consistent with the damage to PU1 ICG and PU4 ICG but not to the intermediate gears he said “Yes, I’m not really in a position to agree or disagree, I think, without giving that some consideration”.

In the circumstances, whilst I accept that there is – from a common-sense perspective – some force in the defendant’s argument that this pattern of damage is unlikely to be consistent with simple lengthways differential settlement I also accept that it is not necessarily also inconsistent with a more complex twisting movement. When I bear in mind that the Press was supported by two parallel plinths each supported by 14 piles the likelihood of more complex twisting movement cannot be discounted. I accept that the defendant’s difficulty in undertaking a modelling analysis is that there is no way of knowing what the precise position of the plinths was before the incident so as to be able to say what if any displacement had occurred nor of knowing to what extent the relative displacement of the print units was a cause or a consequence of the failure. Nonetheless the absence of this expert analysis means that this point cannot sensibly be regarded as a knock-out point for the defendant.

The experts also disagreed as to whether the suspect tooth had passed through the mesh after fracturing. The relevance of this debate was that if the suspect tooth had fractured first through culmination of fatigue and had then passed through the mesh the impact between the suspect tooth and the other tooth might sufficiently explain the overload failure of the other fractured or damaged teeth, even if they were not themselves fatigued. Mr Broadhurst’s view was that the relatively modest damage to the suspect tooth, as well as the teeth immediately adjacent to it, was inconsistent with it passing through the mesh, whereas Mr Hammersley’s view was that the damage was more severe and sufficient to justify the conclusion that it had passed through the mesh.

In my view Mr Broadhurst’s evidence on this point is more compelling. Mr Broadhurst had accepted that a number of the other detached teeth showed damage consistent with passing through the mesh and his evidence as to why the same could not be said as regards the suspect tooth was in my judgment more compelling than that of Mr Hammersley. In any event since Mr Hammersley said in cross-examination^[5/162] that he did not consider the suspect tooth to have been the cause of failure that point in the end did not lead anywhere for the defendant.

This debate led on to the wider debate between the experts as to the cause of the misalignment between PU3 and PU4. Their respective cases were set out at [2.3.1] of their joint report. However, since they were agreed at [1.15] that they could not answer this question from a metallurgical examination it did not seem to me that they can assist very much on this fundamental question save as regards their evidence in relation to fatigue or overload. In cross-examination^[5/164-165] Mr Hammersley suggested for the first time that the relative displacement between PU3 and PU4 was such that the gears would be pulled away from each other however he also agreed that if the movement at the time of failure was in the other direction that would pull them towards each other. Since it is possible that the initial movement was in that direction and the subsequent movement due to the gear crash was in the other direction I do not think that this late emerging evidence, which I think followed evidence to similar effect by Mr O’Donnell raised for the first time in his cross-examination, assists the defendant in any material respect.

It is also important to consider the potential causes of fatigue and of overload. I have already referred to the agreement between the metallurgy experts that if the gears had been in good condition, with sufficient backlash and adequately lubricated there would have been no risk of fatigue or overload.

So far as lubrication is concerned, I have already referred to the report of abnormal excessive oil consumption and concluded that, as the defendant concedes, it is not relevant to this case. I am also satisfied that there is no evidence of there being insufficient oil lubrication to the gears. As was clarified in the evidence and as Mr O'Donnell agreed in cross-examination the gears were lubricated by passing through an oil shower which dispensed oil. He confirmed that any drop in oil flow would activate a sensor and shut down the Press, so that unless someone had deliberately isolated the sensor (as to which there is no evidence and no reason for thinking likely) the Press simply could not operate without lubrication.

Mr Hammersley’s view was that the failure was probably either the result of wear related damage arising from inadequate backlash clearance and an insufficient oil film thickness (as referred to above) or the result of very slight slippage of the bolted joint between adjoining press units causing very slight misalignment that existed over a number of months leading up to the failure. He accepted in cross-examination^[5/144] that if the Press had initially been set level and with a correct backlash within tolerance it could only come to have an out of tolerance backlash if something had happened so as to cause the Press to have become twisted or to suffer from some vertical displacement. It is not clear from his evidence what might have caused slight slippage of the bolted joints if not also some twisting or vertical displacement of the Press. In his June 2013 report the only possibilities he referred to were press misalignment due to differential settlement or problems due to heavy oil consumption. In his main report at [9.34] he suggested that inadequate backlash could be caused by wear or “very slight relative movement of the adjoining press units … potentially due to movement of the supporting plinth or possibly as a result of abnormally high loads arising from a jam in the press”. He accepted that the latter was an issue for the printing press experts and it is clear that neither suggest it, for the very good reason that there is no evidence whatsoever to do so. He also accepted that he could not give expert evidence as to whether or not a consequence of an out of tolerance backlash would be print quality problems.

I have already concluded that I prefer Mr Broadhurst’s opinion that there was no excessive wear and tear in this case. I am satisfied that if there was a problem due to incorrect backlash it can only have occurred as a result of differential movement of the Press itself caused by differential settlement of the plinths.

In summary, whilst I accept that Mr Hammersley made some good points, I am satisfied that Mr Broadhurst’s evidence overall was more convincing than that of Mr Hammersley for the reasons given above and that view is consistent with my overall impression of Mr Broadhurst as more convincing generally in relation to failure analysis than Mr Hammersley.

(b) The print experts’ evidence

My conclusion in [191] above is consistent with the relevant expert evidence given by the print experts as regards the causes of fatigue. Whilst of course they cannot give evidence of a metallurgical nature, because that is not their specialism, they can give relevant evidence as to the causes of fatigue in printing press gears.

The starting point is that the print experts, who between them have great expertise in investigating problems with printing presses, agreed in their joint report that printing press failures of this nature are extremely rare.

They also agreed – joint statement at [3] - that if, as I have found, the failure was sudden and unexpected in the sense that there were no problems with the Press immediately prior to the failure, gear failure such as happened here only occurs either due to the failure of the supporting plinths or floor or where a press is jammed at production and stops immediately. They agreed – joint statement at [9] - that there is no evidence of the latter and, on the evidence before me, I am satisfied that this possibility can be discounted. The print experts also agreed at [9] that “should teeth break off a gear the normal reason for failure is the ingress of a foreign body in between the meshing point of each gear” but that “with this scenario the number of teeth missing is limited to very specific areas of the gear train [which] was not the case with the press failure [here]”.

In his report Mr O'Donnell had said that, apart from the insertion of a foreign body, whether a truly foreign object or a detached tooth, “gears may fail for a variety of reasons including: (a) metal in the gears becoming brittle; (b) collapsed bearings; (c) the press being out of level”. In cross-examination^[3/95] he accepted that there were no other possibilities of which he could conceive. He also accepted^[3/97] that there was no evidence to indicate any collapsed bearings. As regards brittle metal, he explained^[3/98] that this was a reference to either a casting defect in the gears or to fatigue, which possibilities he would leave to the metallurgists to consider. The print experts agreed that “gear teeth can fail in service, but to have them fail due to fatigue, there needs to be an abnormal load affecting them to cause the fatigue to occur”.

It was Mr Sims’ evidence in cross-examination^[3/58] that fatigue of gears such as this was extremely rare because the gears were over-engineered for their application and he had not come across an instance of gears simply wearing through fatigue. In cross-examination^[3/100] Mr O'Donnell agreed that the gears were designed to have a long life and that fatigue was not to be expected in the normal course of things. In cross-examination Mr O'Donnell also agreed^[3/99-100] with what Heidelberg had noted in its second report, which was that “under normal press operation, maintaining the installation specifications of the press, the main gear drives would not become fatigued . This could only be caused where there is an inadequate backlash between the gears, which would indicate that the press has moved outside the press specification.”

