Energy Works (Hull) Limited v MW High Tech Projects UK Limited & Anor

Paragraph

By an Engineering, Procurement & Construction contract (commonly referred to as an EPC contract) dated 20 November 2015, MW High Tech Projects UK Limited (“M+W”) agreed to design and build an energy-from-waste plant in Hull for Energy Works (Hull) Limited (“EWH”) for a total price of £153,897,518. The plant was intended to process and then gasify refuse-derived fuel (“RDF”) in order to generate a sustainable source of electricity.

The plant comprised two essential components:

On 4 March 2019, almost 11 months after the contractual date for completion, the gasifier plant had still not been commissioned and work had been suspended. Accordingly, EWH purported to terminate the EPC contract pursuant to clause 44.1(c), alternatively at common law. The principal issue in the main proceedings is whether EWH was entitled to terminate the EPC contract or M+W was entitled to an extension of time such that EWH’s notice took effect as a termination for convenience. Substantial claims and cross claims turn upon resolution of this central issue:

EWH’s claim includes the sum of £9,943,504.40 in respect of alleged defects in the works. In the event that M+W is found liable for defects in the gasifier, it seeks a contribution from Outotec who in turn denies liability and counterclaims for unpaid sums alleged to have fallen due under the subcontract totalling US$16,857,314.86.

This judgment resolves the major heads of claim worth millions and tens of millions of pounds. The more modest defect claims and counterclaims will be dealt with in my second judgment.

For the reasons explained below, I make the following findings in the main proceedings:

Further, for the reasons explained below, I make the following findings in the third-party proceedings:

This dispute is high value, complex and highly technical. The information before me is vast and the electronic bundle runs to 142,037 pages. Putting that in context, a paper copy of the bundle would fill 474 lever arch files. Of that material, the EPC contract and its schedules run to 7,259 pages. The Outotec subcontract is less complex at 564 pages but is just one of forty subcontracts. The contractual documentation also includes a further seventy-nine agreements, financing documents, variations, warranties and leases. The parties served statements from 28 witnesses that run to over 1,900 pages. They also rely on expert evidence from 25 different experts whose combined reports run to over 8,500 pages. I have my own manuscript notes as well as transcripts of twenty-two days of evidence and submissions. Finally, the parties provided me with 1,894 pages of written submissions together with rather more compressed oral submissions over four days.

I should like at the outset to express my admiration for the extraordinary grasp of the detail of this complex dispute so clearly displayed by all counsel and for their skill in ensuring that this case was tried pretty much within its original time estimate. I also pay tribute to the enormous assistance that they provided to me throughout the trial and through their detailed written submissions which are of the very highest quality. The parties understandably focused their limited time at trial on the issues on which the most money rides. That laser-like focus has, however, come at some cost in that in writing this judgment it became increasingly evident that there were important areas of the case where the parties mounted no or very little challenge to their opponents’ cases either through cross-examination or submissions. Further, while counsel rightly focused on the tens of millions of pounds, it is unfortunate that the parties were not able to take a commercial view on issues worth as little as £1,000. Even given these factors, this judgment has taken far longer to hand down than I would have wished. It is not for the want of application, and I apologise to the parties for the inconvenience caused to them by my delay.

While this judgment is of substantial length, it necessarily does not deal with all of the evidence or argument before the court. Rather its focus is on deciding the pleaded issues and upon explaining my reasons as economically as possible for the decisions that I have reached. I acknowledge that, in a case of this size, it is possible for a judge to overlook a piece of evidence or a submission. Even if I have not, a party that loses on an issue might be left uncertain as to whether a particular piece of evidence or argument that is not expressly referred to in this judgment has been taken into account. Given the enormity of the evidence and submissions in this case, I therefore took the unusual step of expressly inviting the parties to identify any material piece of evidence or argument that was already before the court but which they considered might have been overlooked in my draft judgment. It was of course necessary to give sufficient time for this exercise to be completed properly that also took into account the lawyers’ other commitments and their need to read back into the case. Accordingly, the handing down of this judgment has been delayed some weeks while this exercise has been completed.

Stephen Dennison KC and Jonathan Acton Davis KC, leading counsel for EWH and M+W respectively, welcome this approach. Adrian Williamson KC, leading counsel for Outotec, is, however, troubled. He submits that the circulation of a draft judgment is not the end of the beginning of the litigation, but rather the beginning of the end. He is right to contend that a very tight rein must be kept on further submissions after circulation of a draft judgment. In Egan v. Motor Services (Bath) Ltd (Note) [2007] EWCA Civ 1002, [2008] 1 W.L.R. 1589, Smith LJ observed, at [49]-[51]:

“49.

I wish to add a few words to deprecate the practice which was adopted in this case of counsel writing to the judge, after a draft judgment has been provided, to ask him to reconsider his conclusions. It is a growing practice and in my view it should happen only in exceptional circumstances.

50.

The purpose of the judge providing a draft of the judgment before hand-down is to enable the parties to spot typographical, spelling and minor factual errors which have escaped the judge’s eye. It is also to give the parties the opportunity to attempt to reach agreement on costs and to consider whether they wish to appeal. Consideration of such matters before hand-down can save costs. Circulation of the draft is not intended to provide counsel with an opportunity to reargue the issues in the case.

51.

Only in the most exceptional circumstances is it appropriate to ask the judge to reconsider a point of substance. Those circumstances might be, for example, where counsel feels that the judge had not given adequate reasons for some aspect of his/her decision. Then it may be appropriate to send a courteous note to the judge asking him/her to explain the reasons more fully. By way of further example, if the judge has decided the case on a point which was not properly argued or has relied on an authority which was not considered, the appropriate course will be to ask him/her either to reconvene for further argument or to receive written submissions from both sides. Letters such as the one sent in this case, which sought to reopen the argument on a wide variety of points, should not be sent.”

Mr Williamson refers me to Gosvenor London Ltd v. Aygun Aluminium UK Ltd [2018] EWHC 227 (TCC), [2018] B.L.R. 353, at [46]-[51]. In Gosvenor, Fraser J circulated his draft judgment after a one-day hearing of an application for summary judgment. Circulation of the draft led to an application that the court should recall and reconsider its draft judgment. Fresh evidence was placed before the court and no doubt, if admitted, fresh submissions would have been heard upon the new evidence. In refusing to admit the new evidence and reconsider his judgment, Fraser J rightly said, at [52]:

“Very careful consideration must be given to such applications, and litigants should not be given the ability to have a second bite at the cherry. The distribution of a draft judgment under CPR Pt 40 should not be seen (as it seems to be, by many legal advisers currently) simply as an open invitation to embark upon an additional round of the litigation, remedying lacunae in their own evidence and raising further arguments. If a matter could have been raised at the first hearing, then it should be. If time is needed to deal with something, then the court must be asked for time – this will not always be given, but the matter must be dealt with then.”

I entirely agree with those observations. Fraser J was right that the opportunity to comment on a draft judgment is not generally the occasion to file further evidence or make fresh submissions. There are limited circumstances where the court will reopen the case and admit further evidence or argument. Citing Gosvenor is, however, to misunderstand the invitation that I extended to the parties in this case. My direction did not invite either new evidence or argument, but rather – in a very substantial case in which an enormous volume of material was presented in a compressed hearing – the identification of any evidence or argument that was already before the court but which one or other party believed I might have overlooked. That, in my judgment, is not to invite a second bite of the cherry but to remind me, lest it has been overlooked, of the finer details of the first bite.

In Spice Girls Ltd v. Aprilia World Service BV, The Times, 12 September 2000, a concession was made in the course of argument. Arden J, as she then was, circulated her draft judgment and, in the usual way, received lists of suggested typographical errors. The judgment was handed down and the judge then heard argument on consequential matters. Permission to appeal was sought on the basis that the judge had overlooked the concession. In reopening the matter and amending her findings of fact, Arden J said, at [9]:

“… it is clear that the court has jurisdiction to correct an error of material fact before the order is drawn (see for example Stewart v. Engel, The Times, 26 May 2000; Pittalis v. Sherefettin [1986] Q.B. 868; Charlesworth v. Relay Roads Ltd [2000] 1 W.L.R. 230). It inevitably happens with complex cases that from time to time a fact which is material is overlooked. But the jurisdiction to correct an error is to be exercised cautiously and sparingly, and the question of review should be raised as promptly as possible. An application to the court to vary a finding of fact is not to be encouraged as it may lead to groundless applications. In this instance, as I have said, Mr Mill’s approach was not to apply to the court to review its finding of fact but rather to use it as a basis for seeking permission to appeal. In my judgment, an appeal is not the appropriate course where there are errors in judgments which can be corrected by the court which conducted the trial. To leave such matters to an appeal means further delay, uncertainty and costs, which is not in the interests of the litigants. The trial judge is in a strong position to consider the effect of the error in the context of the entire case.”

Again, I respectfully agree. No one is infallible, but in most cases a judge can be relatively confident that he or she is unlikely to have overlooked anything that might be material. As Arden J observed, in more complex cases the risk increases. Good practice where counsel believes that that might have happened is for the point to be drawn to the trial judge’s attention since it may be both difficult and inconvenient for any such error to be corrected on appeal. Difficult because the appeal court often defers to the findings of fact of a TCC judge in a highly technical dispute, and because - in order to do justice to any such ground of appeal - the appeal court might have to get to grips with a substantial volume of highly technical evidence. And inconvenient for the reasons identified by Arden J.

Further, in English v. Emery Reimbold & Strick Ltd [2002] EWCA Civ 605, [2002] 1 W.L.R. 2409, Lord Phillips MR said, in the context of the connected matter of a perceived lack of reasoning in a judgment, at [25]:

“If an application for permission to appeal on the ground of lack of reasons is made to the trial judge, the judge should consider whether his judgment is defective for lack of reasons, adjourning for that purpose should he find this necessary. If he concludes that it is, he should set out to remedy the defect by the provision of additional reasons refusing permission to appeal on the basis that he has adopted that course. If he concludes that he has given adequate reasons, he will no doubt refuse permission to appeal.”

Properly understood, my direction was therefore no more than an express invitation to consider that which the parties should have been considering in any event coupled with the time to ensure that they could fairly be expected to raise any matters of concern in a case of this size. In the event, while I am grateful for the helpful suggestions made by all counsel, the only substantive amendment made as a result of this process is a modest change to the quantum of the contribution that would have been ordered in respect of defect 28 had such claim been properly notified. While I have not found it necessary to amend the text in order to deal expressly with each and every point raised with me after circulation of the draft judgment, I confirm that all matters raised have been carefully considered.

This is a document-heavy dispute in which the best evidence comes not from the lay witnesses or their carefully crafted witness statements, but from the contemporaneous documents. In a well-known passage in Armagas Ltd v. Mundogas SA (The Ocean Frost) [1985] 1 Lloyd’s Rep 1, Robert Goff LJ (as he then was), said that it was necessary to approach the assessment of factual witnesses “by reference to the objective facts proved independently of their testimony, in particular, by reference to the documents in the case, and also pay[ing] particular regard to their motives and to the overall probabilities.”

In Gestmin SGPS SA v. Credit Suisse (UK) Ltd [2013] EWHC 3560 (Comm), Leggatt J (as he then was) made some perceptive observations as to the fallibility of human memory, conventional misconceptions as to its reliability (at [16]-[18]) and the honest distortion of memory through the litigation process (at [19]). I agree with the judge’s conclusion, at [22]:

“… the best approach for a judge to adopt in the trial of a commercial case is, in my view, to place little if any reliance at all on witnesses’ recollections of what was said in meetings and conversations, and to base factual findings on inferences drawn from the documentary evidence and known or probable facts. This does not mean that oral testimony serves no useful purpose – though its utility is often disproportionate to its length. But its value lies largely, as I see it, in the opportunity which cross-examination affords to subject the documentary record to critical scrutiny and to gauge the personality, motivations and working practices of a witness, rather than in testimony of what the witness recalls of particular conversations and events. Above all, it is important to avoid the fallacy of supposing that, because a witness has confidence in his or her recollection and is honest, evidence based on that recollection provides any reliable guide to the truth.”

Generally, I consider that the lay witnesses gave clear and straightforward evidence and sought to assist the court rather than advance the interests of their employers. I regret to say that the same was not true of M+W’s primary witness, Roy Meakin. As will become evident, I reject Mr Meakin’s evidence on a number of key issues where, in my judgment, his evidence was either contradicted or not supported by contemporaneous records. I find that he allowed himself to become an advocate in M+W’s cause and repeatedly strained to explain events according to its narrative rather than simply and straightforwardly assisting the court with his recollection.

I am confirmed in this assessment by noting that Mr Meakin previously behaved in this way as a witness in respect of the Hull project. He was a key witness for M+W in Premier Engineering (Lincoln) Ltd v. MW High Tech Projects UK Ltd [2020] EWHC 2484 (TCC) before Stuart-Smith J, as he then was. The judge observed, at [96], that while his evidence had been reliable and clear in some areas, his evidence about a key meeting had been “conspicuously vague and unsatisfactory.” The judge did not accept that his memory of the meeting was as poor as he made out. Further, the judge rejected, at [51] and [74], Mr Meakin’s claims that important matters were discussed in undocumented meetings and conversations. So too in this case, as I explain below, I do not accept Mr Meakin’s evidence that critical details as to the anticipated programme for Outotec’s further works to the gasifier were provided in undocumented conversations.

Further, I note that in Premier, Stuart-Smith J observed that Mr Meakin attempted to “duck and weave” in order to put M+W in a more commercially advantageous position. There are, in my judgment, echoes of the same approach in this case in the conflict between the position that Mr Meakin took as against EWH that the Fuel was not compliant and his insistence to Outotec that it was “fine.” Likewise, in the conflict between his insistence in January 2019 that the refiring of the gasifier had to be suspended because of the poor quality of the Fuel, and his contemporaneous assertion to Outotec that the problem was its failure to complete the necessary remedial works. With regret, I accept EWH’s submission that Mr Meakin lacked commercial integrity in such dealings.

Each party formally closed its case after the conclusion of the evidence. The case was then adjourned for some weeks to allow the parties to prepare their closing submissions. In the interim, EWH gave further disclosure and sought to rely on some fresh documents in the course of its closing submissions.

It is common ground that the duty of disclosure is continuing and that EWH was required to disclose the fresh documents. That conventional position is retained under the disclosure pilot applicable in the Business & Property Courts by paragraph 3.3 of Practice Direction 51U. Where the further disclosure adversely affects claims that have already been advanced by EWH then I also accept that it has acted properly in drawing such disclosure to the court’s attention. Doing so avoids the risk of misleading the court and is consistent with the duty to act honestly in all matters of disclosure as required by paragraph 3.1(5) of the Practice Direction. Indeed, EWH has quite properly reduced some heads of claim where the new documents do not support the case that it presented at trial.

There is, however, a distinction between giving further disclosure and admitting new material into evidence. I observed that further evidence could certainly be adduced after the close of the parties’ cases either by agreement or upon an application to reopen EWH’s case. In response, Mathias Cheung, junior counsel for EWH, referred me to the decision of Norris J in Swift Advances plc v. Ahmed [2015] EWHC 3254 (Ch) in which the judge allowed a party to reopen its case to admit a new document that was found after the closing speeches but before the judge had completed his assessment of the evidence. The defendants were able to put in further witness statements and offered the opportunity to give further oral evidence in respect of the new document. Swift is simply an instance of a case in which a judge acceded to an application to reopen a party’s case. In the event, the matter was not agreed, and no application was made to reopen EWH’s case. Accordingly, this judgment is given on the basis of the material properly put in evidence at trial and I have not considered the new unproven documents.

Throughout this trial, each party has criticised one or other of its opponents for seeking to advance an unpleaded case. The point was first made on the opening day when Mr Dennison expressed some concern that there might be cross-examination or argument by M+W on the basis of unpleaded issues. He made plain that he would object to such course being taken. In response, I made the following uncontroversial observation:

“My basic approach always to pleaded issues is that if somebody wants to amend, they must make an application. If something is shown to be within the current pleadings such that that’s not necessary, then so be it. If it’s outwith the current pleading, then it seems to me that the pleadings both define and confine the issues in a case, and therefore, absent being persuaded that something is within the current pleaded case or a successful application to amend, then it’s out.”

Much later in the trial, Felicity Dynes, junior counsel for EWH, objected to a line of questioning on the basis that Mr Acton Davis appeared to be pursuing an unpleaded case. Mr Acton Davis assured me that his purpose in asking the particular questions was to test the assumptions behind the witness’s evidence. I allowed him to do so but cautioned all parties:

“As I said right at the beginning, if it’s right that something falls outwith the pleadings, then the mere fact of having presented the argument or having asked the questions doesn’t imply any amendment to your pleadings.”

As will be apparent, I do not subscribe to the view that statements of case are only of historical interest at trial. In complex commercial litigation, cases will be amended and often re-amended, or even re-re-amended as in this case. Certain parts of a case will be abandoned, and other pleas might fall away only at trial. Parties and judges are not, however, expected to divine other parties’ cases by trawling through voluminous witness statements, expert reports and written submissions, but rather are entitled to take the view that the purpose of the evidence served is to seek to prove the pleaded case rather than to advance a new one. Such observation is particularly apposite here, where, as already noted, the witness evidence runs to over 10,000 pages. In such high value and complex litigation with the highest quality legal representation, it is particularly important that pleadings define and confine the issues.

No applications to amend were made by any party at trial. Accordingly, each is restricted to its pleaded case. Such restriction is a complete answer to some of the arguments that were presented at trial.

The EPC contract between EWH (as Purchaser) and M+W (as Contractor) incorporated the fifth edition of the Model Form of Conditions of Contract for Process Plants suitable for Lump Sum Contracts in the United Kingdom, the “Red Book”, issued by the Institution of Chemical Engineers in 2013, with bespoke provisions set out in the Special Conditions. EWH appointed Fichtner Consulting Engineers Limited to act as the Project Manager. M+W appointed Roy Meakin to act as the Contract Manager.

The Outotec subcontract incorporated the fourth edition of the Model Form of Subcontract Conditions, the “Yellow Book”, issued by the Institution of Chemical Engineers in 2013, with bespoke provisions set out in the Special Conditions. On 18 February 2016, Outotec also provided a collateral warranty to EWH by way of deed.

Issues of contractual construction fall to be determined in accordance with the well-known principles identified by the House of Lords and the Supreme Court in a series of recent cases. Such principles were authoritatively summarised by Lord Neuberger in Arnold v. Britton [2015] UKSC 36, [2015] A.C. 1619, at [15]:

“When interpreting a written contract, the court is concerned to identify the intention of the parties by reference to ‘what a reasonable person having all the background knowledge which would have been available to the parties would have understood them to be using the language in the contract to mean’, to quote Lord Hoffmann in Chartbrook Ltd v. Persimmon Homes Ltd [2009] A.C. 1101, para. 14. And it does so by focussing on the meaning of the relevant words …. in their documentary, factual and commercial context. That meaning has to be assessed in the light of (i) the natural and ordinary meaning of the clause, (ii) any other relevant provisions of the lease, (iii) the overall purpose of the clause and the lease, (iv) the facts and circumstances known or assumed by the parties at the time that the document was executed, and (v) commercial common sense, but (vi) disregarding subjective evidence of any party’s intentions.”

As Lord Neuberger observed in Marks & Spencer plc v. BNP Paribas Securities Services Trust Co. (Jersey) Ltd [2015] UKSC 72, [2016] A.C. 742, at [28], it is only after the process of construing the express words of a contract is complete that the court can consider the issue of the implication of terms. Here, the court is concerned with what Sir Thomas Bingham M.R. (as he then was) described in Philips Electronique Grand Public SA v. British Sky Broadcasting Ltd [1995] E.M.L.R. 472 (CA), at page 481, as:

“a different and altogether more ambitious undertaking: the interpolation of terms to deal with matters for which, ex hypothesi, the parties themselves have made no provision.”

In BP Refinery (Westenport) Pty Ltd v. Shire of Hastings (1977) 180 CLR 266 (PC), Lord Simon said, at page 283:

“for a term to be implied, the following conditions (which may overlap) must be satisfied: (1) it must be reasonable and equitable; (2) it must be necessary to give business efficacy to the contract, so that no term will be implied if the contract is effective without it; (3) it must be so obvious that ‘it goes without saying’; (4) it must be capable of clear expression; (5) it must not contradict any express term of the contract.”

In Philips, Sir Thomas Bingham M.R. said, at page 481, that this passage “distils the essence of much learning on implied terms. But its simplicity could be almost misleading.” He wisely cautions judges, at page 482:

“The question of whether a term should be implied, and if so what, almost inevitably arises after a crisis has been reached in the performance of the contract. So the court comes to the task of implication with the benefit of hindsight, and it is tempting for the court then to fashion a term which will reflect the merits of the situation as they then appear. Tempting, but wrong …

… it is not enough to show that had the parties foreseen the eventuality which in fact occurred they would have wished to make provision for it, unless it can also be shown either that there was only one contractual solution or that one of several possible solutions would without doubt have been preferred.”

In the Marks & Spencer case, Lord Neuberger added six comments to this summary of the law, at [21]:

“First, in Equitable Life Assurance Society v. Hyman [2002] 1 A.C. 408, 459, Lord Steyn rightly observed that the implication of a term was ‘not critically dependent on proof of an actual intention of the parties’ when negotiating the contract. If one approaches the question by reference to what the parties would have agreed, one is not strictly concerned with the hypothetical answer of the actual parties, but with that of notional reasonable people in the position of the parties at the time at which they were contracting.

Secondly, a term should not be implied into a detailed commercial contract merely because it appears fair or merely because one considers that the parties would have agreed it if it had been suggested to them. Those are necessary but not sufficient grounds for including a term.

However, and thirdly, it is questionable whether Lord Simon’s first requirement, reasonableness and equitableness, will usually, if ever, add anything: if a term satisfies the other requirements, it is hard to think that it would not be reasonable and equitable.

Fourthly, …. although Lord Simon’s requirements are otherwise cumulative, I would accept that business necessity and obviousness, his second and third requirements, can be alternatives in the sense that only one of them needs to be satisfied, although I suspect that in practice it would be a rare case where only one of those two requirements would be satisfied.

Fifthly, if one approaches the issue by reference to the officious bystander, it is ‘vital to formulate the question to be posed by [him] with the utmost care’, to quote from Lewison, The Interpretation of Contracts …

Sixthly, necessity for business efficacy involves a value judgment. It is rightly common ground on this appeal that the test is not one of ‘absolute necessity’, not least because the necessity is judged by reference to business efficacy. It may well be that a more helpful way of putting Lord Simon’s second requirement is, as suggested by Lord Sumption in argument, that a term can only be implied if, without the term, the contract would lack commercial or practical coherence.”

By clause 13 and Schedule 11 to the EPC contract, M+W was required to complete the works to allow Take Over to be certified by 9 April 2018, being 871 days from the date of the contract. By clause 15 and Schedule 12, M+W was liable to pay liquidated damages, subject to the Delay Damages Cap, at the rate of £84,800 per day in the event that completion was delayed beyond such date save that the right to damages would be suspended insofar as the Project Manager notified the parties that M+W was entitled to an extension of time pursuant to clause 14. Schedule 12 set the Delay Damages Cap at 15% of the contract price.

It is common ground that the works had not been completed and Take Over had still not been certified at termination on 4 March 2019. At the daily rate of £84,800, and subject to M+W’s argument that it was entitled to an extension of time, such cap was reached on 7 January 2019 some 56 days before termination.

Clause 44.1(c), as amended, provides:

“If: …

(c)

(subject to clause 15B.1), the Contractor having paid or allowed or becoming liable for a sum or sums in aggregate equal to or greater than the Delay Damages Cap; …

then, without prejudice to any other rights or remedies, the Purchaser may forthwith issue a Notice terminating the employment of the Contractor under the Contract with immediate effect.”

Accordingly, unless M+W was entitled to an extension of time of at least 56 days, the Delay Damages Cap was exceeded and EWH was entitled to terminate the contract pursuant to clause 44.1(c).

Claims for an extension of time are governed by clause 14 as amended. By clause 14.7, both parties agreed that they would “at all times use reasonable endeavours to minimise any delay in the performance of their obligations under the Contract, whatever may be the cause of such delay.” Notwithstanding such agreement, clause 14.4(d) provides that an entitlement to an extension arises where, among other matters, delay was caused by EWH’s breach of contract. Such entitlement is, however, subject to prior notification in accordance with clauses 14.1 and 14.1A.

In considering a request for an extension of time by reason of an alleged breach of contract, the Project Manager is required by clause 14.2 to have regard to the following matters:

“(a)

an extension shall only be granted when the [breach of contract causing the delay] affects achieving the completion of the Plant or the Works or any part of the Plant or the Works by any date or by the end of any period stated in the Contract;

(b)

all the information currently available to the Project Manager;

(c)

the amount of any extension in respect of a particular cause of delay shall be fair and reasonable; and

(d)

in the event of extension for a cause which occurs at a time when the Contractor is already in delay for which no extension is allowable, the delay accrued prior to the allowable extension shall not be excused.”

M+W seeks a total extension of time of 27 weeks comprising three periods: (a) 1 June to 14 August 2018; (b) 9 November 2018 to 4 February 2019; and (c) 5 February to 4 March 2019. It pleads an entitlement to such extension by reason of EWH’s alleged failure to deliver any RDF, alternatively RDF that complied with the contractual specification. That broad formulation is further explained at paragraphs 94-95 of the Defence and Counterclaim and at paragraphs 3 and 8 of Annex 6 to the Defence and Counterclaim:

Accordingly, the position is as follows:

I shall turn in the next section (paragraphs 46-72) to consider the provisions of the contract concerning the delivery of RDF and quality management which are central to these allegations. I shall then consider M+W’s alleged entitlement to suspend works (paragraphs 73-83) before turning to consider the allegations of breach (paragraphs 84-174). I shall next consider whether any breach caused delay (paragraphs 175-266). Finally, I shall consider whether M+W notified such delay or expected delay and its alleged cause in accordance with clause 14.1 (paragraphs 267-290). In view of my findings on those issues, the question of what extension of time might be fair and reasonable does not arise and I set out my conclusions at paragraphs 291-293.

EWH’s core obligations under the EPC contract were set out at Schedule 3 to the contract. Among other matters, section 3.6 required EWH to:

“(2)

make arrangements for the supply of such quantities of RDF in accordance with Schedule 22A under the terms stated in Schedule 14 and 15, subject to the Contractor’s right to reject Unacceptable RDF;

(3)

… provide RDF with a bulk density and [net calorific value] in accordance with the specification detailed in section 1.3.2 of Schedule 22A, in such proportions that the gasifier inlet bulk density and [net calorific value] requirements of section 1.4.3 of Schedule 22A can be met by the following means:

a)

blending in the reception hall (operator – mechanical plant);

b)

de facto blending and inerts removal in the MPT plant; and

c)

blending in the fuel bunker (operator – mechanical plant) ….

(7)

make arrangements, at the Purchaser’s expense, for the removal of RDF evidenced through sampling to be Unacceptable RDF as defined in Schedule 22A …

provided that the Purchaser’s obligations under (7) … shall be limited to providing the relevant operational personnel … and shall not derogate from (or excuse) the Contractor’s obligations under clause 33 (Taking Over) to carry out takeover procedures, including any takeover tests.”

Schedule 14 dealt with, among other matters, the supply of RDF during the commissioning of the plant. Paragraphs 14.8.1.1 and 14.8.2 provided:

“14.8.1.1 The Contractor shall notify the Purchaser of RDF requirements as set out in 14.8.2 and manage RDF receipt and off-loading process.

The Purchaser shall set up supply contracts. For a period of a maximum 9 weeks from the first RDF delivery on site, the Purchaser will be responsible for the delivery of up to 25,000 tonnes of RDF, the disposal of up to 22,000 tonnes of any Fuel and out of specification Fuel produced, and the disposal of up to 2,250 tonnes of inerts from the MPT plant. The Contactor will be responsible for the costs associated with the disposal of any Fuel and inerts from the MPT plant exceeding the quantities and/or exceeding the period from the first RDF delivery on site stated above…

14.8.2

At least 6 months prior to the start of commissioning, the Contractor shall provide an outline schedule of the quantities and dates of the RDF required to successfully complete the commissioning and Take-Over procedures. As part of the Commissioning Protocol issued to the Purchaser prior to starting commissioning, these dates and quantities shall be confirmed.

In the month before RDF deliveries are due to commence and subsequently two weeks prior to commencement, any changes to the Commissioning Protocol which affect RDF deliveries shall be immediately identified to the Purchaser so that alternative arrangements can be made.

The Contractor shall notify the Purchaser 48 hours prior to any changes to the commissioning tonnages notified in accordance with the paragraph. Failure to do so will result in the Contractor being responsible for any Purchaser costs associated with storing, handling, transporting and disposal of the RDF.”

By paragraph 1.3.1 of Schedule 22A to the EPC contract, M+W was required to design, manufacture and deliver the plant based on the RDF parameters described in the schedule. Paragraph 1.3.1 provided:

“The material supply to the facility will be refuse derived fuel (RDF). RDF may be derived from either municipal solid waste (MSW) or commercial and industrial waste (CIW) ...”

Section 1.3.3 provided:

“The Contractor shall design, manufacture and deliver a mechanical pre-treatment (MPT) plant to treat the incoming RDF as defined in clause 1.3.2 and Table 22A.2.0 above and to:

-

reduce the size of the RDF to meet the requirements in Table 22A.2.

-

reduce the percentage of non-combustible ferrous and non-ferrous metals, non-combustible glass and non-combustible inert materials in the incoming RDF to produce a fuel to the gasifier as defined for these parameters in Table 22A.2.2 and 22A.2.3 below.”

The contractual specification for incoming RDF was set out at Table 22A.2.0 of Schedule 22A. It provided:

The text beneath the Table 22A.2.0 set out the consequences of RDF being out of specification:

The text continued:

“Bulk density of the incoming RDF will be calculated according to BS EN 15401 2011: Solid Recovered Fuels – Determination of Bulk Density, using a 220-litre container. 3 measurements of bulk density will be made as required by BS EN 15401, which will be averaged to give a single daily value.

The [net calorific value] of the Incoming RDF will be laboratory tested and reported as set out in BS EN 15400:2011, Solid Recovered Fuels – Determination of calorific value.

Baled inputs will have a maximum bale size of 1100mm x 1100mm x 1700mm, with non-metallic binding and plastic wrapping.

Unless stated otherwise, and excluding bulk density and net calorific value (NCV), the limits stated in table 22A.2.0 above are based upon daily averages of the RDF delivered to the RDF reception, sampled before the pre-shredders and mixed to provide representative samples.

Unacceptable RDF is defined in appendix C and indicates those materials that if passed through the MPT, may cause damage to plant or equipment, cause excessive wear and tear, and adversely affect Plant performance.”

Appendix C to Schedule 22A defined “Unacceptable RDF” in the following terms:

“1.

Any item greater than 600 mm in any dimension. This does not apply to the external dimensions of whole bales.

2.

Any oversized item or items above 10kg that has damaged the shredder.

In cross-examination, Mr Wilcock accepted that while it would be easy to spot some obviously Unacceptable RDF, such as large lumps of metal, big stones or sheets of tarpaulin, there would be limited opportunity to identify whether the waste was compliant as it was tipped on to the reception hall floor. That said, appropriately sized sieves could easily extract over-sized objects.

Paragraph 1.3.1 of Schedule 22A further provided:

“… The Purchaser shall have an appropriate quality management system in place to ensure that the RDF is in accordance with Table 22A.2.0 – Incoming RDF Specification.”

Mr Dennison argues that, properly construed, Schedule 22A is not addressed to and does not impose obligations on the purchaser. Such obligations are, he contends, contained in Schedule 3. Rather, the purpose of Schedule 22A is to set out the basis against which M+W was required to design and manufacture the plant.

While Mr Dennison is right to say that EWH’s responsibilities were set out at Schedule 3, such provisions included the obligations:

Thus, while Schedule 22A was primarily concerned with the design basis for the plant, it also set out the “arrangements for the supply of RDF” that EWH was required to make. Such arrangements included, in my judgment, the obligation to “have an appropriate quality management system in place” to “ensure” that the RDF was within specification.

Paragraph 1.4.1 provided:

“The design point for the gasifier is provided in Table 22A.2.1, and the design fuel parameters given in Table 22A.2.1 shall be assumed for the purpose of performance guarantees.”

The table then provided:

Schedule 22A specified the permitted size distribution of the Fuel and the general specification for the Fuel at Tables 22A.2.2 and 22A.2.3:

Sections 1.4.2 and 1.4.3 of Schedule 22A provided that M+W was responsible for compliance with the size distribution and Fuel specification provided that the incoming RDF was supplied in accordance with Table 22A.2.0.

The text below the Fuel Specification in paragraph 1.4.3 of Schedule 22A added:

“Bulk density of fuel will be calculated according to BS EN 15401 2011: Solid Recovered Fuels – Determination of Bulk Density, using a 220-litre container. 3 measurements of bulk density will be made as required by BS EN 15401, which will be averaged to give a single daily value.

Unless stated otherwise, the limits stated in Tables 22A.2.2 and 22A.2.3 above refer to the fuel fed to the gasifier, sampled from a conveyor belt between the fuel store and the gasifier and mixed to provide representative samples.”

Paragraph 2.2 of Schedule 22A required a “high level of Availability.” Specifically, it provided:

“The gasification stream … shall be designed to be capable throughout its Design Life of maintaining full-load operation in accordance with the Firing Diagram for a minimum of 8,000 hours without the need to shut down for manual cleaning.”

The Firing Diagram was based on a single design point detailed at Table 22A.3. The design point for the net calorific value was 12.5 MJ/kg but the Firing Diagram itself, at para. 3.3.2, was drawn on the basis of the net calorific value being in the range of 10-16 MJ/kg. Note (3) to the Firing Diagram made plain that, among other matters, this was the range of net calorific value for which the gasifier and boiler were to be capable of operating in continuous and stable operation. It will be noted that this range was narrower than the range allowed for the RDF specification (8-20 MJ/kg), but in line with that allowed for the Fuel specification (Table 22A.2.3).

The performance guarantees were set out in Schedule 17. The seven Absolute Performance Guarantees were set out at Table 17.3. Subject to clauses 35.14 and 35.14A of the EPC contract, failure to meet any of those guarantees entitled EWH to reject the plant. The five Economic Performance Guarantees were set out at Table 17.4:

A failure to meet any of the Economic Performance Guarantees entitled EWH to be paid liquidated damages as specified at Table 17.5 and Daily Performance Damages as specified at Table 17.5B. In assessing performance against these guarantees, the contract required use of appropriate correction curves. Paragraph 17.1 of Schedule 17 provided:

“The performance guarantees are quoted against a set of reference conditions (such as ambient air temperatures) which may differ significantly from the actual conditions during operation and when the Performance Tests are conducted. It is therefore an essential requirement that the performance guarantees are supported by defined reference conditions and correction curves or formulae to enable the performance as measured against actual conditions to be corrected back to the reference conditions.

These correction curves and formulae shall be provided by the Contractor and form part of the Contract … The final correction curves shall be approved by the Project Manager.”

Taking each of guarantees 1, 2, 3 and 5 in turn:

The broad scheme of these provisions can be conveniently summarised:

Accordingly, there was no express contractual obligation to test the waste prior to its delivery to site, or to provide a certificate of conformity. Indeed, the contract required RDF to be tested after its delivery to the RDF reception such that, in normal operating conditions, it would necessarily have been processed through the MPT plant and gasified before such tests were reported.

Further, there was no express right to reject waste that did not comply with the RDF specification unless it was so out of specification that it was Unacceptable RDF. Indeed, the contract expressly envisaged that out-of-specification waste might be supplied, that its supply might have particular consequences (for example in respect of contamination, slagging, availability, throughput, increased consumption of urea, ammonia slip, lime and activated carbon, and compliance with emission levels), and that it was necessary to apply corrective curves by reference to the Design Fuel and the midpoint of the design bulk density in order to assess the plant’s performance against a number of guarantees.

For these reasons, I accept that the contractual sampling and testing regime cannot have been intended either to determine whether a particular delivery of RDF should be accepted or rejected, or whether processed Fuel should be gasified. Rather, the purposes of sampling and testing were to monitor the quality of the RDF to allow EWH to manage its supply chain and, secondly, to provide an objective basis for evaluating the performance of the plant.

The obligation was to have “an appropriate” quality management system in place to ensure compliance with the RDF specification and not to provide a copy of the same to M+W, or to seek or obtain M+W’s agreement to its proposed quality management system.

M+W suspended commissioning activities between 1 June and 14 August 2018 before the impasse was broken by the agreement of a Transitional Agreement. Commissioning was suspended again on 14 January 2019 when M+W refused to refire the gasifier.

In the Executive Summary of its closing written submissions, M+W argues:

“The correct legal position is that where the contract is silent, M+W is unconstrained in how it reacts to [EWH’s alleged breaches of contract]. The only practical limit is that if M+W’s reaction is so unreasonable as to break the chain of causation, it will likely be unable to recover the time and/or cost consequences of responding in that manner.

Otherwise, M+W is entitled to respond to the breach as it sees fit and EWH is obliged to underwrite the time and money consequences of the same under Clauses 14 and 19.”

Despite my invitation, Mr Acton Davis cited no authority in support of these sweeping propositions. I have no hesitation in rejecting them as unsound in English law. It is absolutely not the position that, where a contract is silent, a party can respond to the other’s breach of contract “as it sees fit” and subject only to its response not being unreasonable. On the contrary, the primary remedy for a breach of contract is a claim for damages. In some cases, the court may order specific performance of the obligation. Further, the innocent party may, in certain circumstances, be entitled to treat the contract as at an end. Absent some term of the contract to the contrary, the innocent party is not, however, entitled simply to withhold performance of its own obligations, whether such course would be reasonable or not.

In Fercometal S.A.R.L. v. Mediterranean Shipping Co. S.A. [1989] 1 A.C. 788, the House of Lords confirmed that even where the breach is repudiatory, the innocent party’s choice is simply between affirmation and treating the contract as discharged. Lord Ackner explained, at page 805E:

“There is no third choice, as a sort of via media, to affirm the contract and yet to be absolved from tendering further performance unless and until A gives reasonable notice that he is once again able and willing to perform.”

For completeness, that is not to say that the innocent party is not afforded time to decide whether to affirm the contract or treat the contract as discharged: Stocznia Gdanska S.A. v. Latvian Shipping Co. (No. 2) [2002] EWCA Civ 889, [2002] 2 Lloyd’s Rep. 436, at [87], per Rix LJ; Chitty on Contracts (34^th Ed.), para. 27-055. That is not, however, a right to suspend performance. Chitty adds, in the same paragraph:

“A contract remains in force until it has been terminated for breach so that a contracting party who has not elected to terminate the contract remains bound to perform his obligations unless the effect of the other party’s breach is to prevent performance of the innocent party’s obligation becoming due.”

Further, in Channel Tunnel Group Ltd v. Balfour Beatty Construction Ltd [1992] QB 656, Staughton LJ said, at pp.666-667:

“The contractors maintain that they are entitled to suspend work on the cooling system, although they have not yet done so, by reason of Eurotunnel’s breaches of contract described above. If it were solely a question of English law, this argument would face some difficulty. It is well established that if one party is in serious breach, the other can treat the contract as altogether at an end; but there is not yet any established doctrine of English law that the other party may suspend performance, keeping the contract alive.”

Chitty cites the Channel Tunnel Case at paragraph 39-225 as authority for the proposition that:

“Generally, a breach of contract will only give rise to a claim for damages, and the innocent party will be obliged to continue its outstanding performance of the contract notwithstanding that breach.”

Likewise, Keating on Construction Contracts (11^th Ed) observes, at paragraph 6-095:

“Every breach of contract entitles the other party to damages to compensate for the loss sustained in consequence of the breach. But, with the exceptions discussed below [in which the innocent party is entitled to treat the contract at an end] and subject to express contractual rights of determination, breach of contract by one party does not discharge the other party from performance of its unperformed obligations.”

Citing the Channel Tunnel Case, Keating adds at paragraph 6-140:

“Although particular contracts may give the contractor express rights if certificates are not paid, there is no general right at common law to suspend work if payment is wrongly withheld. This is consistent with the principle that, except where there is a breach of a condition or fundamental breach of contract, breach of contract by one party does not discharge the other party from performance of its unperformed obligations.”

Of course, by s.112 of the Housing Grants, Construction & Regeneration Act 1996, Parliament has legislated to depart from the common law position to allow contractors a statutory right to suspend performance of a construction contract in certain cases of non-payment. Such provision is not in play in this case.

Even if Mr Acton Davis’ proposition of law were sound, it is advanced on a false premise. The contract in this case is far from silent:

Thus, M+W was entitled to refuse to accept deliveries of Unacceptable RDF. Absent some repudiatory breach on the part of EWH, and no such breach is alleged, it was not, however, entitled to refuse to accept other deliveries or to suspend commissioning. If M+W believed that EWH had breached the contract in some way short of repudiation then M+W’s obligation was to continue to perform its own contractual obligations. Meanwhile, any consequent claim for an extension should have been made pursuant to clause 14.1 and any claim for additional payment made pursuant to clause 19.1.

On 31 May 2018, Fichtner certified the plant’s readiness to receive RDF in accordance with paragraph 14.9 of Schedule 14. The pleaded challenge to the delay in certifying readiness to receive RDF is no longer pursued and accordingly M+W only now seeks an extension of time from 1 June 2018. It is common ground that no deliveries of RDF were made between 1 June and 14 August 2018.

As to this period:

M+W’s formulation is curious. EWH’s obligation was not to deliver such RDF as it “knew” was required, but only such RDF as M+W had formally notified EWH that it required pursuant to Schedule 14. At paragraph 94(ia)(c), M+W relied upon four RDF supply schedules. Three are now relied upon, and only the first two can be the potential foundation for the claimed extension of time:

By a letter dated 2 February 2018, Mr Meakin criticised EWH’s failure to share details of its quality management system and the results of its off-site testing. He asserted:

“Given the obligation on M+W to design the Plant based on the RDF parameters, the requirement that the RDF is within specification is fundamental to the whole delivery of the Plant. Therefore, it is not unreasonable for M+W to seek assurance that the RDF will be within the required parameters. It is beneficial for both EWH and M+W to be satisfied that the RDF complies with the Contract requirements, because M+W is under no obligation to accept and process it in the MPT plant if it is not.

Given that you have confirmed that EWH has the appropriate quality management system in place in accordance with section 1.3.1 of schedule 22A, and that the RDF will be delivered in accordance with the requirements under section 1.3.2 of schedule 22A, we do not understand your reluctance to provide the requested information or explain how you intend to demonstrate this by sampling and testing in the Plant’s reception hall.