The print experts were agreed in the joint statement that if the plinths or base had suffered from differential settlement in excess of the 0.03mm/m tolerance as stipulated by Heidelberg (or in excess of 0.05mm/m if uniform along the Press) this would have become apparent because it would have led to a print quality problem known as doubling. In his cross-examination Mr O'Donnell said^[3/80-82] that the 0.03mm/m and 0.05mm/m figures in the joint statement were “threshold” figures, rather than figures beyond which problems with print quality would undoubtedly occur.

When Mr Sims was asked about this in cross-examination he said this:

“Q. So paragraph 4.41 your evidence then is if there was -- if the plinth base was out of tolerance more than 0.03,that would reflect in the print?

A.

Yes, depending on how far out, depending on how much and depending on the period of time. If the out of level -- if that tolerance was -- if it was outside that tolerance by maybe 0.02 millimetres, you wouldn't see a massive difference in print quality. As that tolerance was breached further, I would anticipate seeing a greater issue in print quality. The other issue with regards to that being out of tolerance is it would put undue pressure and wear on elements on the printing press which over time would manifest theirselves in a print-related problem.”

Later in cross-examination^[3/45] he was asked about the amount of differential settlement necessary to cause the substantial damage seen in this case. He said it would have to be more than 0.05mm/m. Emphasising that he was speaking as a print expert not as a structural engineer he said that it would be “heading towards millimetres not points of millimetres or point noughts of millimetres”. He explained that this was by reference to the damage to the gears which he believed would have taken a significant amount of movement to cause. He was asked more about this in re-examination^[3/71] and in answer to the question “how much out of tolerance would it have to be to result in a significant gear overload” he said:

“I think it is very difficult to say specifically, given the fact that you have only 0.2 millimetres to 0.5 millimetres backlash in the meshing point -- it is logical to assume any value over 0.5 millimetres would start to show an issue.”

That answer seems to me to be a little confused because it was Mr Sims’ evidence in his report – see [4.11] – and common ground that the backlash tolerance was 0.02mm – 0.05mm rather than 0.2mm to 0.5mm. Mr Plewman invited me in oral closing submissions to read it as a simple error where Mr Sims was intending to say 0.05mm. In my view the evidence of the print experts in terms of precise measurements of movements must be treated with some caution, because: (a) it was not always obvious whether the questions and answers were directed to movement of the plinths or of the Press or whether reference was being made to a step change of say 1mm or differential settlement of 1mm over 1m; (b) it was not always obvious whether it was being assumed that differential settlement of say 1mm of the plinths would automatically lead to differential settlement of 1mm to the Press; (c) the print experts had the same difficulty as everyone else in knowing to what extent the movements found in the plinths were longstanding or recent and to what extent the movements found in the Press pre-dated and caused the failure or post-dated and were caused by the failure; (d) even print experts are liable to make mistakes when giving evidence when referring to measurements such as 1mm, 0.1mm and 0.01mm.

Nonetheless in the circumstances and given his earlier evidence under cross-examination in my view the gist of his evidence overall was that whilst distortion of the plinths of around 0.05mm/m or more would lead to noticeable problems with print quality there would need to be vertical displacement of the Press in excess of that, perhaps as much as 0.5mm, to explain the catastrophic failure and damage seen in this case.

In that respect Mr Sims had explained the effect of distortion of the press on print quality and the likely failure mechanisms in the event of such distortion leading to displacement of 1.3mm between print units 3 and 4 in sections 5 and 6 of his report, from which it can be seen that he was not saying that there was a straightforward linear correlation between vertical displacement of say 0.03mm of the Press and the backlash being altered by 0.03mm. In short, it was his opinion that:

The gist of this evidence was substantially agreed by Mr O'Donnell in paragraphs 2, 7 and 8 of the joint statement which he confirmed in cross-examination. Mr O’Donnell had said in his report and confirmed in cross-examination that the Press could have continued working for a period of time before failing if the plinth supporting it had moved by more than 1mm, with the greater the movement the more likely it was that the failure would occur quickly, albeit that there would have been a reduced print quality. In answer to a question from me Mr O'Donnell agreed that if the Press itself had dropped by more than 1mm that would have stopped it from working instantaneously.

In my judgment it is both possible and appropriate to draw some conclusions with reasonable confidence from this evidence. In summary, in my judgment the position is as follows:

In his cross-examination Mr O'Donnell also accepted^[3/92-3] that it would only be possible to have a problem with backlash if the print units displaced vertically relative to each other – as happened here between PU3 and PU4 – and that if there was a backlash problem there would be a noticeable result whether through a doubling effect on print quality or otherwise.

In my judgment the evidence of the print experts provides significant support for Mr Broadhurst’s opinion and casts significant doubt on Mr Hammersley’s opinion. That is because, in summary:

(c) The structural engineering experts’ evidence

The defendant’s starting point is that there is no positive evidence from the structural engineers that there was any ground movement here at all, whether in terms of evidence of differential settlement of the plinths or movement of the foundations or ground beneath. This is clearly the case.

The defendant also notes that the other experts were all agreed that only the structural engineer experts were qualified to determine whether the Press’ foundation had suddenly moved or failed on 17 April 2013, and if so, what the cause of that foundation failure might be. Again that is clearly the case.

The defendant also points to the statement by Mr Cherrett in the joint statement to the effect that he was not qualified to offer any comment on the behaviour of the Press “save that I have witnessed similar press failure where press units are displaced without apparent displacement of the supporting foundations”. The defendant sought to rely on this to show that presses do sometimes fail without foundation movement being implicated. This evidence was of course consistent with the other experts’ evidence that the vertical displacement of the Press found here could equally have been caused by the failure as opposed to being the cause of the failure. It does not however seem to me to in any way undermine the evidence of the print experts as to the possible causes of the failure of the Press in this case or to indicate that there might be further possible causes of failure which had not been identified either by the print experts or by the metallurgical experts. Mr Cherrett did not identify in his evidence, whether written or oral, any other potential causes.

I have already referred to the examination of the plinths undertaken by Mr Brown after the failure and what he found. Although a difference in levels of up to 8.6mm along the plinths at first appears significant in fact the structural engineers agreed in their joint statement at [1] that the difference in levels was unlikely to be associated with the failure of the Press as most, if not all, of it would have been present at or shortly after installation and at [4] that the plinths showed no physical evidence of subsidence or any sudden movement occurring in the period preceding the failure. They also agreed, however, at [3] that the degree of movement required to cause the Press to fail was so small that recent cracking or distortion of the plinths might not necessarily be evident. It follows that it is common ground that there was no visible evidence of the plinth having distorted in the period preceding the failure but that the absence of such evidence is not determinative that there was no distortion to such extent as might have led to the failure of the Press. A question which arises is the point at which one would expect to see physical evidence of recent differential settlement. In cross-examination Mr Cherrett agreed^[4/56] that a step fracture of the plinth would be expected in the event of differential settlement of the plinth of 1mm or more, although he also noted that if the differential settlement was over a longer length the plinth might still distort but not crack.

I have also already referred to the absence of any detailed post-failure investigation into the piles or the ground into which they were driven. It is thus not possible, as Mr Cherrett agreed in cross-examination^[4/59], to identify any positive structural engineering evidence of ground movement.