M+W is not willing to insert RDF into the MPT plant (which has been specifically designed on the basis of the RDF specification in Table 22A.2.0) unless it is certain that it is in accordance with the required specification such that it will not damage the MPT plant.”

Addressing EWH’s concerns about delay, Mr Meakin continued:

“With respect, the issues of the delivery of RDF for Take Over and commissioning are intrinsically linked to EWH demonstrating to the reasonable satisfaction of M+W that its deliveries will comply with EWH’s obligations under the Contract.

M+W can confirm the date of the first delivery of RDF provided EWH can confirm the RDF is within specification by proving the above have been satisfactorily answered so that M+W can be assured that the RDF can be placed into the MPT Plant and will have no detrimental effect on the MPT equipment or the output fuel specification. It is not possible for EWH to arbitrarily separate the questions of quantity, quality and time of delivery for its convenience.”

By a letter dated 13 March 2018, Mr Meakin acknowledged that EWH had indicated its intention to engage a certified UKAS laboratory to sample and test the RDF and to deliver RDF in accordance with Schedule 22A of the EPC contract. He complained, however, that EWH had not provided any method statement, identification of the laboratory concerned or details as to the proposed testing. He contended that it was not sufficient for EWH to make a “bare and unsupported statement” that it would deliver compliant RDF, and that such statement needed to be backed up by reasonable evidence of the quality control systems that the contract required. Mr Meakin argued that EWH’s statement overlooked the location and timing of the sampling and testing. Further, he criticised EWH for its unwillingness to share the results of its off-site testing. Mr Meakin rejected the argument that M+W was only entitled to reject Unacceptable RDF, and concluded:

“For the avoidance of any doubt whatsoever, M+W is not obliged to and will not process or put into the MPT plant RDF which does not comply with the parameters of Schedule 22, Table 22A.”

By a letter dated 11 May 2018, Mr Meakin insisted that before seeking to deliver any RDF on 14 May, EWH should first provide M+W with its quality management system; its environmental management system; a waste transfer note for each load of RDF to be delivered; details of the compositional analysis for each batch of RDF evidencing its compliance with the RDF specification at Table 22A.2.0; the results of the waste acceptance test criteria for each batch of RDF; and details of the destination of materials taken from site. He explained that M+W would be unable to accept delivery of RDF to site without provision of such documents as it could not otherwise be sure that statutory obligations under the Environmental Permitting (England & Wales) Regulations 2016, the Environmental Protection Act 1990 and the Waste (England & Wales) Regulations 2011 were being met.

In cross-examination, Mr Meakin explained his frustration at the lack of information. He asserted that he would have required a contractual variation before agreeing to process out-of-specification RDF. He insisted that M+W needed to know the composition of each truck load of waste before it was delivered to site in order to ensure that the specification could be met by blending.

On 25 May 2018, Mr Wilcock responded on behalf of EWH. He refuted that the documentation listed was required prior to delivery of RDF but nevertheless provided copies of the company’s quality management system; its draft environmental management system; the waste transfer notes for intended deliveries that M+W had not been ready to accept on 28 March, 23 April and 14 May 2018; and certificates of conformity for such intended deliveries. He did so, he maintained, not in compliance with any legal obligation but in a spirit of co-operation.

Mr Meakin responded on 30 May 2018 with detailed commentary upon the quality management system and other documents provided. He again asserted that each delivery was required to comply with the specification for incoming RDF.

Following the certification of the plant’s readiness to receive RDF, EWH and Fichtner repeatedly pressed M+W for an updated delivery schedule. Such request was first made on the day of certification by Fichtner’s email of 31 May 2018. Further requests were made for an updated delivery schedule by EWH’s letters of 8 June and 4, 16 and 20 July 2018; Mr Wilcock’s email of 7 August 2018; and Fichtner’s letter of 29 June 2018. EWH also confirmed that it had sampled a stock of RDF and obtained certificates of conformity, and that it was ready to deliver RDF in accordance with what it regarded as its contractual obligations. Mr Wilcock told me in re-examination that, at 8 June, EWH had at least 3,300 tonnes available for delivery.

On 3 June 2018, Mr Meakin replied to Fichtner. He wrote:

“... to allow the Contractor to proceed with commissioning activities we require the Project Managers (sic) assurances and guarantee, that in all respects each delivery of RDF provided by the Purchaser will meet, in perpetuity, the Incoming Fuel Specification and will be provided complete with all necessary supporting documents to satisfy the contractual and statutory obligations and duties, including but not limited to, those requirements set out in the Contractors (sic) letter dated 11 May 2018.

Subject to these assurances the Contractor will be able to consider accepting RDF to part of the Plant and recommence commissioning of the MPT plant.

We look forward to receiving such assurances and necessary supporting documentation to accompany each delivery to permit RDF into the Plant.”

The same demand for assurances in perpetuity had been made in another letter of 1 June. This cannot have been a serious demand since it was of course absurd to seek Fichtner’s assurances and guarantees as to EWH’s performance, let alone “in perpetuity.”

Meanwhile:

Accordingly, there were no unconditional notifications of M+W’s requirements for RDF during the first alleged period of delay from 1 June 14 August 2018. Further, the conditions that M+W sought to impose were extra contractual:

Since notification was a condition precedent to the purchaser’s liability to deliver RDF, EWH was not in breach of contract in failing to deliver RDF between 1 June and 14 August 2018.

Again, the pleaded formulation is curious. M+W alleges, at paragraph 94(ii) of its Defence and Counterclaim, that no RDF was delivered after 25 October 2018 “despite the fact that it continued to be required to commission the gasifier.” There is, however, no attempt to plead the antecedent unconditional notifications of M+W’s requirements that would have triggered EWH’s contractual obligation to deliver RDF to site. Since notification was a condition precedent to the purchaser’s liability to deliver RDF, EWH was not in breach of contract in failing to deliver RDF during these second and third periods.

In the course of the trial, the parties and their experts explored the quality of:

The indifferent quality of the RDF produced by various suppliers which was not delivered to the site in the early part of 2018 is largely academic. As Dr Stephen Wise observed, the whole point of early off-site testing was to identify which suppliers could produce RDF that would meet the specifications. Such testing showed that Mid UK was best able to meet the contractual specification and indeed EWH then settled on using Mid UK as its sole supplier during the commissioning of the plant. The selection of a sole supplier did mean that EWH lost the ability to blend various streams of RDF, but the critical issue for this delay claim is the quality of the RDF that was delivered.

The question of the quality of the RDF delivered and the Fuel processed from such RDF post termination is important to, among other matters, the question of slagging (defect 23) and will be analysed later in this judgment in that context.

I turn then to the RDF that was delivered to site before termination. Samples were taken from the RDF supplied by Mid UK to site over 35 days between 14 August and 21 November 2018. Such testing showed that the waste was not compliant with certain parameters within the RDF specification on a number of occasions. Michael Brown’s analysis can be summarised as follows, with an additional row showing the analysis for net calorific value on the basis of daily averages:

By contrast, Dr Wise observes that the sampling results showed the RDF to be “almost always”, which he put at 98% of the time, to be within the required parameters. That, he adds, is “in the real world … about as good a set of results as a fuel supplier could expect to achieve.”

For the reasons explained below, I consider that Mr Brown overstates the extent of non-compliance, in part because of his reliance on spot compliance. Equally, I accept that, as William Webb (junior counsel for M+W) ably demonstrated in cross-examination, the 98% statistic cited by Dr Wise is not helpful and liable to mislead.

The EPC contract specifically provides for the taking of daily averages of mixed waste for all parameters other than bulk density and net calorific value: Sch. 22A, para. 1.3.2. What is less clear is what is to be done differently in the cases of bulk density and net calorific value. It is convenient to repeat the contractual requirements used to calculate the bulk density of both the RDF and Fuel at paragraphs 1.3.2 and 1.4.3 of Schedule 22A:

“1.3.2

Bulk density of the incoming RDF will be calculated according to BS EN 15401 2011: Solid Recovered Fuels – Determination of Bulk Density, using a 220-litre container. 3 measurements of bulk density will be made as required by BS EN 15401, which will be averaged to give a single daily value …

1.4.3

Bulk density of fuel will be calculated according to BS EN 15401 2011: Solid Recovered Fuels – Determination of Bulk Density, using a 220-litre container. 3 measurements of bulk density will be made as required by BS EN 15401, which will be averaged to give a single daily value.”

Mr Brown identifies that this could mean that compliance with the specification for bulk density was to be tested against:

Mr Brown records at paragraph 3.15 of his main report that he was instructed that the correct contractual construction was that the bulk density of each sample (arrived at by averaging three measurements) was to be tested against the RDF specification using the spot compliance method. He added that he agrees with such construction. Dr Wise observes that the method specified by BS EN 15401:2010 (namely filling a container with RDF, allowing it to settle, refilling and then weighing it) is not particularly complicated or prone to error. He therefore suggests that, from a technical perspective, it would make more sense to construe paragraph 1.3.2 of Schedule 22A to require not the averaging of three different measurements of the same sample but the averaging of the measurements of three different samples.

BS EN 15401:2010 provides that, after obtaining a single measurement of bulk density, one should unify the used sample with the unused sample material and repeat the test procedure to obtain at least one further replication. As already noted, the contract required three measurements and accordingly two further replications in this case. Such procedure does not, therefore, involve the repeated measurement of the very same scoop of material but the measurement of three different scoops of material from the same larger sample. Arguably that could be achieved by testing only one of the ten 1,200-litre samples three times. (See below at paragraphs 149-156 for a discussion of the sample size.)

When considering the proper construction of the contract, it is important to remember that RDF is inherently heterogeneous; that its particle size can be significantly larger than a more processed material (such as solid recovered fuel) in that up to 90% could have a dimension up to 300 mm and the remaining waste could be up to 600 mm in size; and that the waste is processed and mixed before it is introduced to the gasifier. The purpose of sampling and testing is to be able to draw conclusions about the quality of the RDF supply as a whole, both in order that EWH can manage its supply chain and in order to evaluate the performance of the plant. Mr Brown is right to observe that taking average results masks the peaks and troughs, but since an individual sample or increment may not be representative of the whole, sampling and testing on a spot-compliance basis is not, in my judgment, likely to be particularly useful. Useful conclusions are more likely to be drawn from the sampling and testing of a large number of representative samples of waste. Equally, I accept Dr Wise’s observation that counting the number of increments of a heterogeneous material that fell within a particular parameter is not much more helpful. What matters is whether the waste as a whole was within the specification.

Further, the contract also required the bulk density of the Fuel to be measured by the same methodology and yet the bulk density requirements of the Fuel specification (also set at 150-300 kg/m³) could be met after blending: Sch. 3, para. 3.6(3). That consideration plainly points away from spot compliance and towards a construction of paragraphs 1.3.2 and 1.4.3 that will lead to more representative results.

Furthermore, however one is to arrive at it, the contractual method required a single daily value for both the RDF and the Fuel. Accordingly, I reject the construction of the contract that instead compares the bulk density of multiple daily samples with the contractual specification. While the contract is not entirely clear, I prefer a construction that yields the required single daily value and which is more broadly representative of the bulk density of the RDF delivered. Accordingly, of the two methodologies proffered, I prefer the daily average.

Taking the daily average results, the raw data show that the bulk density of the RDF fell below the specification of 150-300 kg/m³ on 9 and 12 November 2018 when it fell to 148.6 and 145.7 kg/m³ respectively. However, paragraph 9.1 of BS EN 15401:2010 required the mean value of the bulk density to be reported to the nearest 10 kg/m³. When this is done, the bulk density for 9 and 12 November would each be rounded to 150 kg/m³ and was therefore within the specification. There was therefore no breach.

As with bulk density, it is unclear what is to be done differently in testing for the net calorific value of the RDF. Again, Mr Brown was instructed that the EPC contract required the net calorific value test results to be analysed on a spot-compliance basis. He therefore reports a non-compliance in any instance when a single sample test result for net calorific value fell outside of the RDF specification. On such basis, the net calorific value of the RDF fell outside the required range in 26 of the 321 samples taken over the 35 days.

While the contract provides a specification for the net calorific value of RDF (being 8-20 MJ/kg), the key requirement was to supply RDF in such proportions that the narrower specification for Fuel (being 10-16 MJ/kg) could be met by blending: Sch. 3, para. 3.6(3). The contract does not expressly identify the method by which this will be assessed, providing only that the net calorific value of the RDF will be “laboratory tested and reported as set out in BS EN 15400:2011, Solid Recovered Fuels – Determination of calorific value.” Testing the RDF on a spot-compliance basis cannot, however, assist in determining the ability to achieve a particular range of values by blending.

I therefore agree with Dr Wise that, since the Fuel specification can be met by blending within the MPT plant and in the fuel bunker, it would make more sense to average a number of test results. Indeed, when the throughput remains low - as it would during the commissioning phase - such average might usefully be taken over a number of days. Accordingly, I reject Mr Brown’s approach of considering the net calorific value of the RDF on a spot-compliance basis. Indeed, such approach is inconsistent with his approach of taking a five-day average when modelling the net calorific value of Fuel in the bunker.

I therefore consider the daily averages. As noted above, on that basis the net calorific value reported by Socotec was within the RDF specification of 8-20 MJ/kg on each of the 35 days. Indeed, this was important since, as Dr Wise conceded, the effect of the removal of inert material (which, contractually, could be as much as 14.5% of the incoming RDF) by the MPT plant would be to increase the net calorific value of the processed Fuel.

The bigger issue, therefore, is compliance with the narrower Fuel specification. While Professor Beckmann reports the results of Fuel testing, each of Mr Brown and Dr Wise preferred to model the likely net calorific value of the Fuel in the bunker between August and December 2018 by considering the RDF data rather than the Fuel data. Such approach had the advantage of excluding the effects of Fuel drying out in the bunker, any further degradation of the material in the bunker and any issues arising from the separation efficiency of the MPT plant. Their models can best be understood in graphical format:

Mr Brown’s model takes a simple five-day rolling average of the net calorific value because the bunkers were designed to hold 13,000 m³ of Fuel, being the equivalent of 4 to 5 days’ operation of the gasifier. Dr Wise agrees that it is appropriate to take an average net calorific value over several days. He does not, however, consider that Mr Brown accurately models the net calorific value of the Fuel:

Dr Wise’s own model is more sophisticated and seeks to take into account the effects of uneven levels of distribution and the effects of processing, although he accepted in cross-examination that one could further refine his methodology for accounting for the effect of the removal of inert material. He comments on his own model:

Nevertheless, both models put the net calorific value over 16 MJ/kg during October and more than marginally so during November 2018. That was, indeed, the contemporaneous view expressed by Richard Burgess, EWH’s Project Director, in internal communications. In his January 2019 draft Fuel Paper, he identified four causes:

While it may well be that the Fuel dried out further in the bunker thereby increasing its net calorific value, on the balance of probabilities I find that EWH was in breach of contract in that it failed to supply RDF that was capable after processing and blending of meeting the stricter net calorific value parameters in the Fuel specification. That said, I also accept the evidence that, at least at low levels of exceedance, this was not a substantial problem. Provided the parameters for moisture content were observed, the net calorific value of the Fuel could be reduced simply by wetting it. Indeed, doing so would have the added advantage of increasing the bulk density of the Fuel.

The heavy metal content was required not to exceed 1,000 mg/kg. It is common ground that the heavy metal content of the RDF delivered to site was outwith the specification on a number of occasions:

BS EN 15442:2011 recognises that while solid recovered fuel with a very small particle size and a very homogenous bulk will show “good repeatabilities and reproducibilities”, fuels with a larger nominal top size and a heterogeneous bulk (such, I interpolate, as the RDF in this case) will be less consistent for parameters such as copper, nickel and mercury. The standard attributes the poor robustness of testing for such fuels to the imperfection of sample preparation to deal with extremely heterogeneous materials. Accordingly, Dr Wise observes that it is no surprise that testing reported exceedances for heavy metals.

Dr Wise also notes that the Fuel sampling data show the extent to which the MPT plant was effective in reducing the heavy metal content in that the level only exceeded the Fuel specification (which was also set at a maximum of 1,000 mg/kg) on one day, 22 November 2018. This, Dr Wise explains, is because non-ferrous metals, and particularly copper, would be separated out by the eddy current separators.

Notwithstanding the difficulties in testing for heavy metals, I find that EWH was in breach of contract in failing to deliver RDF that met the specification.

The single non-compliance was on 1 October 2018 when the level of fines passing through the 6mm screen hit 15.1% as against the contractual maximum of 15%. I accept Dr Wise’s characterisation of this exceedance as very minor. It was, nevertheless, a breach of contract.

While Dr Wise preferred to talk of minor exceedances, the RDF and Fuel specifications were not targets but contractual obligations. Accordingly, I find that EWH was in breach of contract in failing to deliver RDF that:

EWH provided a copy of its quality management system to M+W on 25 May 2018. The allegation that this was very late such that EWH did not have time properly to monitor its suppliers was rightly not pursued at trial:

Paragraph 1.3.2 of Schedule 22A provided that non-combustible material (defined as metals, glass, stones, ceramics, tiles, bricks and concrete that did not pass through a 3 mm x 3 mm screen) should be sampled and analysed in accordance with the test protocol set out at Appendix D. One of the requirements of Appendix D was that sampling and analysis of incoming RDF would be undertaken by an “accredited contractor.”

It is certainly arguable that, even without such requirement, an appropriate quality management system would require the engagement of an accredited contractor for sampling and testing the RDF. While the application of Appendix D was limited to the on-site sampling and testing of various inert materials, its requirement that the sampling and analysis be undertaken by an accredited contractor strongly supports such argument. In any event, the quality management system itself required that the contractor undertaking both the off-site pre-commissioning sampling and testing and the on-site commissioning sampling and testing should be “UKAS accredited.” No doubt for that reason, the parties and the experts have focused not on whether accreditation was required but upon the appropriateness of appointing Socotec as the contractor.

It is common ground between the parties and their experts that, in the absence of any directly applicable standard, three standards for the sampling and testing of solid recovered fuel provide a useful approach. Specifically:

While Socotec was accredited in respect of some processes involved in the sampling and testing of solid recovered fuel, it was not, as it conceded in a meeting on 20 September 2018, accredited to sample and test solid recovered fuel pursuant to BS EN 15442:2011. Further, its accreditation did not expressly cover testing against each and every contractual parameter. By its closing arguments, M+W therefore argue that Socotec’s accreditation for sampling solid recovered fuel was “limited.” That, however, is not the pleaded case and accordingly such argument is not open to M+W.

Socotec was UKAS accredited under ISO 17025 for conducting sampling and testing in a competent, consistent and transparent way. Its certificate of accreditation bore the serial number 0001 which, Dr Stephen Wise explains, indicated that Socotec was the first laboratory in the UK to be accredited against this standard. ISO 17025 is, he explains, an overarching accreditation. That, in my judgment, is sufficient to dispose of allegation 3(b).

The pleaded allegation is that Socotec was not specifically accredited to test RDF. It is factually correct but there was no such contractual obligation. Furthermore:

Given Socotec’s UKAS accreditation to ISO 17025 and the absence of any recognised standard for testing RDF, I reject M+W’s case that the quality management system was not appropriate by reason of its failure to require the contractor to be specifically accredited in the testing of RDF.

M+W has failed to prove allegation 3.

The pleaded allegation at paragraph 3(ii)(a) of Annex 6 to the Defence is that EWH was in breach of contract such as to cause critical delay between 1 June and 14 August 2018 in that it did not have an “appropriate sampling protocol in place (in that it did not comply with BS EN 15442:2011, BS EN 15401:2010 and/or BS EN 15400:2011 as explained by Michael Brown at item 8 of the RDF experts’ joint statement)”. This plea therefore incorporates the particulars explained by Mr Brown in such report which concern revisions 4 and 5 of the sampling protocol.

It is self-evident that the alleged inadequacy of revisions 4 and 5 cannot have caused any delay during the first period of alleged delay given that:

The general plea as to the alleged inadequacy of the quality management system is, however, repeated for periods 2 and 3 at paragraph 8(iii) by which time revision 5 was being operated and deliveries had started. By its closing submissions, M+W focuses the argument by contending that EWH’s sampling protocol was not appropriate because it breached two requirements of BS EN 15442:2011:

The wording varied a little between the various iterations of EWH’s sampling protocol, but version 5 provided:

“In the absence of any British Standard for sampling of RDF, the principles of BS EN 15442:2011 Solid Recovered Fuels – Methods of Sampling is followed as far as practical for the sampling of RDF.”

By its stated objectives, the sampling protocol sought to define a sampling process that could be carried out safely within operational constraints that followed the principles of BS EN 15442:2011.

BS EN 15442:2011 provides that to sample and test a lot of up to 1,500 tonnes, at least twenty-four increments should be taken. An increment is a portion of the fuel extracted in a single operation of the sampling device. Since each particle should have an equal chance of being sampled, the increments should be taken from various places across the lot. The increments taken from a single lot of material are together the sample; the minimum sample size therefore being the product of the number of increments and the minimum increment size.

Each increment should generally be three times the size of the nominal top size of the waste being sampled. Paragraph 6.8.2 of the standard provides:

“Only if the nominal top size is more than 40 mm the effective sample size may be reduced in order to downscale the sample size to realistic proportions. The reduction of the particle size and the sample size shall be done according to EN 15443, but the sampling report and the analyses report shall clearly mention this deviation and state that therefore the testing results are less representative.”