In his report at [5.5], commenting on Mr Sims’ report at [6.2.8], Mr Brown identified 7 potential causes of differential settlement, being:

It is striking that he excludes subsidence within the natural ground from this list of potential causes and I shall refer to this later. Dealing with the 7 potential causes he does refer to, in my view the following points can be made:

Insofar as settlement is concerned the experts agreed – joint statement at [10.4(c)] – that whilst one would expect initial settlement or bedding down the vast majority of such settlement would occur early on. Mr Cherrett also said in the joint statement that if the piles were founded in the natural clay some subsequent slight global settlement might occur but accepted that there was no evidence to support that possibility given the failure to investigate at the time. He could not say that any settlement was of such a nature or extent as to cause such significant movement of the plinths so as to cause the failure of the Press. Indeed in his report at [4.5] he explained that where loads are transferred to soil at depth by lightly loaded piles (as here) lower settlement values would be expected – which of course is the purpose for adopting that mode of construction. Nor, for that matter, was he able to say that this settlement happened it could have happened so quickly as not to have been perceived through printing quality problems prior to the failure.

In his report at [6.1] and in cross-examination^[4/151] Mr Brown agreed that natural settlement of the plinths within normal construction tolerance and distortion of the plinth may have continued and that he could not rule out continuing degrees of what he referred to as “imperceivable degrees of movement”. He also said at [6.2] that he considered it “most unlikely, and almost impossible, after a period of many years that sudden differential settlement of the piles and associated distortion of the plinths would occur without a significant external influencing factor”.

The position in my judgment is that whilst some minor continuing settlement due to changes in the clay cannot be discounted as a possibility, neither expert considered that it could have been anything other than extremely minor in degree. Neither believed that it could have caused sufficient differential settlement of the foundations or the plinths so as to cause the failure of the Press. Neither believed that it could have done so suddenly unless – as Mr Brown pointed out – it was associated with a significant external influencing factor. If it had occurred gradually there would have been a noticeable impact on print quality well before the day of the failure. Thus I am satisfied that it can realistically be discounted as no more than a remote possibility with no evidence to support it nor explanation as to how it could have led to the failure of the Press in this case.

I turn then to subsidence. Mr Brown’s position has always been that there was no evidence to indicate that any subsidence event took place. Mr Cherrett accepted in the joint statement at [10.4(a)] that there was an absence of evidence to establish the cause of any subsidence and, in particular, that there was no evidence that any groundwater level variation had occurred. He accepted in cross-examination that subsidence did not just happen and there had to be a cause for it. Mr Brown added in the joint statement that there was no evidence of any significant vegetation within influencing distance of the site such as could have caused clay shrinkage leading to subsidence. Mr Cherrett agreed with this in cross-examination^[4/40].

In his report at [4.4] Mr Cherrett had referred to the possibility of changes in groundwater level or decomposition of organic soils as being realistic possibilities. In his report at [4.3] Mr Cherrett had referred to the possibility of rapid pile failure due to corrosion but had accepted in his report and again in cross-examination^[4/22-24] that this was a rare event with no evidence to support it and which he dismissed as unlikely. He had also referred to but dismissed at [4.4] the possibility of vibration from some external source and in cross-examination^[4/28] confirmed that he was also discounting the possibility of vibration from the operation of the Press as a cause.

In cross-examination he was asked about decomposition of organic soils and it is clear from his answers that I can discount this as a realistically possible cause of the failure of subsidence in the natural ground. That is because Mr Cherrett agreed that this was only a possibility and also that the timescales involved meant that it would not explain a sudden movement such as the claimant contends for in this case.

That left only changes in groundwater levels as a realistic possibility and, not surprisingly, he was asked about this in some detail in cross-examination ^{[4/33 – 35, 38 – 43, 61]}. He explained that what he was referring to was a fall in groundwater level in the clay which would lead to shrinkage in the clay above the lowered groundwater level. He agreed that there was no evidence of any change in groundwater levels prior to the failure, so that he could only give evidence as to the presence of groundwater levels in the clay as opposed to evidence of there having been changes in such levels. His evidence was that the Geo-Research investigations provided evidence of groundwater in the natural ground as opposed to in the made ground, and I have already said that I prefer and accept his analysis of this evidence. Nonetheless Mr Cherrett had to accept that this was evidence from 1996 which, therefore, pre-dated by many years the failure itself and that there was no equivalent evidence from around the time of the failure itself, given the inconclusive results of the Clancy investigations.

Mr Brown was unable to advance any explanation or point to any evidence which indicated that subsidence due to a fall in groundwater levels in the clay levels could not have been the cause or was unlikely to have been the cause. Since he advanced it as a possible cause in relation to the made ground and since it is well recognised that clay shrinkage due to a reduction in the water content of the clay can both lead to subsidence and be caused by a fall in groundwater levels there would have been no realistic basis for contending that this could not be a perfectly plausible explanation. Once I discount his view that any such change would have taken place in the made ground the only basis for objecting to this as a theory is the absence of positive evidence to support it which in my judgment is not a sufficient reason for rejecting it by itself.

The claimant contends that the evidence of displacement between PU3 and PU4 is entirely consistent with the cause being sudden ground movement with subsidence being the only likely explanation for this sudden movement. The defendant does not dispute that this is a plausible explanation at a theoretical level, but contends that the theory founders on the absence of positive evidence to support it and the claimant has to accept, as I have said, that there is no such direct positive evidence.

The defendant also contends that the displacement and damage to PU3 and PU4, the much more modest displacement and damage to PU1 and PU2 and the absence of damage between those areas is inconsistent with the cause being sudden ground movement due to subsidence. It is true that the claimant cannot provide a positive explanation for how this could happen but it is also true – as I have stated above – that the defendant has not advanced a reasoned argument as to how differential settlement could not produce such an effect and under cross-examination Mr Hammersley had to qualify his view significantly in this respect.

In summary, the position in my judgment is as follows:

If ground movement: (a) subsidence or (b) (i) normal settlement or bedding down of new structures, (ii) settlement of made ground or (iii) defective design, work or materials?

The findings which I have already made above enable me to be satisfied on the balance of probabilities that the failure was caused by subsidence of the natural clay ground as opposed to (a) settlement or to (b) subsidence of made ground.

I should however also say that if I was wrong and if continuing settlement was a plausible explanation then on my construction of the “normal settlement or bedding down of new structures” exception that would not be engaged anyway, because any such settlement occurring some 15 years after the Press was first installed and sufficient to lead to differential settlement of the plinths and failure of the Press given the design and construction of the piles and the base and plinths could not in my view fall within that exception, since it would not be a normal settlement of a new structure.

The other exception which I must however consider is that of defective design, work or materials.

There was no specific analysis by counsel as to the meaning of “defective design” in the policy, both proceeding on the basis that it should be given its normal meaning, which in my view involves a finding that the design was, on an objective analysis, faulty because it would not perform its intended function. That does not mean that it can be extended to cover every case where it can be said, with the benefit of hindsight, that it failed to prevent the failure of the property insured. I am fortified in this analysis by the observations of HHJ Peter Bowsher QC sitting as an Official Referee in the case of Kier Construction v Royal Insurance 30 Con. LR 45 where, having considered the decision of Windeyer J in Queensland Railways v Manufacturers Mutual Insurance [1969] 1 Lloyds Rep 214 at 218 he held at pp74-75 that it “require[s] an objective test which does not involve an enquiry into whether or not there was negligence”.

I was unimpressed by Mr Brown’s evidence in relation to this aspect of the case. He appears to have: (a) reasoned that if the Heidelberg specification required differential settlement to be limited to 0.03mm/m then the Furness specification should have guaranteed that this could be achieved, so that if it is found that differential settlement occurred in excess of 0.03mm/m then that in itself shows that the design was defective; (b) assumed that Furness did not produce any design other than as shown in the drawings, without making any investigation as to whether or not Furness had also produced any specification, even though that clearly ought to have occurred to him as a real possibility; (c) failed to undertake any proper or detailed analysis as to whether the factors of safety as built in by Furness and as expected to be built in by the pile contractor coupled with the use of the internal T beams might reasonably have satisfied the Heidelberg specification on an empirical basis. In his report he had suggested at p19 that the Heidelberg specification was “impossible” although he also suggested that “it would have been possible to accommodate differential settlement on the top of the support plinth by making it stiffer (deeper and stronger)”. Again, there was no detailed analysis of the actual design or as to what would have been a sufficient design to ensure that the Heidelberg specification was met by providing plinths of specified minimum depth and strength to comply with the Heidelberg tolerance.

When he was cross-examined about this he rather shifted his position by saying^[4/120] that the Furness design “may well have worked on more robust, more uniform and more stable ground conditions but we don’t have those here”. The difficulty with that analysis in my view is that if, as I have found was the case, the Furness design involved taking the piles down to the stable natural clays, there is no real basis for criticism of the design.

I accept and prefer the evidence of Mr Cherrett, supported as it was by the experience of Mr Wardingley and Mr Sims (and not contradicted by Mr O'Donnell) that the design adopted in this case was entirely in accordance with the design generally and successfully adopted over the years both in the UK and abroad for the base and foundations for heavy printing presses such as the Press.

As Mr Sims said in his April 2014 report at [5.2.9], over 8,000 presses of this type have been produced over the years, each requiring a base which would meet the Heidelberg specification. It is inherently unlikely that if it was well known due to experience over the years that some particularly demanding design was necessary above and beyond that adopted by Furness or the other Heidelberg approved UK design consultancies this would not have been known to Mr Sims, Mr Cherrett and Mr Wardingley amongst others, who would have had no reason not to recommend such design or at the very least to warn as to the potential risks of not doing so.

It may be, as Mr Brown has said, that the Furness design could not guarantee that there would be no differential settlement greater than 0.03mm/m, but I do not accept that this meant that the design was defective. For the reasons given above in section 10 I am satisfied that the overall design was not defective, even if – as Mr Cherrett had accepted in the joint statement – it could be said that the design of the plinth would not meet the Heidelberg criteria in the extreme event of the total loss of one plinth. I am satisfied that the Furness design cannot sensibly be regarded as defective in circumstances where it was a design widely used by Furness and other specialist consultancies which had worked in the past simply because it had not been designed to ensure that the Heidelberg specification could be met under every conceivable circumstance.

There is no evidence of defective workmanship or materials. I am satisfied on the factual findings that I have already made that the piles were properly installed in accordance with what I am satisfied was the piling specification and passed scrutiny by Mr Wardingley and there is no evidence that they suffered from any materials defects such as for example corrosion due to defective materials. No criticism has been advanced of there having been any relevant defect in the construction of the base or the plinth nor of the construction or installation of the Press.

In the circumstances I am satisfied that the claimant has established that this exception does not apply.

Cause of the damage - conclusions

Notwithstanding the finding I have already made I must still stand back and consider whether on the totality of the evidence and having regard to any missing or incomplete evidence the claimant has established on the balance of probabilities that the failure of the Press was due to subsidence.

I have already recorded that the defendant’s primary submission is that since: (a) there is no positive evidence which proves that subsidence has taken place, so that it remains only a possibility; (b) the investigations which should properly have taken place to prove whether or not subsidence had occurred have not been undertaken, the claim must fail because, even if the other possible causes are discarded, subsidence as a cause remains no more than a possibility. I reject this submission. It equates positive evidence with direct evidence. As I have already noted, circumstantial evidence is sufficient if that evidence enables the court to reach a positive conclusion on the balance of probabilities.

The starting point is my finding that on the evidence of the damage to the Press and on the conclusions I have reached in relation to the metallurgy and print experts the only credible cause of the damage to the gears is damage due to inadequate backlash itself due to vertical displacement of the Press, where that damage must have been in the nature of a sudden overload type event as opposed to a gradual fatigue type event.

The only credible explanation for the vertical displacement of the Press is differential settlement of the plinths. There is no other possible explanation for this vertical displacement, since the only other explanation for the vertical displacement observed after the failure was the impact of the failure itself if a tooth or teeth became drawn into the mesh. Whilst I accept that this may well explain the nature and extent of the vertical displacement observed after the failure it could not, self-evidently, explain the prior vertical displacement which caused the inadequate backlash which in turn caused the damage to the gears. I am absolutely satisfied that there is no question of anyone having altered the level of the individual print units by using the levelling feet. No-one has suggested any plausible mechanism by which, for example, the bolts holding the print units together could have become loosened so as to allow one print unit to displace vertically as against the adjacent unit to the extent of the tolerance in the bolt fittings.

I accept that there is no physical evidence of a significant vertical displacement of the plinths prior to the failure. I accept that if there had been such an event there would have been visible evidence of cracking in the plinths whereas none of relevance was found. I accept that the variations in plinth levels are explained by initial settlement of the foundations in the construction and installation of the Press phase, where such initial settlement was addressed by the print units not being bolted together until that settlement had already occurred and the levelling feet used to ensure that the print unit was completely level at that point. I also accept however that more modest vertical displacement of the plinths would not result in visible cracking and nor would displacement which was less of a vertical step and more of a gradual differential settlement (albeit within the distance between adjacent levelling feet). I accept that more modest or more gradual differential settlement of the plinth of this nature would be capable of causing vertical displacement of the Press as between print units but which would not leave evidence of recent movement of the plinths.

It is abundantly clear that such differential settlement of the plinth and vertical displacement of the Press must have happened sufficiently quickly as to not result in problems with print quality before the failure. This makes it clear in my judgment that it must have been a sudden small but significant differential settlement of the plinths.

No-one has suggested any credible mechanism by which the plinths could experience differential settlement of this nature other than differential settlement of the base itself due to movement of the foundations and/or ground underneath the base. For the reasons I have given when considering the structural engineering evidence I am satisfied that notwithstanding the absence of direct evidence a credible cause of that differential settlement was subsidence of the natural clay bands into which I am satisfied the piles were founded due to variation in water levels.

In my view it follows that the critical issue in this case is whether or not the evidence which is available is sufficient to enable the court to reach a conclusion as to the cause of the differential settlement of the base on the balance of probabilities and the conclusion I reach on that critical issue is that it is.