EWH’s protocol noted that the plant’s maximum daily throughput was 1,450 tonnes and therefore defined the lot as a day’s deliveries of RDF. The protocol provided that generally ten samples would be taken from each lot. Twenty-four increments would then be taken from each sample. The protocol recognised at section 9 that for a nominal top size of 300 mm, the standard indicated that each increment should be 900 mm cubed. Further, the protocol identified that an increment measuring 900 mm x 900 mm x 900 mm would have a volume of 0.729 m³ (i.e. 729 litres) and, assuming a bulk density of 225 kg/m³ (the average of the range specified in the EPC contract), a mass of 164 kg.

Having identified this issue, the sampling protocol identified what it described as a “practical and representative” model for determining the appropriate volume for each increment:

“For RDF with a nominal top size of 100 mm, the required increment size is 27 litres … Therefore, an actual increment of 50 litres is compliant with this requirement. Furthermore, 10 samples per day of 24 increments of 50 litres gives a daily sample volume of 12 m³.

For a nominal top size of material of 250 mm, the required increment size is 421 litres …, and 24 increments of 421 litres gives a sample size of 10.1 m³. Therefore 10 samples of 24 increments of 50 litres from a Lot gives a greater sample volume than the Standard requires for a nominal top size of 250 mm.

For material with a nominal top size of 300 mm, the required increments size is 729 litres …, and 24 increments gives a sample size of 17.49 m³. Therefore, by taking 15 samples of 24 increments of 50 litres from a Lot gives a greater sample volume than the Standard requires for a nominal top size of 300 mm.

Therefore, the minimum increment size is 50 litres.”

Since twenty-four increments were to be taken from each sample, the protocol identified the effective sample size as 1,200 litres or 1.2 m³. Since ten such samples were to be taken from each lot, a total volume of 12,000 litres (12 m³) would be tested each day. Assuming a bulk density of 225 kg/m³, this would equate to a total mass of 2.7 tonnes. This was, as the sampling protocol noted, greater than the total volume that would be tested by testing twenty-four increments each of 421 litres, being the volume achieved if taking increments measuring 750 mm cubed as indicated for a nominal top size of 250 mm). It was, however, less than the total volume of twenty-four increments each measuring 900 mm cubed as indicated for a nominal top size of 300 mm.

Before commenting upon the protocol, it should be noted that there is a difference in terminology. The standard refers to twenty-four increments being taken from the lot that together comprise the sample, whereas the sampling protocol refers to ten samples being taken from the lot each of which is then further divided into twenty-four increments. To avoid confusion, I shall when referring to the methodology set out in the sampling protocol refer to the ten primary increments from each of which twenty-four sub-increments were taken.

Strictly speaking, I consider it is too exacting to take the view that the RDF specification indicated a nominal top size of 300 mm since the specification required 90% of the waste to be less than 300 mm in all dimensions whereas the standard defines the nominal top size as “the aperture size of the sieve used for determining particle size distribution of solid fuels through which at least 95% by mass of the material passes.”

As already noted, an increment measuring 900 mm x 900 mm x 900 mm would have a volume of 729 litres and, assuming a bulk density of 225 kg/m³, a mass of 164 kg. Mr Brown observed that the 50-litre sub-increments in this case were less than one tenth of the size required by the standard. Dr Wise rightly accepted that in theory it is always preferable to take larger increments but stressed that you cannot ignore practicality when designing a sampling process. He explained that the standard was not designed for fuel with a large nominal top size and that in order to take account of the practicality and health and safety implications of taking such large increments, it was appropriate to take smaller increments. He also made the point that while a container measuring less than one dimension of a solid object might be less likely to pick it up, it would be able to pick up large flexible objects such as plastics.

In cross-examination, Mr Webb rightly pointed out that the proviso in paragraph 6.8.2 of the standard allows a relaxation in the effective sample size and says nothing directly about the size of the increments. There is, however, a link in that the sample comprises the total increments. It is also worth identifying the low threshold level above which the standard accepts some deviation:

Back calculating, the 50-litre sub-increments specified in the sampling protocol would measure 368.4 mm cubed ($\sqrt[3]{{0.05\mathrm{ }\mathrm{m}}^3}$ = 368.4 mm). Dr Wise concluded that EWH had arrived at a “reasonable and robust solution that ensured that every particle of the sample had an equal probability of being included in a sample while also ensuring that increment sizes were more manageable, and sampling could be carried out safely.” He added that any statistical concern that the increments were too small to ensure that every particle had an equal probability of being included in the sample was eased by the fact that multiple samples were being taken each day and that the results of those sub-samples were being averaged to produce a representative result.

I am satisfied that Dr Wise is right to say that BS EN 15442:2011 (even if it were directly applicable) did not require the taking of 729-litre increments each weighing some 164kg. Accordingly, I am satisfied that even within the confines of the standard, EWH was entitled to devise an alternative sampling strategy that involved taking smaller increments.

It is instructive to observe that M+W’s independent sampling contractor, Waste Research Limited, also had to take a pragmatic approach in its own sampling protocol. Such protocol was expressly approved by Mr Meakin:

At a bulk density of 225 kg/m³, the 100 kg increments taken by Waste Research Limited would have had a volume of 444 litres. Given, however, the low bulk density of much of the RDF it might be safer to assume an average bulk density of 160 kg/m³ (as used in Waste Research’s own sampling protocol) which would give a volume of 625 litres. I have therefore considered Waste Research’s own findings as helpfully reported by Mr Brown:

As the experts explained, one cannot take much from the Waste Research findings given the very limited data available. Such data are, however, consistent with Socotec’s findings that the vast majority of the waste was smaller than 75 mm. (Socotec tested against this marginally more demanding standard rather than the contractual 76 mm.)

Dr Wise accepted that the methodology differed from the standard in that only ten primary increments were taken. He said that one has to consider the practical implications of any sampling protocol. He observed that there were large articulated lorries in and out of the reception hall and that health and safety considerations justified taking a smaller number of primary increments. Further, he denied that the chosen methodology was less representative.

M+W is right to observe that, while ending up with 240 sub-increments, Socotec’s methodology only involved dipping into the lot in ten different places. I accept that this is not in accordance with the British Standard and further that such approach meant that, while a lot of information would be obtained about the ten samples, there would not be the same breadth of information that would have been achieved by “dipping into the waste” in twenty-four places. Given the heterogeneous nature of RDF, that meant that such sampling would be liable to be less representative.

Drawing these matters together:

This allegation is pleaded on the basis that EWH did not comply with ISO 9001:2015 in that “it lacked any or any adequate plan for testing followed by corrective/remedial action commenced sufficiently far in advance to ensure that by the time RDF was needed for commissioning, it could be reliably produced by the site or sites due to supply it.” There was no direct contractual obligation to do so but M+W argues that an appropriate quality management system would have complied with such standard. ISO 9001:2015 is a generic international standard for Quality Management Systems in any industry. It employs the Plan-Do-Check-Act cycle.

I accept Mr Brown’s evidence that, in the absence of a specific contractual yardstick against which to assess the quality management system or a defined standard for the production of RDF, the appropriateness of the quality management system could only be assessed against general principles of quality management. Dr Wise is also right to observe that concepts in respect of planning, performance monitoring and performance review could usefully be imported in a quality management system for procuring RDF without actually requiring the implementation of ISO 9001:2015.

Mr Brown identifies three core principles of ISO 9001, that a quality management system should be:

Here, the quality management system set out a supply-chain strategy for procurement from multiple sites and nominated Socotec as the sampling contractor. Further, EWH analysed the off-site sampling results and visited and audited suppliers. Such arrangements were, in my judgment, sufficient. Accordingly, I reject this allegation of breach.

For the reasons already explained at paragraphs 68-72, there was no contractual requirement either to sample and test each lorryload, or to provide evidence that each lorryload complied with the RDF specification.

M+W has failed to prove allegation 4.

To make good these allegations of breach, M+W relies on express and implied terms of the EPC contract. The express terms are at clauses 2.1-2.2, which provide:

“2.1

The parties and the Project Manager shall each co-operate with each other in the discharge of their respective obligations under the Contract with the aim of satisfactorily completing the Plant and the Works in accordance with the Contract.

2.2

The parties shall deal fairly, openly and in good faith with each other. Each party shall disclose information which the other might reasonably need in order to exercise his rights and to perform his obligations under the Contract. In particular, each party shall promptly disclose full information to the other concerning any matter which will or may prevent the Plant or the Works being completed in accordance with the Contract. The parties shall work together in a manner consistent with their respective obligations under the Contract to resolve or mitigate the effect of any such matter.”

In addition, M+W asserts an implied term at paragraph 22B of its Defence:

“Further or alternatively, insofar as [M+W] required EWH’s co-operation to discharge its own obligations, it was an implied term of the Contract, to give it business efficacy and/or to reflect the obvious intention of the parties, that EWH would provide the necessary co-operation.”

It is difficult to see that the alleged implied term takes matters any further forward. In any event, I reject the implied term:

As already explained, EWH was not in breach of any obligation to deliver RDF. While EWH was in breach of contract in period 2 in failing to deliver compliant RDF, I do not consider that M+W has thereby established a separate breach of the obligation to co-operate. Even if I am wrong in this view, I do not consider that this further formulation advances M+W’s case.

I have already rejected the allegation that there was no appropriate quality management system. Reformulating the matter as a failure to co-operate does not advance M+W’s case.

As already explained, EWH was not under any obligation to provide evidence of its quality management system or that deliveries of RDF were compliant. In particular, there was no obligation to ensure that each and every load of RDF was compliant with the specification. Loads would be mixed in the reception area and then sampled and tested after delivery to obtain representative test results.

In any event, EWH did engage with M+W as to its quality management system and, pursuant to the Transitional Agreement, provided additional compositional analysis.

I reject the allegations that there was any failure to co-operate or to deal fairly and openly with M+W. There is, in any event, some irony in such allegations. While I will return to the matter when considering the issue of wilful default, it was M+W that failed to deal fairly and openly with EWH by failing to report its concerns about the design of the gasifier, by concealing important information as to the likely delay to the programme and by seeking to justify the suspension of works by concerns, sometimes contrived, as to the efficacy of the quality management system and the composition of the waste.

I therefore reject the allegations of breach during the period from 1 June to 14 August 2018 and there can be no question of any entitlement to an extension of time for such period of alleged delay. While rejecting the other allegations, I do find EWH to have been in breach of contract in that it failed to supply RDF in accordance with the RDF specifications for heavy metals and fines on a limited number of days in October and November 2018. Further, I find it to have been in breach of contract in November 2018 in that it failed to supply RDF that was capable, after processing and blending, of meeting the narrower parameters for net calorific value in the Fuel specification.

The court must consider on the balance of probabilities whether any proven breaches of contract affected the date of completion of the works, or any part of the works. If so, and leaving out of account any earlier delay for which no extension of time is allowable, the court should grant such extension as is fair and reasonable. Commenting on similar contractual machinery in Walter Lilly v. Mackay [2012] EWHC 1773 (TCC), Akenhead J observed, at [365]:

“In the context of this contractual-based approach to extension, one cannot therefore do a purely retrospective exercise. What one cannot do is to identify the last of a number of events which delayed completion and then say it was that last event at the end which caused the overall delay to the Works. One needs to consider what critically delayed the works as they went along.”

Further, I accept that M+W would be entitled to a full extension of time without apportionment in the event that there were two concurrent causes of delay only one of which gave rise to a claim for an extension: see Walter Lilly v. Mackay (supra) at [366]-[370], Akenhead J; Henry Boot Construction (UK) Ltd v. Malmaison Hotel (Manchester) Ltd (1999) 70 ConLR 32, at [13], Dyson J, as he then was; and De Beers UK Ltd v. Atos Origin IT Services Ltd [2010] EWHC 3276 (TCC), (2010) 134 ConLR 151, at [177], Edwards-Stuart J.

I have already considered the issues concerning the supply of RDF. Before addressing causation, it is necessary also to consider more broadly the delays in commissioning the gasifier.

The design of the thermal train was based upon Outotec’s gasification technology. At its heart was a fluidised bed. The Fuel, being the processed RDF, was fed into the gasifier by plug screw conveyors. Such technology was also being used on two other projects for M+W, being the Levenseat project in Lanarkshire and the Charlton Lane project in Surrey.

Ben Purcell, M+W’s Contract Manager for the Outotec subcontract, was first aware that the feed screw was not operating as it should at Levenseat in September 2016. M+W became increasingly concerned as to the likely performance of the Outotec design in early 2017. Mr Meakin therefore assembled the so-called Intervention Team comprising a team of experts from across Europe to carry out a technical review of Outotec’s design. The verdict of the Intervention Team was damning as early as March 2017. The agenda for a meeting in Frankfurt on 21 March 2017 recorded the following concerns:

M+W was particularly concerned about the design of the fuel-feed system:

The Intervention Team also noted that the design of the gasifier had a “zero fouling factor” leading to excessive temperatures and slagging. The report estimated that the necessary remedial works to resolve issues with gasifier functionality would last 6 months and would cost an additional £3.5 million.

By a letter dated 28 June 2017, M+W formally gave Outotec notice that it considered the plug screw conveyors to be defective contending that there was potential for fragments of incompressible objects to become jammed and for compressible waste to form a bung that could not be moved forward thereby allowing oxygen levels to rise and combustion (rather than gasification) to occur. Blockages would require a complete shutdown in order to strip down the plug screw conveyors. M+W formally sought Outotec’s proposals and programme for rectification works within 7 days. It stressed that such works needed to be carried out urgently. It explained:

“A loss of functionality … will be extremely serious for the process and the continued operation of the plant, which includes the ability to perform as a gasification plant (and not as a combustion plant). If this issue is not dealt with in advance of any commissioning process, it could cause significant delay to commissioning and Take Over of the plant to the Purchaser, with the consequent impact on both M+W and [Outotec].”

By a letter dated 11 July 2017, M+W gave notice pursuant to clause 37.6 of the sub-contract that Outotec had failed within a reasonable period to submit the required remedial proposals. It gave notice of its intention to proceed with its own remedial works at Outotec’s cost. The possibility of such action was suspended by a further letter dated 19 July 2017 after the parties agreed additional operational testing.

In the autumn of 2017, site acceptance tests were undertaken on the plug screw conveyors at Levenseat. Mr Meakin told me that such tests were insufficiently extensive to demonstrate whether the conveyors functioned as intended.

There was, however, a marked difference in emphasis between these hard-hitting conclusions and Mr Meakin’s evidence at trial. He accepted that M+W had “doubts” about Outotec’s technological solution but stressed that the views of the Intervention Team “didn’t always hit the mark.” He explained that M+W used the experts on the team to look proactively at what, from their experience, might go wrong. M+W was using strong language “to some extent pushing the point very hard home” with Outotec.

I do not accept that the depth of concern that was so evident from the contemporaneous documents can simply be explained as M+W’s attempt to bring commercial pressure to bear on Outotec. These were, I find, serious and genuine concerns that were expressed with equal alarm both internally within M+W and when addressing Outotec. Further, I do not find Mr Meakin’s attempt to distance himself from the Intervention Team’s views to have been credible. He was named in the team’s report as the “Report Sponsor” and there is no evidence that he either harboured or voiced reservations about the team’s conclusions. Indeed, on 15 March 2017 he reported to another member of the team that he had had a long conversation with Mr Stumpf, the ultimate owner of the M+W Group, and that Mr Stumpf “got” all of it and was consequently “very concerned.”

I accept EWH’s submission that by suspending the threat to undertake any necessary remedial works at Outotec’s cost, M+W was effectively electing to allow the Outotec technology to prove itself or fail, and to take the risk of delaying any necessary remedial works to a much later stage when it was almost inevitable that such works would cause delay to the overall project.

During testing in May 2018, Ray Nickerson, an Outotec engineer with a colourful turn of phrase, explained to his colleagues the need for an urgent solution for bridging (being the build-up of layers of fuel that impeded its free flow). He proposed installing vibrators or air cannons, but preferably air cannons, to blast the bridge. An internal email dated 20 May 2018 confirmed Outotec’s decision to implement the air cannon solution. Dave Brands of Outotec commented:

“Waiting for the problem to become visible to the customer and the rest of the industry, then hiding behind a fuel specification, is not good business. [Outotec] needs to be proactive and stay under the radar on this one.”

Wendy Crispin explains in her witness statement that Outotec did not then promote the installation of air cannons at Hull after their use at Levenseat caused a fire.

Meanwhile, there had been correspondence between M+W and Outotec from February 2018 about the need to replace the powder activated carbon and lime silos. M+W asserted that the silos installed by Outotec did not comply with the required British and European safety standards. On 27 April 2018, M+W formally instructed Outotec to confirm whether the silos complied with the subcontract and for its remedial proposals. M+W explained that if Outotec did not comply with such instruction, M+W would make good the defect and seek reimbursement of its costs.

Absent any reply from Outotec, Mr Purcell wrote on 11 May 2018 giving notice of M+W’s intention to procure replacement silos at an approximate cost of £250,000. On 23 May 2018, Geoff Wilson, who was responsible for procurement, advised that while suppliers had initially quoted 12-14 weeks, he believed that a 9-week schedule was “demanding but achievable.” Mr Meakin observed that the basic logic would indicate a critical delay to commencement of the Take Over tests. A programme was then prepared showing the critical path running through the work on the silos; with manufacture completed by 25 July and the installation work running to 1 August.

By email sent on 4 June 2018, Nicklas Morén of Outotec sought M+W’s immediate acceptance of a proposal to implement design changes to the plug screw conveyor. Two improvements were suggested as a result of “lessons learnt” on other plants, namely the installation of air cannons to prevent bridging and provide an even supply of fuel and the installation of a water quench system to control the temperature.

By letter dated 5 June 2018, Ben Purcell reminded Mr Morén of M+W’s assertion in its letter of 28 June 2017 that the design of the plug screw conveyors was defective. He complained that Outotec was belatedly seeking to address the issue together with additional design defects that were first identified by M+W the previous year. He added:

“However, as M+W are in the process of commissioning the Subcontract Plant there is now no time available to implement Outotec’s proposed changes before Taking Over and consequently this will delay the Main Contract Works entitling the Purchaser to liquidated damages for the delay caused.”

The letter concluded by demanding detailed proposals and a completed design solution within three business days.

Meanwhile, M+W’s May 2018 report had been issued on 6 June 2018. No programme was included in the report. M+W explained that this was because it was awaiting final confirmation of EWH’s agreement to provide RDF.

On 8 June 2018, Outotec responded in combative terms. It was proposing, it asserted, “minor design changes … as an ISO 9001 certified sub-contractor and consistent with a continual awareness for design improvements … to eliminate a potential hazard and improve operational stability.” It said that it would inform M+W in due course of the schedule and timeline for the water-quench solution but insisted that the installation works would not impact the ongoing commissioning of the plant. The letter was rather unclear as to whether the air cannons were to be installed. Mr Meakin said in evidence that in effect both M+W and Outotec were protecting their contractual positions: M+W was asserting that there were defects that threatened the critical path while Outotec was contending that it was simply proposing some design improvements which should not threaten the commissioning timetable. Ultimately it was not that helpful and M+W still had no precise proposals or timeline from Outotec. Mr Meakin told me that he was not in any event confident that Outotec had then identified all of the necessary remedial works to the plug screw conveyors.

On 9 June 2018, Mr Meakin replied that he was aware of the design changes since they were being implemented across all three projects. He requested the design and installation details by return as well as a programme for the design, manufacture and installation so that M+W could assess the impact of the design improvements. In cross-examination, Mr Meakin observed that while he had demanded a programme from Outotec, he was able to take advice from the commissioning engineers on site. In any event, he insisted that the work was not major and that it would not affect progress.

Mr Purcell of M+W responded further on 14 June 2018. He rejected Outotec’s characterisation of the modification works as simply design improvements. M+W challenged Outotec’s view that the modifications were minor and that they would not delay commissioning. Indeed, Mr Purcell retorted that Outotec’s proposal established that its design was untested, unproven and defective. He asserted that there was then no time available to implement the modifications before Take Over and that the required works would “without question” delay the main contract works and entitle EWH to liquidated damages. Mr Purcell repeated M+W’s demand for detailed proposals and an implementation schedule within a further three working days. Asked about this letter, Mr Meakin again made the point that M+W were pressing their subcontractor hard. He explained that the plug screw conveyor issues had the capacity to become critical if the parties were able to resolve the issue with the RDF.

Meanwhile, further problems had been identified at Levenseat when the plug screw conveyors became blocked with plugged material and then tripped. Additional modifications were proposed. While Mr Meakin was not directly copied into the correspondence, the thread was forwarded to Matt Crawley, a quantity surveyor on the M+W team at Hull, on 14 June 2018. Mr Meakin accepted that he was made aware of these further issues.

By an email sent on 19 June 2018, Stephen Tayton of M+W again chased Outotec urgently for its proposed design solution and programme. On 22 June 2018, Outotec continued to deny that its original design was defective and blamed M+W for its own delay in allowing the implementation of the proposed modifications. Mr Meakin told me that it was not clear what M+W was supposed to have done and that he was still waiting for Outotec’s clear proposals. He was justified in that response.

On 27 June 2018, Mr Tayton wrote to Outotec about what he described as the “catastrophic failure” of the plug screw conveyor at Levenseat. He sought Outotec’s detailed design solution and confirmation that the rectification work would be completed by 31 July. On 3 July, Björn Hoffmann of Outotec rejected the suggestion that there had been a catastrophic failure or indeed that the plug screw conveyor was defective. Mr Tayton responded by sending photographs of the damaged plug screw at Levenseat and added caustically:

“If your statement is to be believed that would mean that Outotec expected the flights of the plug screw to strip off in this way when using RDF (the fuel which it should have been designed for) …

For the avoidance of any doubt the work being undertaken by Outotec at Levenseat (followed by Hull & Suez) is not a variation, it is Outotec attempting to implement a new unproven design to fix a major defect in the fuel-feed equipment they have supplied.”