Standing back, this is not a surprising conclusion. The evidence is that the foundations and the base for the Press were professionally designed and approved by reputable Heidelberg approved engineers and installed by apparently reputable contractors some 15 years before the failure in circumstances where the design always proceeded on the basis that the piles would need to be founded in the natural clays below the made ground which was known to exist. The evidence is that the Press itself was also installed and overseen by a professional reputable team. The evidence is that the Press then operated for 15 years without any problem of any significance in terms of print quality or any other problem such as might lead to a concern that there was a problem with the design or installation of the Press or its foundations. The evidence is that the design and construction and installation process catered for inevitable initial settlement so that once the Press was assembled and the levelling feet adjusted there is no reason why the Press should suffer from vertical displacement unless there was differential settlement of the plinths beneath sufficient to cause that to happen. The gears were well constructed and well maintained and there was no concern at the time that they were reaching the end of their natural life or causing problems in terms of print quality. The evidence as I have found it is clear that if there had been a gradual problem, whether of differential settlement of the plinths causing fatigue or fatigue occurring from some other cause there would have been some indication of that in terms of effect on print quality well before the date of failure. Although the defendant clearly believed that it would be able to establish at trial that this had been the case by reference to the BBR reports from August / September 2012 in fact on the evidence I heard and the findings I made that was not the case. Thus the evidence is of a sudden but not instantaneous failure which is entirely consistent with a sudden but limited differential settlement of the plinths leading to a sudden but limited vertical displacement of the Press. After 15 years the most obvious explanation for a sudden but limited differential settlement of the plinths is a subsidence event affecting the foundations below where the piles took the vast majority of their support from natural clays in which standing groundwater was found when the site was surveyed before construction.

In the circumstances I am satisfied that the claimant has proved its case on liability.

The quantum of the property damage claim – replacement or repair?

As well as obtaining the report and repair estimate from Heidelberg referred to above the claimant also investigated the option of replacement. An equivalent new Heidelberg press would have cost £2.5 million and had an 18 month lead time so that option was swiftly discounted. The claimant was unable to source a similar used Heidelberg press and so decided to investigate alternative makes and models available on the used market. It located in Barcelona and decided to purchase a 9 year old second hand press made by Koening & Bauer from BBR at a cost of £725,000, inclusive of a deposit of £120,000 by way of part exchange for the Press. The contract dated 31 May 2013 with BBR to purchase the K&B press stated that the press would be available within 8 – 10 weeks, which is consistent with Mr Smith’s evidence in his first witness statement that the expected timetable to installation was 3 months.

The defendant’s case is that the claimant failed to mitigate its loss in proceeding with the replacement as opposed to the repair of the Press. It appears that the defendant is saying that the claimant ought to have accepted the Heidelberg proposal. Furthermore, much was made by the defendant at trial of the fact that BBR, having acquired the Press as a trade in for £120,000, ostensibly for salvage, proceeded to refurbish the Press at its premises and to re-sell it as a working press with, so far as is known, no subsequent complaint as to its performance. The defendant contends that this shows that the Press was eminently repairable and also that the claimant ought to have investigated alternative repair options with BBR and others, rather than just relying on what Heidelberg said.

This is an unattractive point for the defendant to take in the context that it is not what Mr Hill nor, so far as can be known, its own representatives believed or stated at the time. At the time Mr Hill’s communicated position was that the claimant was making a sensible decision to purchase the second-hand replacement press rather than to repair the Press. He described it in terms in his email of 30 May 2013 as appearing to be a “reasonable mitigation and risk reduction strategy”. In his email of 11 June 2013 he stated that “your commitment to replacement of the press is a very positive step to mitigate the loss”. He did not think at the time that the claimant was acting precipitately in making this decision without first discussing matters further with Heidelberg or approaching some other repairer, whether BBR or otherwise, for an alternative quotation. This was not just his view; it is clear that he communicated his view to the defendant (see his email to the defendant dated 30 May 2013) and there is no indication that it disagreed with his assessment. Whilst it is true that Mr Hill’s comments were made subject to a reservation of rights, so that the claimant is unable to rely on his comments as having any legal effect, this evidence as to what the defendant and its loss adjusters believed at the time, with the same knowledge available to them as the claimant had, is powerful evidence that at the time the claimant’s actions appeared reasonable.

Moreover, I am satisfied that the claimant’s actions were reasonable. The Heidelberg proposal could not give the claimant any confidence that any repairs would return the Press to its pre-failure state – and this was not simply a warning for form’s sake that the repairs could not be guaranteed but a warning based on a real concern that the Press was beyond economic repair. In his witness statement Mr Hill explained that he understood that the reason for refusing the guarantee was the concern that introducing new parts to an existing press could have knock-on implications in terms of achieving a quality print run. Neither the eventual cost nor the eventual timescale were known with any certainty. The estimate did not include for the costs associated with investigating the need for repairs or improvements to the foundations or the plinths. The claimant was hopeful at the time, I am satisfied from the notes of the meeting of 10 May 2013, that it could maintain production for the next 2 months or so by use of the remaining press in the expectation that business would begin to pick up from August as usual. This explains, perfectly rationally, why the claimant was keen to ensure that it had a second working press in operation within three months or so in order not to lose this business and why the defendant was so supportive of the proposal at the time. Moreover, since the specification for the base for the replacement press did not require a piled foundation there was not the same uncertainty as regards cost or time in that respect as there would have been if the repair option had been adopted.

I also accept the evidence of Mr Ross that until the Press was transported to BBR’s premises and stripped down it would not have been possible to know with any confidence the extent to which it was repairable and, if so, to what standard. As it transpired it was repairable to a standard which was acceptable to the customer who eventually acquired it for a price of approximately £310,000 net of installation costs. Mr Ross made clear that BBR would not have given any guarantee that the Press could be repaired within a guaranteed timescale and at a guaranteed cost to a guaranteed standard. He said BBR would only have agreed to repair the Press on a time cost basis and only gave its customer a 3 – 4 month warranty. Moreover, it is clear – see for example the email from Mr Noel to Mr Hill dated 13 June 2013 – that all parties were fully aware at the time that BBR planned to rebuild the Press and there was no suggestion at the time from the defendant that the claimant ought to take steps to mitigate its loss by asking BBR whether or not they would be prepared to rebuild it for the claimant on the basis of giving guarantees to this effect.

Mr O'Donnell considered that Heidelberg’s estimate was somewhat on the high side. It may well be that his company would have undercut Heidelberg but I do not consider that to be relevant. The claimant had been advised by BBR to involve Heidelberg as the manufacturer due to the extent of the damage and in my judgment it acted perfectly reasonably in adopting this approach. It was not required to obtain three alternative quotations. The question was whether or not the manufacturer was willing and able to repair the Press and guarantee the repair, not whether or not the claimant should have attempted to shave a few thousand pounds off the estimate by haggling.

There was some disputed evidence as to how long it would have taken to repair the Press. I have already noted that Heidelberg’s estimated duration was 29 days, excluding removal and cleaning and any remedial works to the plinths, floor or foundations. In his second witness statement Mr Smith had said that he believed a more realistic timeframe to have been in the region of 22 weeks. I do not consider I can place any real weight on this evidence, since it is clear from his cross-examination that these figures had come from some unidentified source and that he had no direct knowledge of the detail of how they had been arrived at. Mr O'Donnell had suggested a lesser duration of 25 days, but that was limited to separating the press, mounting the new gears, reconnecting the press and testing it. He accepted in cross-examination that it did not include for preliminary investigations to ascertain the nature and extent of the damage and the repairs necessary or any necessary works to the plinths, floor or foundations. In my view there is little or no difference between Heidelberg and Mr O'Donnell’s time estimate. Moreover the really important point in my view as regards timing is that no-one could have known with any confidence at the time just how long the overall process would take. That is because no-one could have known just how much work would actually have been needed to bring the Press back into full working order with guaranteed performance once the full extent of the damage was ascertained. Moreover no-one could have known just how much remedial work would be necessary to the plinths, floor or foundations before the Press could be re-installed.

The defendant also made the point that as it transpired it would have been quicker to have repaired the Press rather than replacing it. That is true, but only if and insofar as: (a) it appears that the delivery and installation of the replacement Press was delayed – albeit for reasons which no-one suggests were the fault of the claimant; (b) it proved to be the case that there was no need to design or install a complex replacement foundation and base for the Press once repaired; (c) the repair of the Press did not take an unduly long time or was particularly problematic. However since none of this could have been known or predicted with any confidence at the time this does not seem to me to be a point of any relevance.