On 27 June 2018, Callum Morris of M+W sent Mr Meakin a draft programme that included the work in replacing the silos and remedial works to the plug screw conveyors. The programme allowed thirty-six days for replacing the silos (26 June to 31 July) and forty-three days for the plug screw conveyors (16 July to 27 August). Within the forty-three days, M+W allowed:

Mr Morris’s covering email observed that M+W still needed the “Outotec activity date from Rob.” Mr Meakin said that would be Rob Lettice, the M+W engineer responsible for the Outotec sub-contract. He added that perhaps Mr Lettice had got some indicative dates from Outotec. That was, however, speculation and there is no evidence before me that Outotec had provided any programme for the proposed remedial works as at 27 June. While Mr Meakin insisted that this wasn’t “a complete finger in the air” but based upon discussions between the engineers on site, no evidence was called from Mr Morris, Mr Lettice or otherwise to establish any information that might have been obtained from Outotec.

Mr Morris provided two further level 1 programmes on 28 June 2018 allowing forty-two days and, alternatively, forty-eight days for the commissioning of the MPT plant. Neither programme made any allowance for the Outotec works.

Meanwhile, by a letter dated 28 June 2018, M+W again pressed as a matter of urgency for Outotec’s completed design solution and implementation schedule so that it could undertake its own design review, HAZOP assessment and “determine the impact and delay caused to the commissioning programme and Taking Over of the Main Contract Works.” On 2 July 2018, Mr Tayton chased Outotec for the design solution, the implementation programme and other information.

On 3 July 2018, M+W produced two more level 1 programmes. One excluded the Outotec works while the other included an allowance for such works. Mr Meakin could not recall why two separate programmes had been prepared and why one programme did not show the full picture. He resisted, however, Mr Dennison’s suggestion that he was undertaking this modelling in order to work out what to disclose to EWH in the next monthly report.

The programme that included Outotec’s proposed further works reduced the period for the installation of the plug screw conveyors to twelve days. The reduction of the installation period by nine days prevented M+W from showing the plug screw conveyor modifications as critical. While Mr Meakin asserted that the installation period had been reduced on the basis of information given to M+W at the time, there is again no evidence before the court to support that claim. Further, his own internal email of 3 July 2018 is revealing as to the true purpose of the revised projection. Mr Meakin wrote:

“I have reduced the PSC installation period to 12 days, which is still inside the RDF delay timescale (by 4 days).”

M+W issued its June report to EWH on 13 July 2018. Again, no reference was made to the need for Outotec to undertake remedial works to the plug screw conveyors although there was reference to the installation of new silos. Such work was not shown on the critical path.

By an email dated 10 July 2018, Mr Meakin explained that in light of Outotec’s inactivity, M+W had decided to replace the defective powdered activated carbon and hydrated lime silos. Meanwhile, trials of the plug screw conveyors were being conducted at Levenseat. On 21 July 2018, Scott Edmondson of M+W reported to Mr Meakin that there were issues with RDF bridging above the plug screw conveyors despite the application of a non-stick coating. Outotec was installing air cannons to prevent bridging, but Mr Edmondson said that he had reservations. Further, he noted that the hopper issues had prevented continuous operation of the plug screw conveyors. Mr Meakin responded by seeking a timeline to complete the testing. Mr Edmondson said that the timeline would depend on the air cannon modifications and successful running of the plug screw conveyors. He added that he “guessed” from past experience that it would also be necessary to modify the plug screw conveyor nozzles and hopper geometry. Mr Edmondson added that it was “clearly an iterative R&D design process.” Mr Meakin ended the exchange by commenting that he wasn’t convinced that it would work either.

On 30 July 2018, M+W produced two further level 1 programmes. One showed the first delivery of RDF on 6 August and the other showed it a week later on 13 August. Both made allowance for the Outotec remedial work but showed that the commissioning of the MPT plant remained critical. Mr Meakin insisted in evidence that M+W was able to produce these programmes because it had Outotec’s programme for the works to the plug screw conveyors. On 31 July 2018, however, Mr Purcell wrote to Outotec complaining that the company had not provided any further information and asserting that M+W had “absolutely no visibility of the nature and extent of the proposed rectification/modification works or the impact that these works will have on the completion and commissioning of the Main Contract Plant.” While Mr Meakin suggested that this was a little heavy-handed and insisted again that M+W had a programme for these works, I do not accept this claim.

Notwithstanding the fact that M+W was modelling the impact on the programme of the Outotec modifications by late June, no reference was made to the possibility that modifications might be required to the plug screw conveyors in M+W’s monthly reports to EWH and Fichtner for June and July 2018 (issued on 13 July and 8 August respectively). Mr Meakin explained such failure on the basis that M+W was managing its own supply chain.

The impasse between the parties as to the delivery of RDF was broken by the Transitional Agreement. In the event, RDF deliveries started on 14 August 2018. The very next day, Mr Morris produced a markedly different level 1 programme that showed the modifications to the plug screw conveyors completing on 13 October 2018. Such works were now on the critical path, as Mr Meakin noted in his internal email of 21 August. The allowance for the installation works, testing and tuning, originally put at twenty-one days but subsequently shortened to twelve days on 3 and 30 July (thereby changing the critical path), suddenly pushed back out to thirty-five days. There is, however, no evidence that Outotec had provided any new information during the first two weeks of August 2018 to explain these changes. Indeed, Mr Tayton made precisely that complaint in his letter of 29 August 2018 to Outotec. As to Levenseat, he criticised Outotec for its attempts to remedy the defect running to over thirteen weeks and involving a “typical prototype proving methodology without any assurance that the revised designs and modifications will meet the functional design requirements.” M+W had, he said, “limited confidence” that the modifications would remedy the defect. As to Hull, he added that two months had passed since M+W’s letter of 28 June and yet no further information had been provided and M+W still had “absolutely no visibility of the nature and extent of the proposed rectification/modification works or the impact that these works will have on the completion and commissioning activities of the Main Contract Plant.”

Meanwhile, cold tests were conducted on the screw feeder in late August or early September. Photographs demonstrate that flights were bent and damaged. Mr Morén explained that the flights were rewelded. The straight-talking Wendy Crispin had, however, another take on this episode. She wrote, in some frustration, to colleagues on 12 September 2018:

“We need to respond with a legal letter and back charge M+W for breaking these screws. They ran it at over 100% torque, against our advice and ran it backward and bent screws that we weren’t going to reinforce. Erin had conversations with people on site that may help our case too. I just don’t understand why M+W is so intent NOT getting this plant up and running. When will the customer fire them so we can finish the job???”

M+W finally received the design drawings in early September 2018. On 21 September 2018, Mr Purcell wrote to Outotec pointing out that these works were now critical to completion since, without a functioning fuel-feed system, the Fuel could not be fed into the gasifier and the plant could not be commissioned. He complained that a complete and accurate schedule of works was still not available. By a later letter dated 2 October, he added that Outotec’s initial programme of 6 September was incomplete and unrealistic in that it had not included provision for the necessary electrical, instrumentation and control-system work required to implement the remedial scheme. Further, Mr Purcell noted an additional design change. M+W stated in terms that these works were delaying completion and that it held Outotec fully responsible, including for liquidated damages falling due under the EPC contract.

The First Fire on RDF was achieved on 9 November 2018. Two weeks later, Mr Meakin wrote to Mr Morén to report that the fuel feed system did not work without significant manual intervention to break up RDF blockages. Mr Meakin asserted that Outotec had already admitted that its rectification works had been unsuccessful and that further alterations would be required. He formally required Outotec to provide detailed proposals within three working days. Outotec responded on 28 November 2018 seeking further particulars. Mr Morén said that the company was “working on a possible solution” but needed more data. There was, accordingly, no settled design solution or clear proposal from Outotec to resolve matters.

By an email sent on 27 November, Mr Meakin specifically noted that the gasifier bed could not handle the tramp and non-combustibles despite the Fuel being “in specification.” Likewise, on 29 November, Mr Meakin drafted a further letter to Outotec in which he again asserted that the Fuel was within specification. In evidence, Mr Meakin told me that plainly M+W were wrong about the Fuel but that they thought that at the time. He was, he said, seeking to keep the pressure on Outotec.

Consistently with this contemporaneous record, Mr Morén told me in his evidence that he had attended meetings in January/February 2019 in which Mr Meakin had told him that the fuel was “absolutely fine.” This recollection is supported by Mr Morén’s internal email of 15 February 2019 in which he recorded that M+W had always said that the fuel was “absolutely fine.” Furthermore, Achim Ditthardt noted in an email that at a meeting on site on 5 December 2018, Mr Meakin had observed that the fuel could be within a wide range and that the fuel at Hull was of a “much better” quality than at Levenseat.

On 29 November, Mr Meakin also attempted to assess how the Outotec issues would affect the programme. He noted that it was very difficult with the limited and changing information that he was receiving from Outotec. With that caveat, he projected the further remedial works continuing through to 14 January 2019. In an internal email chain on 6 December 2018, Mr Meakin calculated that the first revision to the feeder systems had delayed the project by fifty-six days pushing the First Fire date out to 9 November; that the second set of remedial works had failed; and that the third proposed set of remedial works would delay the project by a further fifty-three days. He observed that the combined delay of 109 days equated to liquidated damages of £9.24 million.

On 7 December 2018, Peter Schoenhofer of M+W wrote to Outotec Oyj, the guarantor of Outotec’s obligations under the subcontract. He asserted that Outotec’s default, specifically in respect of the fuel-feed system, was preventing handover of the project. M+W sought an immediate remedial plan and assurances that any modifications would be proven technology rather than used to support continuing research and development.

The ensuing internal debate within Outotec included the suggestion on 8 December by Achim Weiher that Outotec needed to “focus on other places like fuel quality and start-stop operation or whatever is in their ‘garden’.” Kevin Sitton agreed that they should take a point about fuel arguing “it’s hard to run diesel in a car designed for gasoline.” Klaus Sauerbier responded to these ideas by saying that it was “too vague” and by pointing out that Outotec would not be relying on any evidence. He suggested that someone from the technical team would first have to identify a mismatch between the fuel supplied and the contractual specification.

When it was put to him that Mr Weiher was suggesting that Outotec should seek to shift the blame, Mr Morén said that he did not read that in the email. I certainly do read the email exchange in that way but acknowledge that there were occasionally issues with Mr Morén’s understanding of the questions asked and I do not hold that against him. In any event, Mr Morén said that he had asked about fuel quality in a site meeting at around that time and was assured by Mr Meakin, as I have noted above, that the fuel was “absolutely fine.” In any event, Outotec responded to M+W on 12 December 2018. In a carefully crafted and detailed four-page letter, no attempt was made to blame the performance of the plant upon the quality of the fuel.

A further internal programme dated 13 December 2018 projected a further delay of forty-six days to a revised Take Over date of 5 March 2019. Such programme noted the failure of the trial of the fuel-feed system on 5 December and was instead dependent on the success of the next trial on 18 December.

In a further letter dated 19 December 2018, Mr Schoenhofer noted Outotec’s claims as to their performance with “increasing incredulity.” He maintained that the fuel feed system was defective and that Outotec had “no real idea” how to meet the subcontract specification as evidenced by its “continuing trial and error” approach. Mr Meakin confirmed that M+W were frustrated. The letter was, he said, in “typical Peter Schoenhofer style” in spelling that out.

On 23 December 2018, Mr Meakin wrote internally that the delay on the fuel-feed system alone was then 114 days, that dates remained outstanding for works to install air cannons and upon the instruments, and that Outotec’s schedule did not include further works to the screw conveyors and knife gates that were underway at Levenseat and Ince and might prove to be required at Hull. Take Over was now projected for 17 March 2019.

M+W issued its December report on 7 January 2019. It reported a likely delay to Take Over to 20 March but did not mention the possibility of yet further works being required. By letters dated 8 and 15 January 2019, Outotec asserted that the commissioning of the gasifier could proceed without the air cannons. M+W resisted this approach.

Meanwhile, Waste Research Limited carried out testing of the Fuel in the bunker to M+W’s order. Such analysis reported three areas of non-compliance:

By a letter dated 9 January 2019, Mr Meakin asserted that Waste Research Limited’s testing showed that the RDF was out of specification in at least three parameters. He then asserted that EWH had not demonstrated that the RDF was within specification and that M+W had no duty to process out-of-specification RDF. Proposals for rectification of the fuel problem were demanded prior to re-firing the gasifier. Together with the letter, Mr Meakin provided Waste Research’s analysis of the incoming RDF, which again showed non-compliances in respect of, among other parameters, net calorific value, bulk density and heavy metal content.

Further, by a letter dated 14 January 2019, Mr Meakin gave notice to Fichtner and EWH that M+W was suspending the planned refire of the gasifier with solid fuel because of EWH’s alleged failure to rectify the out-of-specification Fuel within the bunker.

While not mentioned in the contemporaneous correspondence, Mr Meakin insisted in his evidence that his real concern was that the level of heavy metals might lead to the plant exceeding the emissions limits in the Environmental Permit. He accepted that no monitoring had been undertaken or proposed to assess whether that would be an issue. He accepted that the Environment Agency made significant concessions and relaxations during the commissioning phase, and that he had not considered whether any breach of the emissions limits might breach such relaxed limits. Furthermore, Mr Morén said in evidence that he could not recall M+W consulting Outotec on the risk of an emissions breach.

M+W adopted, however, a very different position with Outotec. By letters dated 17 and 19 January 2019, Mr Meakin challenged Outotec’s position that the plant could be successfully refired on RDF without the air cannons being in place.

By an internal email sent on 18 January 2019, Mr Meakin reported to Messrs Schoenhofer, Penno and Robinson on the further delay being caused by Outotec. He then wrote that he had included a purchaser delay bar in the latest programme. He explained:

“This is following our request (to EWH) to provide sampling and analysis information before we re‐start. To be clear this is not the strongest claim, but it has been made. We can (and will) keep this claim running.”

In cross-examination, Mr Meakin insisted that what he had meant was that the claim against EWH needed more data. With the further data now available, he asserted that the claim was indeed stronger. Again, he accepted that there had been no internal report about his concern about emissions levels.

On 27 January 2019, Mr Morén wrote to Mr Meakin putting forward two options in respect of replacing the plug screw conveyors to change the geometry and improve the flow of Fuel, as had been done at Levenseat. Mr Morén warned that replacing the double actuated valve would require a long lead time. On 28 January, Mr Meakin reported internally to Mr Schoenhofer that Outotec was now stating mid-May for a partial fix and the end of August for a full solution. He added that this was not the programme of a subcontractor who was under pressure and asked whether Mr Schoenhofer might be having a follow-up call with the Outotec board, presumably in order that such pressure might be applied. Based on the experience at Levenseat, Mr Meakin then proposed ways in which parts of the programme of works might be accelerated.

On 30 January 2019, Mr Schoenhofer wrote to Outotec Oyj complaining that Outotec was now asserting that the further proposed works were conditional upon operational feedback from the remedial work to the instrumentation and the installation of the air cannons. That, he asserted, was totally unacceptable and suggested that the further works were neither designed nor proven. He warned of the potentially catastrophic consequences and the real risk that EWH might terminate the EPC contract or reject the plant. He insisted on a firm and optimised schedule of works.

The installation of the air cannons and the service test were completed on 5 February 2019. On 5 February, Mr Meakin reported the position to Mr Stumpf. He identified all of the outstanding Outotec systems and advised that his attached programme now projected Take Over at 8 May 2019 (with a total Outotec delay of 174 days), but that was dependent on Outotec’s tests being successful. That, he candidly recorded, was not likely. An alternative programme put Take Over at 13 November 2019.

None of this, as Mr Meakin accepted in his evidence, was reported to EWH.

The gasifier was fired on oil on 7 February but was then shut down. A planned refiring on the processed Fuel did not take place the next day. Despite Outotec’s encouragement, the gasifier was not refired. Mr Morén said that no one on site could understand M+W’s position and that his own perception was that M+W were trying to find excuses for not refiring the gasifier. Mr Morén said that he believed that the gasifier could and should have been refired using the Fuel in the bunker.

Given my findings above, this issue does not actually arise. Nevertheless, lest I am wrong in rejecting the allegations of breach during this first period of delay, I consider the question of causation.

The starting point is that the project was already in significant delay at 1 June 2018. The parties’ programming experts agreed that there had been twenty-seven weeks’ critical delay by that date. Absent any claim for an extension for that delay, and none is now pursued, M+W had an accrued liability for liquidated damages of circa £16 million. Further, by clause 14.2(d), such earlier delay cannot be excused.

While M+W now seeks an extension from 1 June 2018, I note that by its Response to EWH’s Request for Further Information served on 30 October 2020, M+W only asserted a claim from 30 June 2018. It pleaded, at paragraph 14 of its Response, that the critical path ran through the installation of piping between the end of May and 18 June and through steam blows and the commissioning of the gasifier between 19 and 30 June. Neil Robinson told me that this information came from the project team but was supported by Mr Loayza, M+W’s delay expert.

The Approved Programme at Schedule 11 to the EPC contract showed a float of some 10½ weeks between the completion of commissioning the MPT plant and the first fire on RDF. Accordingly, commissioning the MPT plant would only become critical if it caused delay to the date of the first fire. The programme allowed eight weeks for this commissioning such that, given that readiness to receive RDF was certified on 31 May 2018, the work should have been completed by about the end of July.

In considering causation, the delay experts agreed that it was appropriate to analyse the project on an as-planned and as-built windows basis. Further, they sought to identify the critical path, being the sequence of activities that at any point in time drove the overall completion of the project. Delay to an activity that is on the critical path necessarily causes delay to completion whereas delay to other activities does not have such effect. While there is significant agreement between the delay experts, they disagree as to the critical path during the first delay period:

Mr Loayza’s analysis is heavily dependent upon M+W’s internal programmes. It is certainly right to say that such programmes showed the delay to the commissioning of the MPT plant to be critical during June, July and the first half of August 2018. Such programmes failed, however, to make any allowance for the modification works to the gasifier until the level 1 programme issued on 27 June 2018. Thereafter four separate programmes issued between 27 June and 14 August made some allowance for the modification works but still showed the critical path running through the commissioning of the MPT plant. That position then changed dramatically in the programmes issued after 14 August.

M+W has called no evidence whether from the planner, Mr Morris, or anyone else to support his programmes and, specifically, to explain the basis on which he programmed the remedial works proposed by Outotec in the absence of any proper information from the subcontractor. I reject Mr Meakin’s evidence that M+W must have been provided with the details of Outotec’s plans in undocumented conversations. Such account was speculation rather than a first-hand account, but it is simply inconsistent with M+W’s repeated demands for clear proposals and a timeline and with the absence of any internal document within M+W discussing this critical information. I am driven to the conclusion that the programmes prepared between 27 June and 14 August 2018, on which Mr Loayza places so much weight, were engineered to support a potential claim for an extension of time rather than to show the true position.

In any event, there is no doubt that the earlier programmes significantly understated the true extent of the outstanding work. I chart in the table below the difference between the delay reported contemporaneously by both Fichtner and M+W. When then considered against the agreed expert position on the actual critical delay at both 1 October 2017 and 1 June 2018, it is clear both that M+W consistently understated the delay and that Fichtner’s own contemporaneous assessments of delay were more accurate:

I accept the evidence of Matt Poole of Fichtner that, while it is not unusual for project managers and contractors to disagree about the level of delay, the discrepancy in this case was difficult to explain. Mr Poole was, in my judgment, right to conclude that the differences between the estimates of delay indicated that M+W were wrongly compressing activities. Indeed, in his witness statement he graphically demonstrated how the period between first fire on RDF to Take Over was compressed at one point from 130 days to just thirty.

Mr Jardine analysed M+W’s forward projections together with the system handover data recorded in M+W’s monthly programme reports. Such analysis showed repeatedly that M+W was only able to complete a small proportion of the systems that it expected to complete each month. In other words, its programmes were consistently overly optimistic, and the completion dates constantly moved out over time. By way of example:

Mr Jardine’s analysis was not confined to the rate of completion of systems on the thermal train. That said, he explained that the vast majority of the systems analysed were required to fire the gasifier on RDF. Furthermore, I am satisfied that the delays on the MPT plant compared favourably with those on the thermal train.

While I find that M+W’s concerns about Outotec’s performance were both serious and genuine, they were not shared contemporaneously with EWH. Mr Meakin said in evidence that doing so had not crossed his mind. Further, he rejected the suggestion that he should have kept EWH informed, insisting that M+W was dealing with its own supply chain. In my judgment, M+W’s failure properly either to report or account in its programmes for its concerns meant that such programmes were inevitably unreliable.

I prefer Mr Jardine’s analysis and conclude that the critical work throughout period 1 was the completion of the gasifier installation works. As he demonstrated, M+W’s contemporaneous programmes were consistently overly optimistic and downplayed until after the parties resolved the impasse in respect of the delivery of RDF, the true extent of the issues with the gasifier. Taking into account the serious concerns that had been identified by the Intervention Team with Outotec’s design in 2017, M+W’s then conclusions as to the scale of the problem and likelihood that if not resolved these issues would delay Take Over, and the lack of detail both as to the proposed remedial works and timeline throughout the summer of 2018, I am satisfied that any properly prepared programme would have shown the gasifier works, and not the MPT plant works, to have been critical throughout period 1.

Rather than leave such matters to the independent experts, Mr Acton Davis asked Luca Carlassara of Fichtner about the criticality of the commissioning of the MPT plant. He too did not accept that the commissioning of the MPT plant was critical throughout period 1. Further, I agree with Mr Wilcock’s observation in cross-examination that M+W’s position during this period was less about addressing its alleged concerns with the RDF and more about “buying time to mask delay.”

Thus, even if I am wrong in rejecting M+W’s case on breach, the alleged breaches were not causative of the delay during period 1. While that finding is sufficient to dispose of this issue, in my judgment the true causes of the delay during period 1 were M+W’s wrongful suspension of the commissioning works while M+W deliberately failed to request deliveries of RDF and the need for further works to the gasifier.

In closing argument, Mr Acton Davis relies on the fact that breach of the emissions limits in the Environmental Permit would be an offence contrary to regulation 38 of the Environmental Permitting (England & Wales) Regulations 2016. He relies particularly on the risk of emissions from excess heavy metals. Further, he argues that M+W should not be required to process RDF through its expensive new MPT plant without reassurance as to its composition such that it could be sure that the plant would not be damaged.

As Christopher Wilcock observed in an email sent on 28 January 2019, breach of the environmental permit was “non-negotiable.” That said, there is no evidence before me that the level of heavy metals was such as to put the plant at risk of breaching such limits. Indeed, as I have already observed, while there was a breach of the EPC contract in the delivery of RDF that was out of specification, the evidence is that the use of eddy current separators in the MPT plant proved effective in reducing the heavy metal content. Further, and in any event, the risk of high levels of heavy metals was foreseen and the agreed remedy was the use of activated carbon. The issue at the time was as to whether the net calorific value might be slightly high. As Mr Burgess retorted in cross-examination, such issue posed zero risk of breaching the permit.

In any event, I reject M+W’s argument that the risk of a breach of the Environmental Permit justified its refusal to accept deliveries of RDF throughout the period from 1 June to 14 August 2018. Following the certification on 31 May that the plant was ready to receive RDF, M+W could mechanically process such fuel through the MPT plant but the gasifier was not ready, and had not been certified as ready, for its first fire on RDF. Accordingly, there was no question of there being any environmental risk through the simple mechanical processing of the heavy metals.

The delay experts agree that the cause of the delay from 9 November 2018 to 4 February 2019 was the need to make modifications to the gasifier feed system. M+W argues that these works were required to resolve the issue of bridging within the hoppers which was, in turn, caused or contributed to by the supply of RDF with excessively low bulk density.

While it is right to record that EWH experienced difficulties in obtaining a supply of RDF that consistently met the specification for bulk density from such suppliers, it eventually settled on sourcing RDF from a single Mid UK operated facility. I have already analysed the bulk density of this RDF. On just two out of 35 days (being 5.71%), the average bulk density fell below 150 kg/m³, although, as explained, such test result was to be reported to the nearest 10 kg/m³ such that there was no breach.

In any event, M+W’s argument runs contrary to the parties’ expectations in that Table 22A.2.0 noted:

“If the bulk density is lower than the minimum, the throughput is unlikely to be met. If the bulk density is above the maximum, more blockages are likely reducing availability.

In the Joint Statement of the defect experts on defect 17, David Wakefield reported that 80% of the RDF supplied to the plant had a bulk density between 170-180 kg/m³ and that separation efficiencies in the MPT plant drop off with lower bulk densities if a constant mass throughput is maintained leading to more detritus being carried through to the fuel feed system. That said, he advised that it was unlikely that additional detritus led to more blockages and much more likely that the flow characteristics of the lower bulk density material contributed to poor flow. In referring to lower bulk density, Mr Wakefield is plainly alluding to the design bulk density of 225 kg/m³. In cross-examination, he confirmed that the Fuel issues in respect of the operation of the plug screw conveyor were to do with bulk density and the shape of the material. He agreed, however, that he had not undertaken any analysis that identified that the modifications undertaken in 2018/9 had been required because of any particular characteristic of the Fuel.

Chris Higman reported that he could find no basis for concluding that the cause of bridging was the quality of the fuel.

Of the three experts, the real expert in plug screw conveyor technology was Professor Johannes Fottner. Professor Fottner spent five years as a Research Associate at the Chair of Materials Handling Flow Logistics at the Technical University of Munich with a research interest in the design and economic use of high-performance screw conveyors. After 14 years in industry, he returned to the university in 2016 as a Professor of Logistics Engineering and Full Professor of the Chair of Materials Handling Flow Logistics.

Professor Fottner explains that a number of different parameters can cause or contribute to bridging and blocking of a screw conveyor. Specifically, he considered:

While each of these matters can explain the increased formation of bridging and blockages in the material feed, he explained that “by far the most likely” explanation was the properties of the fuel. Such problems led to the need to optimise the plant during the commissioning phase. I accept Professor Fottner’s evidence, as Mr Higman did in cross-examination, that:

That said, Professor Fottner did not attribute the need for modification works to any non-compliance with the RDF specification. Rather the tenor of his evidence was that the works required were part of the commissioning process to refine the fuel feed system to meet the operating conditions.

I reject any suggestion that the underlying cause of the modification works to the fuel feed system was any problem with the quality of the RDF and, specifically, with its bulk density. While lower than the design bulk density, the material was within the specification albeit towards the bottom end of the range.

The delay experts agree that the cause of delay during the final month of this period was M+W’s decision not to proceed further with commissioning of the gasification train. For the reasons already explained (paragraphs 73-83), I reject M+W’s argument that it was entitled to suspend commissioning.

In his evidence, Mr Meakin asserts that M+W suspended refiring because of concern that the level of heavy metals in the Fuel might cause the plant to exceed the emissions limits. However:

While the trial before me was only concerned with the delay claims that have stayed the course, it is telling that a number of other claims for extensions of time arising from allegations of a lack of a water supply, exceptionally adverse weather conditions, strike action, late certification of the Readiness to Receive RDF and river wall earth works were each asserted between March and June 2018 but since abandoned. While the delay claims must be considered properly on their own merits, I accept EWH’s characterisation of the delay claims as essentially motivated by the commercial need for M+W to protect its position against the risk of very large claims for liquidated damages and the possibility of termination.

In view of my findings on causation, it is academic to consider whether M+W gave proper notice of its delay claims. Nevertheless, lest I am wrong about my earlier findings, I consider the issue of notification.

The contractual entitlement to an extension of time is subject to the requirement of prior notification. Clauses 14.1 and 14.1A provide:

“14.1

If the Contractor suffers any delay in the execution of the Works, or has reason to expect to suffer any such delay, he shall as soon as it is reasonably practicable to do so, notify the Project Manager of the delay or expected delay and the cause of the delay or expected delay.

As soon as reasonably possible after that, the Contractor shall notify the Project Manager of any extension to any date or period specified in the Contract for the completion of such obligations as he considers would be fair and reasonable in the circumstances. The Contractor shall keep records made at the time of the circumstances, extent and effect of such delay …

14.1A The notification of delay by the Contractor in accordance with the first paragraph of Sub-clause 14.1 is a condition precedent to any entitlement of the Contractor to an extension under this Clause 14.”

The obligation was to “notify” and not to give “Notice.” Accordingly, I reject EWH’s argument that the requirement of notification of delay or of a consequent claim for an extension of time pursuant to clause 14.1 incorporated the formalities of clause 1.8. There are, however, three aspects to notification:

It should be noted that the only matter that was a condition precedent was that set out in the first paragraph of clause 14.1. Thus:

M+W’s case as to notification is pleaded at Annex 7 to its Defence and Counterclaim. It relies on letters dated 15 and 30 May 2018, 8 and 22 June 2018, 19 July 2018, 22 August 2018, 18 and 26 September 2018, 8 November 2018 and 5 February 2019. In closing argument, Mr Acton Davis focused on the first three letters while making clear that M+W continued to rely on all of the pleaded notices.

By its written closing submissions, M+W also argued that it was “clear from the … evidence in this case, including the witness testimony, that EWH contemporaneously had actual knowledge of the issues with RDF and that M+W viewed these as entitling M+W to more time and money.” Of course, the contractual requirement was not that EWH should have “actual knowledge” but that M+W should “notify” the Project Manager in accordance with clause 14.1. In any event, such expanded case is not pleaded and is not therefore now open to M+W.

Roy Meakin’s letter of 15 May 2018 referred to events the previous day when M+W had refused to accept deliveries of RDF. It referred to earlier correspondence in which M+W had maintained that supporting data should be provided with each delivery of RDF. It then continued:

“1.

The Purchaser refused to provide the qualitative data in respect of deliveries as set out in the Contractor’s letters noted above.

2.

The Purchaser refused to provide the legislatively mandated data in respect of deliveries and rejects as set out in the Contractor’s letters above.

3.

The Purchaser had not provided evidence of the Quality and Environmental Management Systems.

The Contractor was therefore unable to accept delivery of the RDF, despite awaiting the requested data for the day before issuing this Notice as it fails to meet the Contract and legislative requirements.

As an aside, the Contractor records that no sampling/analysis personnel were present to undertake evaluation of the incoming RDF. In the circumstances, the Contractor has no choice but to issue this letter as notice of delay in accordance with clause 14.1.”

By reference to the pleaded breaches of contract, the letter of 15 May was notification of a delay alleged to have arisen by reason of EWH’s failures to evidence that each delivery of RDF was compliant with the contractual specification and that it had a proper quality management system in place (allegations 4(c) & 5(b)).

Mr Meakin’s letter of 30 May 2018 was written to EWH and was not accordingly notification of anything to Fichtner. It set out a critique of the quality management system:

The letter complained that the documents provided by EWH raised “more questions over the reliability of data and the Contractor’s entitlement to use and rely on the data.” Mr Meakin concluded by asserting:

“As such the delay in RDF remains to the Purchaser’s account.”

If the letter of 30 May 2018 had been sent to Fichtner then, by reference to the pleaded breaches of contract, it was notification of a delay alleged to have arisen by reason of EWH’s failures to evidence that each delivery of RDF was compliant with the contractual specification RDF and that it had a proper quality management system (allegations 4(c) & 5(b)). It was not, however, so sent.

Mr Meakin’s letter of 8 June 2018 asserted that EWH had not been in a position to provide the “mandated documentation” in respect of the deliveries of RDF planned for 14 May 2018, and that such matters had been confirmed in the May letters. He continued:

“The upshot is that since 14 May 2018 to the date of this letter, the Purchaser has not been in a position to meet the contractual commitments in respect of the supply of RDF. Our letter dated 15 May 2018 gave Notice of delay in accordance with Clause 14.1.

Our submissions in respect of the extent of the delay and associated extension of time for completion together with assessment of additional payment due under Clause 19 will follow once the delaying events are ended.”

The letter concluded by challenging EWH’s claims for liquidated damages.

By incorporating the May correspondence, I accept that the letter of 8 June was notification of a delay alleged to have arisen by reason of EWH’s failures to evidence that each delivery of RDF was compliant with the contractual specification RDF and that it had a quality management system (allegations 4(c) & 5(b)).

The notice of 22 June 2018 stated:

“6.

The Purchaser has been unable or unwilling to provide the Contractor with documentation validating the acceptability of RDF to be supplied by the Purchaser, the consequence of which is that the Contractor cannot accept Purchaser provided RDF on to the site;

6.1

this accordingly requires an extension to the Take Over in respect of the Works under the EPC Contract,

6.2

In light of the above material circumstances we consider a matter(s) entitling M+W to an extension of time to any date or period specified under the EPC Contract has occurred under clause 14.4, being 14.4(d).

6.3

Accordingly, we give you notice, pursuant to clause 14.1 of the EPC Contract, that the progress of the Works will be delayed and an extension of time Take Over in respect of the Works is required …”

The notice continued at Part B to give a written statement of the grounds for an extension. M+W asserted:

“The Purchaser’s breach is the failure to provide the qualitative data in respect of the [RDF] that is required to be provided to the Contractor for use in commissioning and testing the Facility.”

Since the notice was concerned with a delivery on 14 May 2018, it asserted that the delay to that date was forty days.

Plainly this was notification of a delay alleged to have arisen by reason of EWH’s alleged failures pleaded as allegations 4(c) & 5(b).

These letters simply updated the claim to sixty-eight and then ninety-three days.

Mr Meakin’s letter of 5 February 2019 referred to a series of letters from 28 March 2018 to 28 January 2019. Much of that correspondence related to M+W’s insistence that EWH should evidence that each delivery complied with the contractual specification but the correspondence in January 2019 included complaints that RDF delivered to site was not in fact compliant. The letter continued:

“Absent the provision of valid sampling results that demonstrate compliance of the Incoming RDF with Schedule 22A Table 22A.2.0, the Contractor has no duty to process the material delivered and is prevented from completing the commissioning and Take Over testing of the Works.

From the foregoing, it is clear that the failure of the Purchaser to comply with the Contract has impacted upon the Contractor’s ability to comply with the Contract, and the Contractor repeats the Notices in accordance with Clauses 14.1 and 19.1 in respect of delays and additional costs provided in the above noted correspondence.

The failure to provide compliant RDF continues, and the Contractor has requested the Purchaser’s action to rectify the non-compliant fuel currently stored in the bunker. The delay occasioned by the Purchaser’s failure continues, however, as advised by the Contractor in his submission dated 22 June 2018 …, the delay to the works at that time was noted as 50 days. The Purchaser is still (at the date of this letter) unable to evidence deliveries in compliance with Schedule 22A, Table 22A.2.0, and indeed the Purchaser’s own results demonstrate that the material is not in compliance. The period since the submission of 22 June 2018 to the date of this letter is a further 228 calendar days, the total impact of the Purchaser’s failure to demonstrate RDF compliance is 278 calendar days and the Contractor is entitled to relief from damages and his associated cost for this period.”

I have considered the January 2019 correspondence referred to in this letter and said to indicate a failure to comply with the specification:

By reference again to the pleaded case, this letter was notification of a claim for delay arising from alleged breaches of contract in the provision of non-compliant RDF (allegation 2) and in failing to evidence that each delivery of RDF was compliant with the contractual specification RDF (allegations 4(c) & 5(b)).

None of the other documents pleaded at Annex 7 takes M+W’s case any further:

Thus, M+W only gave notice of allegations 2, 4(c) and 5(b). Such notice was timely. Since notification pursuant to the first paragraph of clause 14.1 was a condition precedent to any entitlement to an extension, it follows that M+W’s claim for an extension on the grounds of any other breaches must fail.

Thus:

These conclusions are not affected by the following note in EWH’s internal analysis in November 2018 of proposed terms of settlement:

“The advised extension of time of 91 days is credited to the existing LD account. However, it is assumed that LD’s are settled in November, and then paid (at the lower 50% rate) on a monthly basis thereafter until Take Over is achieved. This is an optimistic assumption as, so far, the Contractor has shown no appetite to settle its LD account on time.”

As to this document:

Accordingly, I reject M+W’s claims for an extension of time.

Having rejected M+W’s claims for an extension of time, it follows that, by 4 March 2019, the Delay Damages Cap had been surpassed and EWH was entitled to and did terminate the EPC contract for Contractor’s Default pursuant to clause 44.1(c).

In the alternative, EWH argues that the contract was terminated by its acceptance of M+W’s repudiatory breaches of contract. EWH relies on three matters:

Since, for the reasons explained above, I conclude that EWH was entitled to terminate the contract pursuant to clause 44.1(c), it is not strictly necessary to consider the alternative case at common law. Lest I am wrong, then M+W argues that a failed termination pursuant to clause 44 takes effect as a termination for convenience pursuant to clause 43 and that the common law right is excluded. It relies on clause 44.12 of the contract which provides:

“If the issue by the Purchaser of any Notice terminating or purporting to terminate the employment of the Contractor under this Clause 44 is subsequently determined to have been invalid, such Notice shall not constitute a repudiation of the Contract by the Purchaser but shall be deemed to have been a Notice of Termination issued in accordance with Sub-clause 43.1 and thereupon the rights and obligations of the parties shall be as stated in Clause 43 (Termination by the Purchaser for convenience) and not as stated in this Clause 44.”

EWH points to clause 45.2 which expressly preserves the right of termination at common law. It provides:

“Except in the case of termination of the Contractor’s employment under Clause 44 (Termination for Contractor’s default), or Clause 44B or a repudiation of the Contract by either party, the liability of either party to the other arising out of or in connection with the Contract or the Works, whether by reason of any breach of contract or of statutory duty or tortious or negligent act or omission shall be limited to the damages, remedies and reimbursements expressly provided in the Contract.”

I reject M+W’s argument that the contract provided a comprehensive code for termination that excluded the possibility of termination at common law:

In my judgment, the proper construction of the contract is that clause 44.12 prevents an invalid notice of termination served pursuant to clause 44 from being treated as a repudiatory breach. It does not, however, prevent EWH from seeking to terminate the contract in any event upon the grounds of M+W’s alleged repudiatory breach.

Repudiation involves a breach of contract which is grave enough to go “to the root of the contract”: per Lord Wilberforce in Federal Commerce & Navigation Co. v. Molena Alpha Inc. [1979] A.C. 757, at 779. In Stocznia Gdynia S.A. v. Gearbulk Holdings Ltd [2009] EWCA Civ 75, Moore-Bick LJ observed, at [20], that the provisions for liquidated damages in a contract provided “an agreed measure of compensation for breaches of contract by way of delay … which, although important, do not go to the root of the contract.” He added:

“However, they have also agreed that there comes a point at which the delay or deficiency is so serious that it should entitle Gearbulk to terminate the contract. In my view they must be taken to have agreed that at that point the breach is to be treated as going to the root of the contract. In those circumstances the right to terminate the contract cannot sensibly be understood as anything other than embodying the parties’ agreement that Gearbulk has the right to treat the contract as repudiated with … the usual consequences.”

Here, the termination notice was served on 4 March 2019, almost two months after the Delay Damages Cap was reached on 7 January 2019. At that point, the total delay was a few days shy of 11 months beyond the contractually agreed Take Over date of 9 April 2018. Ongoing delay beyond the Delay Damages Cap was at EWH’s cost since there was no further entitlement to liquidated damages. I have no hesitation in concluding that by 4 March 2019 the works had been delayed to such an extent that M+W’s breach of contract went to the root of the contract.

I have already rejected M+W’s claimed entitlement to suspend commissioning. Even if the delay to 4 March 2019 was not itself sufficient to amount to a repudiation, such delay coupled with M+W’s unjustified refusal to continue with commissioning the gasifier plainly entitled EWH to terminate the contract.

There is also a good case for alleging that M+W was in breach of contract for failing properly to report on the progress of the works. In light of my findings on the other grounds, it is, however, unnecessary to consider such case further at this stage or to consider whether any such breach went to the root of the contract.

Accordingly, I find that, even if I am wrong in concluding that EWH validly terminated the contract for Contractor’s Default under clause 44.1(c), EWH was entitled to and did validly terminate the contract at common law.

By its final schedule of loss served with its closing submissions, EWH claimed some £131,362,885.23 plus interest:

EWH seeks liquidated damages for delay in the sum of £23,077.331.70. Relying on British Glanzstoff Manufacturing Co. Ltd v. General Accident, Fire & Life Assurance Corp. Ltd [1913] A.C. 143, M+W argues that upon the true construction of the contract, the claim for liquidated damages was lost upon termination and replaced by a claim for general damages for delay.

Clause 15.1 of the EPC contract provides:

“If the Contractor fails to satisfy the requirements under Clause 33 and Schedule 15 in accordance with Schedule 11 (Times of completion) to enable the Project Manager to issue the Take Over Certificate or the Contractor fails to do any other thing in accordance with Schedule 11 (Times of completion), the Contractor shall pay the Purchaser liquidated damages as specified in Schedule 12 (Liquidated damages for delay) (subject to Sub-clause 15A), but shall have no liability to pay damages in excess of the Delay Damages Cap.”

Paragraph 12.2 of Schedule 12 provides:

“The Liquidated Damages payable for delay in accordance with Sub-clause 15.1 of the Contract shall be calculated by multiplying the daily rate set out in Table 12.1 by the number of days by which completion of the construction of the Plant and the satisfaction of all the requirements under Clause 33 and Schedule 15 to enable the Project Manager to issue the Take Over Certificate is later than the permitted period for the same as stated in Schedule 11.”

M+W argues that, since liquidated damages are calculated by reference to the difference between the actual and contractual dates of Take Over, no such damages are payable upon the termination of the contract before Take Over is achieved. Mr Acton Davis prays in aid the construction of a similar provision in Glanzstoff, and submits that such argument remains open notwithstanding the decision in Triple Point Technology Inc. v. PTT Public Co. Ltd [2021] UKSC 29, [2021] A.C. 1148 since ultimately the question is the proper construction of the liquidated damages clause.

In Triple Point, Lady Arden described Glanzstoff, at [42]-[43], as a “little-known case” that was not of significance and which did not establish any new proposition of law. Rather, it was a decision that turned upon the interpretation of the particular contract in that case. Throwing further doubt upon the decision, she added, at [42]:

“When the court is required to interpret a similar clause today, it will have to decide the issue in the same way as any other question of interpretation and not by treating Glanzstoff as having created some special rule applying to liquidated damages clauses.”

In my judgment, M+W’s argument falls into the error identified by Lady Arden at [35]-[36]:

“35.