In my view the time for repair as opposed to replacement is a side-issue and was not the decisive reason for the decision which was made; the real issue was the lack of any guarantee that repair would work to restore the Press to its pre-failure position and in my judgment that uncertainty entirely justified the decision to replace rather than to attempt to repair.

The defendant also suggested during the course of the trial that the claimant ought also to have considered not repairing or replacing the Press at all and relying instead solely on the remaining Press. I have no hesitation in rejecting this suggestion. It appears to be founded on the defendant’s case that as at the time of the failure the claimant’s actual and projected order book was so poor that its expected production requirement could easily have been met using just the one press. However that argument ignores the following points: (a) the claimant’s evidence, which was not challenged and which I accept, that the business was traditionally quiet in the first part of the year, becoming busier as the year progressed, so that even if the expected production requirement as at April 2013 could have been met by using just one press there was no guarantee that this would continue to be the position going forwards; (b) although the claimant had lost some major contracts in the period prior to the failure it had also begun a process of rationalisation and had appointed a new sales team to win more work, so that the claimant was reasonably proceeding on the basis that this would bear fruit in the medium to long term; (c) the claimant had operated using 2 presses since 2004 which, as was the claimant’s evidence and which I accept, gave it a competitive advantage in that it allowed it to accept orders with confidence that it could meet the sometimes tight timetables required without fear of problems being caused due to press downtime or failure or lack of production capacity.

Mr Smith was cross-examined on the basis that he had said in a witness statement in response to an application for security for costs that he would not have replaced the Press if he had known that the defendant would repudiate the claim. I do not regard that assertion as relevant since that was not the factual position which the claimant believed it was in when it took the decision to replace the Press. At that stage the defendant was, whilst reserving its rights, actively encouraging the claimant to move forwards speedily to replace the Press on the basis that this would mitigate its business interruption claim and was not suggesting that it was actively considering repudiating the claim. Furthermore, as Mr Noel said in cross-examination, that would have been a decision based solely on a financial analysis of what the claimant could have afforded to do in the event that the defendant decided – wrongfully as I have now found – to refuse to indemnify rather than a decision based on an analysis of the claimant’s business requirements. Finally, as Mr Plewman submitted, it is unattractive for an insurer who has agreed to cover particular items of business plant on a reinstatement basis then to seek to argue that in fact there was no need to reinstate at all, whether by replacement or repair.

In the circumstances I am satisfied that the claimant is entitled to recover the cost of replacing the Press as claimed. There is no dispute as to the quantification of the claim, which is £824,683.07, calculated as follows:

The quantum of the business interruption claim for loss of gross profits

The starting point is to ascertain the claim for loss of gross profit due to reduction in turnover before any adjustments are made for business trends, variations or special circumstances (“the required adjustments”). This is agreed between the experts as follows: standard turnover is calculated to be £4,839,778, the indemnity period turnover is taken to be £3,887,973, with the shortfall in turnover amounting to £951,805. The rate of gross profit is 38.04%, giving a reduction in turnover of account of a loss of gross profits of £362,034.

The claimant’s primary position is that this is not only the starting point but also the end point because no required adjustments need to be made. The defendant’s primary position is that once the required adjustments are made it is apparent that there is no loss. Both accept that dependent on the factual findings to be made it may be that there is some valid claim but which is less than the starting point figure. The claimant suggested that an appropriate approach would be to adopt “a rough and ready discounting” of the total claim.

I have already commented adversely on the inadequacies in the evidence produced by the claimant in relation to this element of the claim, both documentary and witness. In its closing submissions the claimant accepts that “the documentary evidence is thin, and that too little was preserved after the sale of the business in November 2015” but seeks to rely on Mr Smith’s evidence that a loss of business did in fact take place. That submission might have some force if it had been the case that Mr Smith had produced clear and detailed evidence supported, where appropriate, by witness evidence from others who could confirm the details, however that is far from the case here.

It is clear that the claimant proceeded, both initially in terms of making the claim and subsequently in terms of pleading and advancing its claim, on the basis that all that it needed to establish was the accuracy of the primary basis of calculation and did not need to establish anything else. This is notwithstanding that as early as 22 May 2013 Mr Hill had specifically asked Mr Noel to convey to the claimant the importance of mitigating loss by overtime working and outsourcing and to advise him if there were any further developments in terms of meeting customer demand or otherwise. Given that the essence of the claimant’s case as now presented is that it was simply not possible to meet existing commitments through increasing overtime and that specific customers would not permit outsourcing and more generally would not place orders due to the concern about the claimant only being able to operate on one press, it is remarkable that: (a) there was no notification of any of this at the time, despite the clear terms of the email from Mr Hill; (b) there was no attempt to retain or to obtain evidence of the matters which are now relied upon, whether by contemporaneous documents or witness statements from those directly involved with dealing with customers or otherwise. Instead there is an almost complete absence of contemporaneous documentation to support the claimant’s case and the only witness evidence comes from Mr Smith who had no more than the broadest knowledge of events given that he was not involved in the day to day operations of the business at the time.

In his principal witness statement in support of the claim the only substantive evidence given by Mr Smith in relation to the business interruption claim, other than to formally confirm the audited accounts for the y/e 31 December 2012, was in [24] where he stated, without giving any details, that: “Due to the specialised requirements of a number of our pharmaceutical packaging customers, the terms of many of these customer contracts prohibited us from outsourcing work to third parties which placed tremendous pressure on what capacity we had left. This also meant that a number of our customers moved their contracts away from us to alternative suppliers on their approved supply list”.

It is clear that it was only once the expert forensic accountants had met that it became apparent to the claimant that there was a real issue which it needed to address in relation to the required adjustments. Whilst I appreciate that it may be said that this was not something which had been expressly pleaded by the defendant in its Defence nor the subject of witness evidence by the defendant nonetheless it is remarkable, given the clear evidence of the claimant’s accounts and the clear evidence of the claimant’s financial position before and after the failure, that the claimant did not anticipate the need to demonstrate that the whole of the loss was due to the failure rather than to other causes. It appears to me that the claimant simply assumed that all that it needed to do was to make the claim in accordance with the agreed formula and leave it to the defendant to take any point about required adjustments – presumably in the misconceived expectation that the defendant would simply accept it without question. As it transpired the defendant rejected the claim before any analysis or discussions had taken place as to quantum, so that the first time this issue raised its head was in the course of the expert discussions and subsequently. It was in those circumstances that the claimant sought and obtained permission to adduce further witness evidence and produced some further disclosure to address the matters raised by Mr Cameron-Williams in his report and in the joint statement. However the further witness evidence was limited to that provided in the second witness statement of Mr Smith which was wholly inadequate in a number of significant respects, as was the further disclosure which was provided.

There were three principal issues which were contested between the parties in relation to the issue of required adjustments, namely:

Both forensic accountants produced very substantial reports with appendices with a significant amount of detail produced. I hope that I will be forgiven for addressing this element of the case relatively briefly given that I have already had to consider both the issues of liability and the primary claim for the cost of replacement of the Press in some considerable detail and given that due to the time constraints to ensure that the whole case was completed within the trial period the time for oral evidence on these issues, both factual and expert, was limited to some 1½ days of court time.