The difficulty about this approach is that it is inconsistent with commercial reality and the accepted function of liquidated damages. Parties agree a liquidated damages clause so as to provide a remedy that is predictable and certain for a particular event (here, as often, that event is a delay in completion). The employer does not then have to quantify its loss, which may be difficult and time-consuming for it to do. Parties must be taken to know the general law, namely that the accrual of liquidated damages comes to an end on termination of the contract (see Photo Production Ltd v. Securicor Transport Ltd [1980] A.C. 827, 844 and 849). After that event, the parties’ contract is at an end and the parties must seek damages for breach of contract under the general law. That is well understood: see per Mr Recorder Michael Harvey QC in Gibbs v. Tomlinson (1992) 35 Con LR 86, 116. Parties do not have to provide specifically for the effect of the termination of their contract. They can take that consequence as read. I do not, therefore, agree with Sir Rupert Jackson when he holds in the second sentence of paragraph 110 of his judgment that ‘If a construction contract is abandoned or terminated, the employer is in new territory for which the liquidated damages clause may not have made provision.’ The territory is well trodden, and the liquidated damages clause does not need to provide for it.

36.

Of course, the parties may out of prudence provide for liquidated damages to terminate on completion and acceptance of the works so as to remove any question of their being payable thereafter. But if they do, it is in my judgment unrealistic to interpret the clause as meaning that if that event does not occur the contractor is free from all liability for liquidated damages, and that the employer’s accrued right to liquidated damages simply disappears. It is much more probable that they will have intended the provision for liquidated damages to cease on completion and acceptance of the works to stand in addition to and not in substitution for the right to liquidated damages down to termination.”

Lord Leggatt observed, at [79], that, subject to contrary agreement, the parties’ accrued rights are preserved on termination. He then added:

“In principle, therefore, where at the time of termination delay for which liquidated damages are payable has already occurred, there is no reason - in law or in justice - why termination of the contract should deprive the employer of its right to recover such damages, unless the contract clearly provides for this.”

Further, Lord Leggatt made clear, at [86], that the court must approach the question of construction from the starting point that “it is ordinarily to be expected that, unless the clause clearly provides otherwise, a liquidated damages clause will apply to any period of delay in completing the work up to, but not beyond, the date of termination of the contract.” He added, at [93]:

“In short, the purpose of agreeing in advance on a sum payable as liquidated damages for each day of delay caused by the contractor would be defeated if the stipulated sum was payable only if and when the contractor chose to complete the contract.”

As in Triple Point, I construe the reference in the instant case to the date of actual completion of the works as the end point for liquidated damages: see Triple Point, at [48]. Any other construction would, as Lady Arden put it, render the liquidated damages clause of little commercial value. Accordingly, I find that liquidated damages were payable in the event of termination even though Take Over was not in fact achieved. I am fortified in this orthodox construction of the liquidated damages clause by the following further provisions of the contract that make plain that EWH’s entitlement to liquidated damages for delay accrued from time to time and did not crystallise solely upon the delayed certification of Take Over:

Accordingly, EWH is entitled to liquidated damages against M+W in the sum of £23,077,331.70.

It is not, therefore, necessary to consider EWH’s alternative case for general damages for delay.

Subject to the terms of the contract, EWH can recover the losses that arose either naturally from M+W’s breaches of contract according to the usual course of things, or which were within the parties’ reasonable contemplation as a not unlikely result of such breaches: Hadley v. Baxendale (1854) 9 Ex. 341; Victoria Laundry (Windsor) Ltd v. Newman Industries Ltd [1949] 2 K.B. 528; The Heron II [1969] 1 A.C. 350. The burden is of course on EWH to plead and prove its losses. Given the precision sought by M+W, it is appropriate to observe that EWH must prove its losses on the balance of probabilities.

It is equally trite that a claimant cannot recover damages for any part of its loss that it could have avoided by taking reasonable steps, or which it did in fact avoid. The burden is on M+W to plead and prove EWH’s alleged failure to mitigate its losses: Roper v. Johnson (1873) L.R. 8 C.P. 167. Claimants cannot, however, be expected to weigh precisely their losses. In Banco de Portugal v. Waterlow & Sons Ltd [1932] A.C. 452, Lord Macmillan observed at page 506:

“Where the sufferer from a breach of contract finds himself in consequence of that breach placed in a position of embarrassment the measures which he may be driven to adopt in order to extricate himself ought not to be weighed in nice scales at the instance of the party whose breach of contract has occasioned the difficulty. It is often easy after an emergency has passed to criticise the steps which have been taken to meet it, but such criticism does not come well from those who have themselves created the emergency. The law is satisfied if the party placed in a difficult situation by reason of the breach of a duty owed to him has acted reasonably in the adoption of remedial measures, and he will not be held disentitled to recover the cost of such measures merely because the party in breach can suggest that other measures less burdensome to him might have been taken.”

M+W argues that the Delay Damages Cap applies equally after termination such that there can be no further entitlement to any delay-related losses after the cap has been exhausted: Annex 4 to the Defence, para. 36(i).

The Delay Damages Cap was defined by clause 1.1 as the “maximum aggregate Liquidated Damages payable for delay as stated in Schedule 12.” The simple answer to M+W’s argument is that the claims for losses suffered and costs incurred after termination of the EPC contract are not claims for liquidated damages within the meaning of Schedule 12. Indeed, as I have already explained, the proper construction of the entitlement to liquidated damages in this contract is the conventional one identified by Lord Leggatt in Triple Point, namely an entitlement to damages for delay up to but not beyond the date of termination. Accordingly, I reject M+W’s argument that there can be no claim for losses suffered and additional costs incurred by reason of delay post termination once the Delay Damages Cap has been reached.

Clause 45.1 provides:

“Notwithstanding any other provision of the Contract and subject to Sub-Clause 45.1A neither the Contractor nor the Purchaser shall be liable to the other for: …

(b)

loss or deferment of anticipated or actual profit, loss of revenue, loss of use, loss of production, business interruption or any similar damage or for any consequential or indirect losses of any kind resulting from or arising out of or in connection with the Works or the performance of them or any act or omission relating to them howsoever caused;

except in respect of …:

(ii)

any sum included within the liquidated damages for delay under Sub-clause 15.1, Clause 15B or in lieu of liquidated damages under Clause 15A …”

Clause 45.3 provides:

“Subject to Sub-clause 45.3A, the total aggregate liability of the Contractor to the Purchaser arising out of or in connection with the Contract and the Works shall not exceed [£153,897,518].”

Clause 45.3A of the contract provides:

“The limitation of liability referred to within Sub-clause 45.3 shall not apply and the Contractor does not exclude or restrict liability for any of the following (and which shall not be taken into account in determining whether the limit of liability under Sub-clause 45.3 has been reached):

(a)

liability arising under Sub-clauses 30.10 or 30.15 and Clause 31 (Insurance);

(b)

liabilities arising or payments made by the Contractor to the extent corresponding payments are received or receivable by the Contractor pursuant to insurance policies required to be effected and maintained in accordance with this Contract (with the exception of professional indemnity insurance under Clause A6) or to the extent that corresponding payments would have been received or receivable by the Contractor pursuant to such insurance policies but for the Contractor’s failure to effect and maintain such policies or comply with the terms of such insurance policies (including a failure to diligently pursue insurance claims or causing such insurance policies to become void, unenforceable or impaired);

(c)

the wilful default of the Contractor and/or any person for whom the Contractor is responsible;

(d)

fraud or fraudulent misrepresentation or a breach of the Bribery Act 2010 in each case by the Contractor and/or any person for whom the Contractor is responsible.”

By its Reply, EWH pleads its reliance on clause 45.3A. At paragraph 60A, it contends that M+W was in wilful default by reason of:

“(i)

M+W’s failure properly to report on the nature and extent of the defects in the fuel feed system, the extent of the remedial works that would be required to remediate those defects, and the impact that those works would have on the completion of the Contract works, and

(ii)

M+W’s failure and/or refusal to continue commissioning works from mid-January 2019 onwards.”

EWH asserts that, in a case of wilful default, clause 45.3A does not, upon its true construction, simply disapply the limitation of liability in clause 45.3 but it also prevents M+W from relying upon any exclusion or limitation of liability: Reply, para. 60B.

“Wilful default” is not defined by the EPC contract. In Re City Equitable Fire Insurance Co. Ltd [1925] Ch 407, the Court of Appeal considered the expression “wilful neglect or default.” Approving Romer J’s construction, Warrington LJ said, at pp.524-525, that:

“a person is not guilty of wilful neglect or default unless he is conscious that in doing the act which is complained of, or in omitting to do the act which it is said he ought to have done, he is committing a breach of his duty, and also, as he said recklessly careless whether it is a breach of duty or not.”

The expression “wilful misconduct” was considered by Longmore J, as he then was, in National Semiconductors (UK) Ltd v. UPS Ltd [1996] 2 Lloyd’s Rep. 212. The judge said, at p.214:

“… for wilful misconduct to be proved there must be either (1) an intention to do something which the actor knows to be wrong or (2) a reckless act in the sense that the actor is aware that any loss may result from his act and yet does not care whether loss will result or not or, to use Barry J’s words in Horobin’s Case, ‘he took a risk which he knew he ought not to take’: [1952] 2 Lloyd’s Rep. at 460.”

National Semiconductors was considered with apparent approval by the Court of Appeal in Denfleet International Ltd v. TNT Global SPA [2007] EWCA Civ 405, [2007] R.T.R. 41 in the context of the expression “wilful misconduct” in the Convention on the Contract for the International Carriage of Goods by Road. Toulson LJ said, at [25]:

“To establish wilful misconduct within the meaning of the [Convention], it is not enough to show that the carrier was at fault in failing to take proper care of the goods and that the carrier’s conduct was the product of a conscious decision. It has to be shown that the actor knew that his conduct was wrong or was recklessly indifferent whether it was right or wrong; and, as part of that requirement, he must have appreciated that his conduct created or might create additional risk to the goods.”

In De Beers UK Ltd v. Atos Origin Services UK Ltd [2010] EWHC 3276 (TCC), Edwards-Stuart J considered a clause that disapplied any exclusion or limitation of liability for fraudulent misrepresentation, wilful misconduct or deliberate default. The judge concluded, at [206], that the clause listed the three concepts in descending order of culpability. He then explained:

“Fraudulent misrepresentation obviously involves dishonesty. Wilful misconduct refers to conduct by a person who knows that he is committing and intends to commit a breach of duty, or is reckless in the sense of not caring whether or not he commits a breach of duty (see Romer J in Re City Equitable Fire Insurance Co Ltd …) Deliberate default means, in my view, a default that is deliberate, in the sense that the person committing the relevant act knew that it was a default (i.e. in this case a breach of contract). I consider that it does not extend to recklessness and is therefore narrower than wilful misconduct (although the latter will embrace deliberate default).”

A wilful default is thus wider than a deliberate default and may be established upon proof of recklessness. In my judgment, to prove a “wilful default” within the meaning of clause 45.3A, EWH must prove that M+W was in breach of contract and that either M+W intended to commit such breach or was recklessly indifferent as to whether its conduct was in breach of contract or not.

For completeness, I should record that, in the course of argument as to the proper construction of clause 45.3A, I was not addressed as to clause 45.4, which provides:

“Sub-clauses 45.1 and 45.3 shall apply whether or not either party shall be held to have repudiated the Contract.”

It is at least arguable that there is some tension between the two clauses. That said, the clauses do not entirely overlap since there is no mental element in determining whether a party has repudiated a contract and it is possible to conceive of circumstances in which a party commits a repudiatory breach of contract without either intending to commit such breach or being recklessly indifferent as to its contractual obligations. Accordingly, I am satisfied that the two clauses can be reconciled. In any event, had there been a conflict then the special condition negotiated between the parties at clause 45.3A would prevail over clause 45.4 in the general conditions: see clause 1.2 and Homburg Houtimport BV v. Agrosin Private Ltd [2003] UKHL 12, [2004] 1 A.C. 715, at [11].

M+W’s reporting obligations can be found at clauses 2.2, 3.5 and 3.7 of the EPC contract:

“2.2

The parties shall deal fairly, openly and in good faith with each other. Each party shall disclose information which the other might reasonably need in order to exercise his rights and to perform his obligations under the Contract. In particular, each party shall promptly disclose full information to the other concerning any matter which will or may prevent the Plant or the Works being completed in accordance with the Contract…

3.5

If at any time during the performance of the Contract the Contractor is of the opinion that a change to the Works or the design or method of operation of the Plant:

(a)

is necessary to eliminate a potential defect in the Plant…; or

(c)

would otherwise be beneficial to the Purchaser;

the Contractor shall promptly notify the Project Manager accordingly.

3.7

Unless otherwise agreed, the Contractor shall at intervals of not more than one calendar month report to the Project Manager in accordance with Schedule 21… on the progress of the Works, supporting his reports with appropriate documents including any proposed revisions to the Approved Programme ...”

EWH particularises its case in respect of the alleged failure to report at paragraph 60A(a) of its Reply. The allegation focuses on the disconnect between M+W’s monthly reports for December 2018 and January 2019 and M+W’s internal recognition in January and February 2019 as to the true extent of the likely delay in completion of the Works.

By letter dated 19 December 2018, M+W complained to Outotec about continuing design defects in the fuel feed systems affecting all three projects. It observed that rectification would further delay the project at Hull and that the scope and duration of such works remained unclear. Mr Meakin then provided an internal update on 23 December 2018. He noted a Take Over date of 17 March 2019 but added that Outotec’s dates for installing the air cannons were still to be confirmed and that there was no allowance for the screw and knife gate changes that were currently underway on the other projects. Such additional works, he noted, might also be needed at Hull.

M+W issued its December 2018 report on 7 January 2019. It reported a new projected Take Over date of 20 March 2019 “as a result of the ongoing Outotec issues.” Such date was said to be subject to satisfactory completion of Outotec’s remedial works.

On 18 January 2019, Mr Meakin reported internally on the likely delay to Take Over. The projection included an allowance for a stabilisation period as advised by Dave Brands of Outotec and gave alternative Take Over dates of 5 and 28 April 2019. On 21 January 2019, M+W prepared a further level 1 programme that estimated a 12-week gasifier rectification period for the installation of diffusers and resolution of the ash/bed systems. This programme projected Take Over as slipping out to 16 July 2019.

On 27 January 2019, Outotec sent M+W its proposed programme for modification works to the plug screw conveyor. The programme showed the completion of Outotec’s works by 29 August 2019 but did not confirm that these additional works were either necessary or would be carried out. After failing to get a clear answer to precisely what works would be done, M+W wrote to Outotec on 30 January 2019. The letter confirmed “in the strongest possible terms that the ‘conditional’ schedules provided on 27^th January 2019 …[were] totally unsatisfactory and unacceptable.” M+W observed that the condition that the knife gate modification works remained provisional implied that the further works were neither designed nor proven.

By an internal email sent on 5 February 2019, Mr Meakin provided Mr Stumpf with a project update. He summarised that twelve of the Outotec systems had issues and that the subcontractor was “currently no-committal (sic) on rectification dates”; four systems were “OK”; and a further three systems could not be hot-commissioned until the feed system issues had been resolved. He then reported:

“Programme attached shows Take Over at 8^th May – based upon Outotec tests being successful, which is not likely;

2^nd programme shows impact of the Outotec PSC Programme (issued by Outotec, 27^th January)”

Yet two days later, on 7 February 2019, M+W issued its January 2019 report. It then reported a revised Take Over date of 7 May 2019.

I am satisfied that during January and February 2019, M+W failed promptly to disclose full information to EWH concerning the nature and extent of the defects in the fuel feed system, the extent of the remedial works that would be required to resolve those defects, and the likely timeline for such works. I am satisfied that these were matters which plainly might prevent the timely completion of the Works. Further, the January 2019 report did not amount to a proper report on progress. Accordingly, M+W was, in my judgment, in breach of its obligations under clauses 2.2 and 3.7 to report the nature and extent of defects in the fuel feed system throughout January and February 2019.

I am satisfied that such defaults were deliberate. Indeed, this conduct was a continuation of M+W’s previous strategy in 2017 and 2018. While Mr Meakin characterised it as simply M+W dealing with its own supply chain, I am satisfied that the failure to report the nature and extent of the continuing issues with the fuel feed system in early 2019 and thereby withholding M+W’s own very serious concerns as to the extent of the likely delay to Take Over was deliberate. Even if I am wrong to regard such conduct as deliberate, it is clear that at the very least M+W was recklessly indifferent as to whether its conduct was in breach of contract or not.

EWH’s case as to the suspension is particularised at paragraph 60A(b) of the Reply. It contends that the January 2019 suspension of works was “a pretext for refusing to perform its obligation to proceed with the works” and that M+W’s true purpose was “to mask the extent of the delay that was being caused by the remedial works to the gasifier and fuel feed system.”

I have already addressed the suspension of the works between 14 January and 4 March 2019. For the reasons explained above, I have found that M+W was in breach of contract in suspending the commissioning.

In his email of 18 January 2019, Mr Meakin explained that he had included a purchaser delay bar in his draft programme. This, he said, was following M+W’s request that EWH provide sampling and analysis information before M+W resumed work. He added:

“To be clear this is not the strongest claim, but it has been made. We can (and will) keep this claim running.”

On 24 January 2019, Mr Meakin explained to Mr Schoenhofer:

“You should also know that we have written to the Purchaser, to claim delay due to the fuel in the bunker being out of specification. This claim (we allege) prevents us from re-firing. This should give us concurrency of delay.”

In cross-examination, Mr Meakin sought to explain that the claim was not the strongest in that M+W did not have the data to make its case. In my judgment, it is clear that M+W’s true purpose was to be able to show concurrency of delay and thereby achieve some commercial leverage. I am therefore satisfied that at the very least M+W was recklessly indifferent as to whether its conduct in suspending performance was in breach of contract or not.

The finding of wilful default is not, however, the end of the matter. Upon its true construction, clause 45.3A disapplies the contractual limitations and exclusions to any liability for such wilful default. Accordingly, a finding of wilful default can have no effect in respect of claims other than for such default. While M+W was in wilful default in failing to report the nature and extent of the problems with the fuel feed system and in suspending work, the claims for post-termination losses are not claims for losses consequent upon such defaults.

Accordingly, while I find that M+W was in wilful default as alleged at paragraph 60A of the Reply, such finding has no effect upon the claims for post-termination losses and EWH’s claim remains subject to the contractual exclusions and limitations in clauses 45.1 and 45.3.

Mr Acton Davis submits that the quantum claim is inadequately explained and evidenced and that EWH has failed to prove its case on causation. He asserts that the factual and legal basis for asserting that the losses that were incurred post termination are the sole responsibility of M+W remains “largely unknown.” Further, he argues that the claim ignores the true contractual scope of M+W’s works by making the impermissible assumption that whatever work EWH decided was required was in fact attributable to M+W’s breach of contract.

Mr Dennison responds that the required evidence was served and called but that M+W simply elected not to challenge it. Certainly, despite the value of EWH’s damages claim, the parties spent very little time at trial investigating the losses. Indeed, a number of the lay witnesses who dealt with the quantum of these claims were not required to attend court for cross-examination at all. Those who were required to attend were not subjected to rigorous cross-examination and much of their evidence was unchallenged. Further, the experienced quantum experts largely agreed the calculations of loss upon various assumptions.

EWH’s claim proceeds on the assumption that the additional work that has had to be carried out since termination was caused by M+W’s breaches of contract. There was undoubtedly further work to be done. As will become apparent, EWH has failed, however, to prove its case in respect of all of the pleaded defects. In particular, for the reasons explained below, it has failed to establish its case in respect of defect 23 (slagging). While the immediate consequence is that damages cannot be recovered for defects that have not been proved, there may be a broader impact upon EWH’s claim for termination damages. Mr Acton Davis submits that in the event of such finding “all losses flowing from slagging, including any time-related costs which would have been incurred in any event whilst the slagging issues were resolved, are not recoverable from M+W.” He adds that neither EWH nor its experts have identified a way of identifying the impact of an adverse finding on defect 23. Further, he argues, the court should not “wade through the quantum documentation to give effect to its factual findings on causation.” He concludes this argument with the submission:

“In short, if the costs that are not recoverable cannot be disentangled from costs which may be recoverable, that ought to be fatal to the entire head of cost subject to the problem.”

Upon handing down this judgment, I will invite the parties to address me further upon its consequences. While I will reserve my judgment until I have heard the argument, three general observations as to my initial views on that issue may be helpful:

Rather than simply adjourn all further issues of quantum on EWH’s termination claim, I set out my findings below in order to indicate the awards that would have been made, at least upon the major heads of claim, if the court had accepted that all of the losses flowed from termination. Doing so will dispose of a number of points of contractual construction and principle that were argued at trial.

On 22 March 2019, EWH appointed Black & Veatch Limited as its replacement EPC contractor in order to complete the works. Subsequently, EWH was able to reduce the Black & Veatch manpower upon the appointment of BISL as its replacement O&M contractor. Black & Veatch totally demobilised in March 2020 at the start of the COVID-19 national lockdown.

EWH seeks its additional costs of engaging Black & Veatch in the sum of £12,119,903.25. Such revised sum arises from the work done by the parties’ quantum experts, Ann Nash and Mark Gordon, on the basis of the rates agreed in the Black & Veatch contract for its salaried staff and for agency staff based on industry rates plus 10%. If, however, the court were to reduce the award for salaried staff time to industry market rates then the experts agree the reduced sum of £8,321,716.61.