Before addressing these three issues I should refer to the notes of the meeting of 10 May 2013. I have already said – see paragraph [120] above – that I accept the reliability of the contemporaneous accounts produced by the defendant’s attendees insofar as they were contested by Mr Smith. Specifically I am satisfied that the claimant did say at the meeting that its expected turnover for the year was £5.5 million, down from the preceding year of £6 million, and that this was neither an “off the cuff” comment nor was it said on the basis that it already took into account an actual or anticipated decline in sales due to the loss of existing customers due to the loss of the Press. This is entirely consistent in my view with the fact that on 25 June 2013 the claimant’s finance director produced a revised forecast for the year showing forecast turnover of some £6M, which itself indicates that at this time the claimant did not believe that its turnover was being damaged by the lack of the Press. There is no documentary or other credible evidence to confirm that by 10 May 2013 the claimant already knew that it had already lost business to other suppliers as a result of the Press failure. Mr Cameron-Williams’ note records, I have no doubt accurately, that the claimant had not informed its customers of the failure and there is no evidence that the news had already leaked out. It must be remembered that this was still at the early stages, before Heidelberg had even prepared its formal report and before the claimant had entered into a contract for the replacement press. I am satisfied that the claimant would have wanted to keep this as quiet as possible whilst it was still deciding what to do and at a time when business was clearly still quiet and it still had a working press to satisfy existing orders. Although Mr Smith claimed in evidence that the revised £6M turnover replaced a previous forecast of some £7M, I am unable to accept this given that there is no contemporaneous evidence to confirm it and is inconsistent with such evidence as there is and nor was it even referred to in his witness statements.

It is also apparent from the meeting notes and, indeed, makes perfect sense, that the claimant’s already implemented strategy in the face of declining turnover had been to cut staff levels by around one third in order to protect the gross profit level. It is also apparent that whilst the expectation was that the appointment of new sales staff was intended to win new business and hence increase turnover there is no evidence that this had already happened by the time of the incident (other than a reference in the typed minutes to the claimant having recently won a large contract for Christmas packaging from Marks & Spencer – about which there is no evidence from the claimant to the effect that this business did not materialise). To the contrary, it was said that the business had not yet picked up after Easter as it usually did. Although there was a vigorous debate in cross-examination of Mr Cameron-Williams as to whether the claimant had said, as had been recorded by Mr Cameron-Williams in his handwritten notes, that there were “no obvious green shoots” of recovery. I have no doubt that whether or not this precise phrase was used words to that effect were said and that this was entirely consistent with the claimant’s view at the time. I also have no doubt that the claimant did say, as is recorded, that it considered it could manage with just the one existing press for the next two months, relying on overtime if necessary.

The underlying business trends

The claimant accepts, as it must given the audited accounts, that its business was in decline from well before the failure. Mr Cameron-Williams pointed to a number of items of evidence which show this.

Mr Cameron-Williams relied upon the audited accounts from which it could be seen that in 2011 there was a decline in turnover from 2010, with the decline continuing in 2012 accompanied by a drop in margin. The decline and drop in margin continued into 2013, when turnover was marginally down from the £5.5 million envisaged in May 2013, but both the decline in turnover and drop in margin were reversed in 2014 before declining again in 2015.

It was suggested to him in cross-examination that a substantial part of the loss of turnover from 2011 to 2012 was represented by the loss of one particular customer (known as Kimball) who contributed £920,000 to turnover in 2011. Whilst this is true it does not invalidate the overall analysis of decline, not least in the absence of new customers being found to replace lost customers such as Kimball.

Mr Cameron-Williams also relied upon an analysis of sales values from 2008 to 2015 which show a downward trajectory. The claimant submitted that reliance should be placed on the facts that: (a) there was a dip in sales year on year from 2012 to 2013 followed by a resurgence in 2014; (b) within 2013 there is a particular dip in sales from April 2013 through to September 2013, which it seeks to attribute to the failure. However, in my view the slight additional dip in 2013 does not detract from the overall picture, particularly when the same pattern is evident in 2009-2011 and seeking to attribute this additional dip to the failure ignores the impact of the restructuring in 2012 in circumstances where two new sales managers had only recently been recruited. Moreover the dip in sales from April to September 2013 is explained by what was said at the May 2013 meeting about the business not having yet picked up after Easter as it usually did. In any event a dip in sales from April to September 2013 due to the non-availability of the Press is inconsistent with the production data figures, as referred to be below. Moreover the defendant complains, with good reason, about the absence of detailed monthly sales data. This is clearly information which would have assisted both forensic experts and the court and could and should have been retained and disclosed by the claimant. Insofar as the claimant is seeking to persuade the court to rely on its high level sales data instead I am satisfied that I should exercise appropriate caution before doing so in the absence of proper disclosure and data as to the orders placed, the orders accepted and the breakdown of sales achieved month by month over this period.

The claimant submitted that the steps taken to re-structure the business before the failure would have succeeded in restoring the company’s fortunes but for the failure of the Press. The difficulty with this submission is that there is no evidence to support it and evidence to contradict it. The first point is that even though the replacement Press was installed and operational in November 2013 the fortunes of the company did not recover as might have been expected if the re-structure had achieved its objective. Insofar as the claimant argues that the success of the re-structure was hamstrung by the loss of business due to the loss of capacity due to the failure, the difficulty is that there is simply no evidence that identified significant customers stopped placing orders due to the non-availability of both presses and then did not return to the fold after the replacement press was installed. The claimant seeks to rely on a statement in the 2013 accounts to the “anticipated benefits of the new printing press not being achieved as quickly as planned” but that in my view does not meet the objection that there is no hard evidence both of losses due to the failure and an ability to regain the business even after the replacement.

In short, I am satisfied that there is plentiful evidence of a long term decline in the fortunes of the company which continued before, during and after the failure and the period of only one press, and which must, on any view, be regarded as an underlying business trend which required an adjustment to be made.

The available production capacity

Although there was a detailed debate about production capacity between the forensic experts which was fully debated in cross-examination the defendant makes what in my judgment is an unanswerable point which establishes its case, which is that the relevant production data shows that after the failure the claimant was able to increase the utilisation capacity to over 60% and was also able when necessary, in May 2013 and again in September and October 2013, to increase the total production to over 1 million runs per month. Even after the replacement press was brought into operation in November 2013 the total production runs did not rise above significantly above that achieved using just the one press until January 2014.

As the defendant observed in its closing submissions, what this clearly showed is that when the claimant needed to increase both its utilisation capacity and the total production runs it was able to do so even without the second press. Mr Smith was unable to provide any alternative explanation when asked about this in cross-examination and there is no documentary or other witness evidence which indicates that the lack of production capacity prevented the claimant from accepting or performing orders which it would otherwise have been able to perform but for the failure. To the contrary, this evidence is clearly consistent with the evidence that the claimant was able to increase production capacity as and when necessary by working overtime, as indeed it had said that it would be able to do in the May 2013 meeting. Although Mr Smith sought to give evidence that there were limits on the amount of overtime which could be worked due to the reluctance of staff to work overtime notwithstanding the enhanced pay on offer, there is no contemporaneous evidence to this effect and, frankly, it beggars belief that staff, who Mr Smith emphasised tended to be longstanding employees, would refuse to work overtime for additional pay and to ensure the survival of the company in what was clearly a difficult economic climate for the company. If that really had been the case, and the claimant really was turning away valuable orders and losing valuable customers as a result, it is inconceivable that the claimant would not – as specifically requested – have notified Mr Hill that this was the case at the time. Instead the evidence is that the claimant has only made a claim for one weekend overtime working which, in my judgment, eloquently speaks to the fact that the claimant was able to maintain production capacity without the need even to undertake additional operating hours.

Reasons for loss of specific customers

Three substantial customers of the claimant were Vions, Typhoo and Victoria respectively, analysed by Mr Cameron-Williams in his report and the subject of scrutiny at trial.

Vion was the most substantial customer by turnover in 2012, but turnover dropped significantly from 2012 to 2013 and again in 2014 before ceasing entirely. Although this appeared at first blush promising to the claimant’s case in fact it became clear that the loss of business was due entirely to the loss of business at a site in Broxburn, the closure of which was announced in October 2012 and, thus, had nothing to do with the failure. Mr Smith had not referred to Vion at all even in his second witness statement. In an attempt to argue around this the claimant pointed to evidence of sales to two other Vion sites and argued that but for the reputational problems due to the failure of the Press it would have gained the business from the production which was transferred to the other sites. The difficulty with this argument, which is supported only by evidence given for the first time by Mr Smith in cross-examination and upon which I do not feel able to place any real weight, is that there is no evidence to support it. Indeed the evidence that is available shows that the claimant was only securing relatively modest turnover from those other sites before this time so that there is no obvious reason why the claimant should have believed that it had a reasonable commercial expectation of securing such work as may have been transferred to those other sites anyway. Moreover, Mr Cameron-Williams was able to point to the absence of any evidence of a pick-up in sales to those other sites in the first part of 2013. The simple fact is, in my judgment, that the claimant has wholly failed to show that the loss of this business had anything to do with the failure of the Press.

Sales to Typhoo and to Victoria Foods had dropped from 2011 to 2012 and virtually ceased in 2013 before ceasing completely after that. It is evident from the figures that the cessation of sales had nothing whatsoever to do with the Press failure in circumstances where the claimant has been unable to prove that there was some particular explanation (such as seasonality of orders) which would explain why there were effectively no sales to Typhoo or to Victoria Foods in the first 3 months of 2013. It is quite clear in my judgment that the loss of these major customers was precisely what the claimant was referring to in the May 2013 meeting.

Attached to his second witness statement was what Mr Smith described as a record of customer work which the claimant quoted for between March and May 2013 but failed to win. It was simply a list of quotations, stating the date, estimate number, customer, volume and quoted price. In cross-examination he accepted that the claimant had failed to produce any underlying documentation to back up this list. He said that the customers were existing clients of the claimant and that the claimant would have expected to win the work. However he accepted, as he had to, that the claimant would not always succeed in obtaining every job it quoted for.

He referred to one such customer known as Tulip and claimed that it “was a significant customer account, which we shared with one other supplier. Following the incident, the full account was transferred to the other supplier, as we were unable to guarantee that we would be able to satisfy their delivery demands. The value of work that we had quoted for between March and May 2013 with a reasonable expectation of success was in the region of £470,000”.  The immediate difficulty with this account is that all of the Tulip quotations are dated 27 March 2013. In the absence of any hard evidence as to what happened to those quotations, whether they were accepted but then cancelled, if the latter on whose initiative and on what basis, and in circumstances where – as I have already said – there is simply no evidential basis from the production data that the claimant could not have undertaken this work, I am unable to accept this as evidence that these specific jobs from this specific customer was lost as a result of the failure. Under cross-examination Mr Smith’s evidence seemed to veer from suggesting that it was Tulip who declined to place the work because they had become aware of the failure to suggesting that it was the claimant’s decision not to accept the work because it was worried about there being insufficient capacity to satisfy orders. This illustrates that Mr Smith simply had no direct knowledge of any of this and was seeking to put forward the claimant’s case as best he could but with no real knowledge and no documents to rely upon.

He also referred to another customer known as Walkers and claimed that this “was another long-standing account which the Claimant shared with Benson Box. Under usual circumstances we would have been awarded the quoted work listed which totalled in excess of £300,000. However, due to our inability to meet the lead times required by Walkers because of the incident this work was placed with Benson Box instead”. Again there was a complete absence of documentary evidence to support this contention in circumstances where some of the quotations dated from 4 March 2013 and others, dating from 23 May 2013, were individually small. It seems extremely unlikely to me in the absence of cogent evidence, especially in circumstances where customers would normally want the product manufactured and supplied as soon as possible, that quotations placed in early March 2013 could not have been accepted and the work done before the failure. It also seems extremely unlikely to me, if the claimant’s case be right, that the claimant would either have quoted in late May 2013 if it did not believe it could do the work or that it could not have undertaken these relatively small contracts anyway.

Finally he referred to “numerous other customer accounts which were transferred away from us, either temporarily or permanently because of the incident with the Press. The customers in question included Rivingtons, Potted Fish, SP Containers, The Hain Group, Goldenfry, Wholebake, Aimia Foods, Authentic Foods, Stampiton. DS Smith and Macsween”. These were again merely other customers identified in the list referred to and this evidence suffered from precisely the same general objections as in relation to Tulip and Walkers. Mr Cameron-Williams considered these other customers in his report at [2.33] and it is apparent from his evidence, which I accept, that there were only two such customers, Hain and Rivington, where the evidence might even begin to support a case that there had been a change in 2013 which could even arguably be attributable to the failure, but where even there the evidence adduced by the claimant is insufficient to establish a causal connection on the balance of probabilities.

I have no doubt but that the claimant has failed to establish any of this claim. The evidence shows that: (a) the business was in long term decline for reasons which had nothing to do with the failure of the Press; (b) there is no reliable evidence of a dip in production or sales in the period in which the claimant was limited to only one press; (c) there is no reliable evidence of any loss of individual customers due to the failure or the consequences of that failure, whether in reality or in customer perception or in the claimant’s approach. The claimant’s evidence in support of this claim is hopelessly inadequate given that Mr Smith was not a reliable witness on this aspect of the case and given the complete absence of other evidence from witnesses who could have spoken to the consequences in terms of production and sales and the complete absence of the documentary evidence which could and should have been preserved and disclosed.

The claim for additional expenditure

This is a claim for the increased costs of working where there was little if any dispute between the forensic experts. They agreed that costs consequential on the purchase of the replacement press could be recovered as increased costs of working if the purchase of that press was a reasonable mitigating action, which I have already held that it was.

The claim is for the sum of £60,080, comprising:

The issue here is really the adequacy of the evidence to support the claim. Mr Noel’s witness statement simply verified the claim without providing any actual explanation or evidence, not surprisingly since he had no direct knowledge of these expenses and did not himself claim that he had been involved in the ascertainment of this claim. Mr Donaldson had considered this element of the claim and provided a reasonably detailed explanation, based on his discussions with who he described as “the Contact Management Team” as well as with Mr Noel and by reference to some supporting documents. Mr Cameron-Williams did not consider these claims in any detail in his report but suggested that it needed to be established that these were genuinely additional costs as opposed to costs which would have been incurred anyway even if the Press itself had not failed. That is clearly correct. Having looked at Mr Donaldson’s explanations in that regard in my view the only item which can clearly be seen to have been established by clear and convincing evidence to have been incurred and to have been genuinely additional is the first item, which I allow in full in the sum of £18,900, whereas the others are not supported by sufficient convincing evidence, especially where the source of that evidence, insofar as it apparently emanates from the claimant’s “management team”, is not specifically identified.

Conclusions

The claim succeeds as to £824,683.07 plus £18,900, total £843,583.07. From this it is common ground that a £10,000 deductible should apply to the claim with the result that the total amount payable is £833,583.07.

Glossary