The experts’ assumptions – and which are therefore matters to be determined by other evidence – include that the scope of the work undertaken was reasonable; that the works undertaken were within the scope of M+W’s works; that EWH used reasonable resources; that the time taken for the works was reasonable; that all such costs arose from the termination of the EPC contract; and that sums owed by EWH and M+W would be paid.

While the experts cannot assist about these issues, there is significant evidence from Mr Wilcock, Mr Burgess and Mark Roberts, also of EWH. Such evidence was largely unchallenged.

Mr Burgess explains that from early 2018, EWH was concerned at the significant delay in this project and at M+W’s increasingly commercial stance. The board considered that there were going to be significant commercial and contractual challenges ahead in completing the project with M+W. While focusing its primary efforts upon resolving issues with M+W, the board started to consider the need for contingency planning.

Mr Burgess prepared a paper for the May 2018 board meeting at which he recommended that a high-level review be conducted to develop EWH’s contingency plan for completing the project. He noted four options for completing the project: (1) appointing a new EPC contractor on a fixed-price basis against time and performance guarantees; (2) appointing a new EPC contractor on a time and materials plus basis; (3) appointing a managing agent but with all payments being made directly to the sub-contractors; and (4) delivering the remaining works in-house. The planning was codenamed Project 101.

Mr Burgess advised that the first option would appear unlikely due to the diligence period required for any new contractor and the “hefty risk premium” that would inevitably be sought. He also ruled out the fourth option on the basis of EWH’s insufficient “depth of capability and experience” of delivering such a project. That left two viable options. Of the second, Mr Burgess added:

“In the potential pursuit of option (2), the potential replacement contractor will:-

-

Have experience in the construction of similar plants

-

Have the technical and financial resources available to complete the works in the required timescales

-

Be known to the project teams (due to the hit the ground running nature of the completion works)

-

Be attracted to the project for reasons other than fee if possible.

Two organisations present themselves as candidates here, MBV Energy (the JV between MWH and B&V), who undertook the Ince Park project and Outotec, the technology provider at EWH and an experienced EPC contractor worldwide with ambitions in the UK market.

Of the two, Outotec have significant vested interest in stepping into the contract. They are believed to be in significant dispute with M+W and are exceptionally keen to establish their UK credentials. Any arrangement would need to protect both sides from the dispute under their existing contract.

It is recommended that very discrete (sic) enquiries are made to both organisations. Should the need to formalise discussions arise, it will be important to ideally introduce a little competitive tension into the discussions, but also have a fall-back option if the preferred option does not crystallise.”

The board endorsed the strategy which it summed up in a pithy minute:

“Plan for the worst – M+W default

Hope for the best – M+W fall into line and deliver the project.”

The board recommended some caution. There was to be no direct communication with the supply chain (presumably Outotec) at that stage. Work was to start but there was to be a hold on seeking any external validation.

Mr Burgess prepared an internal memorandum dated 17 November 2018 in which he compared the financial consequences of various alternative scenarios. In particular, his analysis compared the internal rate of return that EWH might achieve by appointing a replacement contractor in a termination scenario with the rate of return if it entered into a settlement agreement with M+W. Such analysis marginally favoured termination with a projected internal rate of return of 12.3% against 11.71% in a settlement scenario. He also looked at the cash position. While over the long term the cash position would be better under the termination scenario, his analysis showed that cashflow would be significantly better under the settlement scenario until late 2020. In cross-examination, Mr Burgess stressed that EWH was not chasing the possible economic benefits of termination but that his analysis demonstrated that termination was at least a viable option in which the rate of return might be slightly improved albeit the short-term cash position would be worse.

The settlement scenario included the additional cost of supplying RDF that would be acceptable to M+W. I accept Mr Burgess’s answer in cross-examination that this was not a concession that EWH had hitherto been supplying RDF in breach of Schedule 22A (about which I have in any event made findings) but rather a recognition that EWH had been incurring significant additional costs in appeasing M+W’s demands irrespective of whether they were valid, and that settlement would only be possible by continuing to do so. Indeed, the summary of the settlement scenario explained:

“The Contractor continues to apply pressure to the Purchaser relating to the consequences of supplying out of specification fuel, not accepting of the fact that the fuel is waste derived, and therefore some variance is to be expected. Energy Works has countered this risk by supplying an enhanced RDF at a cost of £35/tonne. This discount has been applied to all fuel where revenue has been recognised.”

Mr Burgess explains the significant financial stress caused on this project by delay. He points to the parties’ agreement of liquidated damages at £84,800 per day which he maintains was a genuine pre-estimate of EWH’s losses. Indeed, such assertion gains significant support from the evidence at trial supporting the alternative claim for general damages. It was therefore critical that EWH’s completion strategy minimised further delay in order to protect the viability of the project.

Mr Burgess observes that there were two main options available to EWH. It could await termination and then run a procurement exercise inviting tenders from interested contractors. Alternatively, it could identify a preferred partner in advance of termination and develop a contingency plan that could be put in place quickly if it became necessary. He explains that the board rejected the first option since it would involve significant post-termination delay during which the plant would have to be shut down. Further, it would not be possible to assess the condition of the plant to the level of detail required to produce a tender pack until after termination. Such a procurement strategy might take twelve months to run its course. Furthermore, Mr Burgess observed:

“EWH was also aware that it would not get a replacement EPC contractor at a reasonable price or on acceptable terms. We did not believe that any contractor would be keen to take on a part-finished plant on a standard EPC basis because they would never have a perfect knowledge of the completion status of the plant. The idea that anyone would accept responsibility for M+W’s work, liquidated damages and performance guarantees was untenable. Even if we could find a contractor who would, there would be a massive uncertainty premium.

A full procurement process with a fixed scope of work would not lead us to an agreement with the level of protection or guarantee that the original EPC contract did. M+W had the benefit of a clean site and could control all of the design, procurement, construction and commissioning activities. A replacement contractor would be in a completely different position and would not be willing to give us a full wrap at a sensible cost. Whoever we contracted with would be expensive and the likelihood of a fixed-price arrangement was very slim. Consequently, there was little benefit in spending months on a procurement process that would not take us to a particularly good position. At this point, we believed that simply comparing rates would not help us and that we would do better to focus on quality.”

Mr Burgess explains that the remaining option of working with a preferred partner had the advantages of allowing EWH to plan on a confidential basis before termination and reassuring investors that termination was a credible alternative strategy. He says that ultimately the board elected to take this route. It concluded that if it were not going to be possible to reach a fixed-price arrangement, the commercial advantages of a competitive process would be nullified. EWH therefore decided to select a contractor on the basis of ability to deliver its objectives of minimal further delay and meet the specification. It sought a contractor with relevant experience of the technology and a track record of performing in difficult circumstances.

The investor, Bioenergy, already had experience of working with Black & Veatch at Ince where the contractor had successfully delivered the works utilising Outotec gasification technology and achieving Take Over on 11 March 2019. Mr Burgess said that this put Black & Veatch in a unique position since no other contractor had completed a gasification plant using Outotec technology in the UK at that time. Black & Veatch had impressed at Ince as a proactive and solutions-focused contractor with expertise in engineering, construction and installation. It also provided a very high standard of housekeeping and health and safety on site.

Confidential discussions started with Black & Veatch in July 2018. A limited contract was placed to allow Black & Veatch to carry out an initial project assessment. Outline heads of terms were explored between September 2018 and February 2019, but the actual negotiations over the contract were conducted in the short window between termination on 4 March and the execution of the Black & Veatch contract on 22 March 2019.

The Black & Veatch contract was on a time and materials basis. Mr Burgess accepts that, while his team had some successes, EWH was not able to conclude the deal that it had been targeting. In particular, EWH was unable to achieve a favourable allocation of risk. Black & Veatch were nervous about taking on invisible risks in an incomplete plant designed and constructed by a third party. Mr Burgess wrote a note on 18 March 2019 identifying the areas where he considered that the terms offered by Black & Veatch were “some distance from the market position.” The first two matters concerned Black & Veatch’s refusal to accept commercial risk. In addition, it sought a mobilisation fee of 10% of expected costs which had an obvious cashflow impact. Further, the terms included incentives which Mr Burgess advised were beneficial since they encouraged early generation and early completion.

While EWH would have liked Black & Veatch to have accepted greater accountability and commercial risk, it recognised that it would always be difficult to determine whether issues with design or construction arose solely from the negligence of M+W or the new contractor. Mr Burgess concludes:

“In the end, the B&V Contract was far from perfect, but EWH could not obtain better terms from B&V. Bringing in an alternative was not an option at that stage as it would have led to significant further delay and, even if that had been a possibility, we would have faced similar challenges as we did with B&V. In the end, the Board decided that it was better to get on with it and complete the Plant.”

Mr Burgess insisted in cross-examination that EWH had been very happy with Black & Veatch’s performance, but they ran into further issues such as slagging, noise and fuel-feed issues that EWH had to avoid. Consequently, the period to completion became significantly longer than originally anticipated and EWH became increasingly concerned as to the level of cost that it was incurring. Further, there were concerns about the quality of the records and that Black & Veatch staff were overbooking hours to the project. A demobilisation plan was formed in January 2020 but COVID-19 intervened and Black & Veatch left site around the end of March 2020.

M+W pleads that EWH is required to prove that Black & Veatch’s works were limited to those matters which fell within the scope of M+W’s own works and which were incomplete at termination: Annex 4 to the Defence, para. 14(i). Mr Burgess gave evidence that the Black & Veatch works were so limited. That evidence was not challenged and no evidence was called to contradict him. Instead, the issue was addressed with Ms Nash, EWH’s quantity surveying expert.

It will, however, be necessary to address causation more broadly in a further judgment for the reasons identified at paragraphs 350-354 above. In that respect, I note the following matters:

M+W pleads that the costs were “unreasonably high” and asserts that EWH failed to mitigate its losses. It argues that it was unreasonable to engage Black & Veatch on a time-spent, as opposed to a lump-sum, basis and that the rates agreed were well above market rates by an average of 50%: Annex 4, para. 14(ii).

Neil Robinson, M+W’s Operations & Commercial Director, accepted in his second witness statement that, had he been in Mr Burgess’s shoes, he too would have advised that option two, namely the engagement of a new EPC contractor on a time and materials plus basis, was the most appropriate strategy. Such concession must be fatal to the argument that EWH failed to mitigate its losses by contracting on a time-spent basis.

Briefly, however, I accept Ms Nash’s expert evidence that in her experience it is very difficult to find a main contractor to take on all of the risks that come with completing works designed and commenced by others on a lump-sum basis. Indeed, Mr Gordon himself accepted that it was, at least initially, reasonable to appoint a new contractor on such basis. While he added that once the condition of the plant was known, a second stage “could have been negotiated under which some form of cost incentivisation could have been agreed”, I accept Ms Nash’s response that she has never come across such a two-stage approach upon a contractor taking over a distressed project of such complexity. I accept EWH’s submission that Mr Gordon’s suggestion falls short of the evidence required to prove that, in contracting with Black & Veatch on a time-spent basis, EWH failed to take reasonable steps to mitigate its loss.

It is common ground that the Black & Veatch rates were higher than market rates. Mr Robinson observes that companies such as Black & Veatch and his own former employer, Jacobs Engineering, are “very tuned in to commercial opportunism and optimisation.” He criticises EWH for failing to maintain a dialogue with at least two alternative contractors prior to termination and for failing to conduct any tender process. He observes:

“It would have been entirely possible for EWH to go to a B&V competitor and request equivalent rates for comparison. Option 2 did not preclude EWH from market testing what B&V were offering.”

Mr Robinson also rejects the suggestion that there were no other suitable contractors with the same combination of engineering expertise and construction capability. As to Black & Veatch’s successful experience with Outotec’s gasification technology at Ince Park, he observes that that project used woodchip rather than processed RDF and completion was in any event delayed. Mr Robinson adds:

“Based on the apparent fact that EWH did not approach any other contractors, but spent over nine months planning its ‘Plan B’, B&V would clearly adopt high rates because presumably they knew there were no other bidders and they (B&V) had become preferred bidders without having to agree commercial terms. I could understand this as an outcome if any engagement was after termination and had EWH not started planning in June the year previously. Planning for so long, with only one contractor will inevitably give that contractor leeway to use excessively high rates and EWH backed itself in a corner in this respect.”

As indicated above, the additional cost incurred by EWH’s procurement strategy was agreed by the experts, subject to their other assumptions, in the sum of £3,798,186.84. Ms Nash observes that this equated to a delay of forty-five days at the agreed rate of £84,800 per day. This helps to put matters in perspective. Certainly, it was reasonable to contract quickly, both to secure the integrity of the part-completed works but also to minimise EWH’s losses. Mr Gordon is, however, right to respond that the calculation is of limited value given that the criticism is not that EWH should have delayed further in appointing a new contract manager but rather that it should have been negotiating with other contractors alongside Black & Veatch in order to introduce some competition into the procurement process.

I accept that the pool of potential alternative contractors was limited and that Black & Veatch’s experience at Ince Park will, quite reasonably, have weighed heavily in EWH’s thinking. Further, I accept that exploratory talks with alternative contractors prior to termination necessarily had to be conducted in confidence and that EWH was right to appoint its chosen contractor quickly after termination without launching a protracted procurement process. Nevertheless, termination had been foreseen as a possible outcome as early as May 2018. Further, as Mr Burgess then recognised, it was important to “introduce a competitive tension” into EWH’s negotiations. In my judgment, the course taken by EWH of negotiating with only one contractor exposed EWH to a foreseeable and avoidable risk of leaving itself with little or no bargaining power such that it would have little choice other than to accept the terms proposed by Black & Veatch. Accordingly, I accept M+W’s argument that EWH failed to mitigate its losses by dealing exclusively with Black & Veatch. I would therefore award, subject to the causation issue, the sum of £8,321,716.61.

The funding of the project is explained by both Hamish McPherson, EWH’s Chairman, and Mr Burgess. EWH is funded by its investors, Bioenergy Infrastructure Holdings Limited; John Hancock Life Insurance Co. (USA); Noy Waste to Energy 2 Limited Partnership; and Charlie and Noreen Spencer. By a Subscription Agreement dated 20 November 2015, the investors loaned £156 million to fund the plant at Hull. Interest was payable from drawdown at the initial rate of 12.676% until 30 April 2018 and thereafter at the rate of 13% per annum. Interest accrued daily and was payable quarterly in arrears.

EWH’s ability to repay the shareholder loan and thereby reduce its financing costs was dependent upon receiving revenue from the plant. The delayed Take Over of the project caused EWH to incur additional financing costs as it continued to service the loan. Mr Burgess observes, at paragraph 339 of his first witness statement:

“As a capital-intensive project, EWH was (and remains) particularly sensitive to timing issues. It is imperative that the Plant starts generating revenue as soon as possible to cover the cost of financing. Any prolonged delay critically impairs the ability of any project to service its borrowing or cost of capital. M+W’s [delay] has caused EWH to incur additional financing charges because the Plant is not generating energy or revenue.”

Mr Burgess explains that the claim is the difference between the interest accruing under his base case, which assumed that the plant was operational on 4 March 2019, and his actual case, which assumed that it was operational from 1 April 2021. There is no claim for additional financing costs incurred pre-termination since the parties agreed, and I have awarded, liquidated damages. The claim is therefore pursued from termination (4 March 2019) to 31 March 2021. Given that the plant had not been completed, Mr Burgess’s calculations were necessarily based on a number of assumptions as to the revenue that would have been generated and the costs that would have been incurred had the plant been operational from 4 March 2019.

The calculation forecasts future revenue by making assumptions as to the tonnage of RDF delivered (which in turn depends on its net calorific value); the gate fee payable; and the future levels of the various payments that would be received for generating electricity (the Baseload Market Reference Price, the Balancing Services Use of System and the Transmission Network Use of System payments). It also models saved costs such as the cost of disposing of ash and processed waste that is not suitable for gasification; operating and maintenance fees; and consumables. Since the model considers the cashflow available to discharge interest payments, it also takes account of overheads and taxation. Further, the model takes account of additional costs incurred by reason of the delayed Take Over of the plant, namely additional project management and leasehold costs.

The claim was reviewed by the parties’ forensic accounting experts, Gordon Hodgen instructed by EWH and Paul Isaac instructed by M+W. They had no significant issues with Mr Burgess’s calculations, although they proposed some modest corrections which had the effect of increasing slightly the value of this claim.

Mr Isaac’s principal concern is that Mr Burgess’s financial models demonstrate that the plant would never generate sufficient cash to pay the interest on the loan facility. Since the unpaid interest would itself attract interest, he graphically demonstrates in his report how the debt will spiral out of control over its 25-year-term. The point is well illustrated by the fact that even if the plant had been operational in March 2019, EWH’s own calculations show that the accrued interest on the loan facility over its 25-year-term would be £829,740,657 such that the total debt would be just short of £1 billion by 31 March 2044. Mr Isaac postulates three possibilities:

I am satisfied that the answer to the issue raised by Mr Isaac is that EWH always intended to refinance the project once it was operational:

Refinancing the project after the plant has become operational is, however, irrelevant to this claim which is for the additional financing costs incurred during the delayed period to Take Over.

M+W argues that the Delay Damages Cap applies equally after termination such that there can be no further entitlement to any delay-related losses after the cap has been exhausted: Annex 4 to the Defence, para. 36(i). For the reasons explained at paragraphs 319-320 above, the Delay Damages Cap did not apply post-termination of the EPC contract and I reject M+W’s argument that these claims are excluded by such cap.

M+W pleads that EWH’s claim for financing costs is not a claim for the costs of completion and that there is no general right to recover all losses flowing from termination: Annex 4 to the Defence, para. 36(ii). It explains its argument further in its submissions at trial that EWH’s claim is, it asserts, limited to the losses falling within clause 44.6, which it characterises as being limited to the costs of completion.

Clause 44.6 required the Project Manager in the case of a termination under clause 44 to issue a Default Certificate once EWH had completed the works giving a full statement of:

“(a)

all sums due to the Purchaser from the Contractor including any cost incurred by the Purchaser in completing the Works in accordance with sub-clause 44.3(b) which is in addition to that which the Purchaser would have incurred if the Contractor had completed the Works in accordance with the Contract; and

(b)

all sums due to the Contractor in respect of work completed by the Contractor prior to termination of his employment other than any such work of a temporary nature necessitated by such termination …

Having allowed for all previous payments made to the Contractor and any sum due to the Purchaser from the Contractor, the Default Certificate shall state the balance due to or from the Contractor.”

Clause 44.6 certainly provides a device for the Project Manager to offset any sums due to M+W against the additional costs incurred to complete the works post-termination. I do not, however, accept that it limited EWH’s entitlement to damages to the costs of completion:

M+W pleads that the claim for financing costs is in truth a claim for loss of revenue that is excluded by clause 45.1(b): Annex 4, para. 36(iii). As already noted, that clause excludes any liability for “loss or deferment of anticipated profit or actual profit, loss of revenue, loss of production, business interruption or any similar damage or for any consequential or indirect losses of any kind resulting from or arising out of or in connection with the Works or the performance of them or any act or omission relating to them however caused.”

I acknowledge, as the accountants did in their evidence, that there is a clear correlation between the lost revenue suffered by reason of the delayed completion of the works and the additional financing costs which EWH had to pay during the extended period of the works. Such additional financing costs would have been avoided had the project completed on time and revenue started to flow. That said, it is self-evident that revenue and costs fall on different sides of any profit and loss account. It seems to me that as a matter of ordinary language a claim for additional financing costs is not a claim for lost revenue. That simple truism is not affected by the fact that one has to calculate the revenue that would have been generated but for the breach in order to calculate the additional financing costs. Despite that link, this is, in my judgment, a claim for additional costs incurred and not an impermissible dressed-up claim for lost revenue.

I am fortified in that conclusion by the decision of Field J in GB Gas Holdings Ltd v. Accenture (UK) Ltd [2009] EWHC 2734 (Comm). In that case, a clause similarly excluded claims for any loss of revenue but the judge held, at [86]-[87], that such provision did not exclude a claim for additional borrowing costs incurred by reason of a loss of revenue. While Mr Acton Davis seeks to rely on the decision of Henshaw J in Toucan Energy Holdings Ltd v. Wirsol Energy Ltd [2021] EWHC 895 (Comm), that case did not concern the question in this case (namely whether a claim for additional financing costs incurred under an existing arrangement was in truth an excluded claim for loss of revenue) but rather whether a claim for the costs of having to go out into the market to refinance a project was an excluded claim for indirect or consequential loss. Indeed, I note with interest that Henshaw J rejected the claim in that case on the basis that it was for indirect or consequential losses and not on the alternative or additional ground that it was a claim for loss of revenue despite the relevant clause also excluding such losses: see [285], [287]-[288] & [766].

In any event, clear words would be required to exclude a claim for the additional financing costs incurred by reason of the delayed completion. As Moore-Bick LJ observed in Stocznia Gdynia SA v. Gearbulk Holdings Ltd [2009] EWCA Civ 75, [2009] 1 Lloyd’s Rep 461, “the court is unlikely to be satisfied that a party to a contract has abandoned valuable rights arising by operation of law unless the terms of the contract make it sufficiently clear that it was intended.” See also Lord Hamblen in Triple Point Technology Inc. v. PTT Public Co. Ltd [2021] UKSC 29, [2021] A.C. 1148, at [106]-[113].

M+W pleads that the financing costs are in any event not recoverable because they are not costs arising from or consequent upon termination: Annex 4 to the Defence, para. 36A(i). I disagree; the additional financial costs arose directly by reason of the delay in achieving Take Over.

M+W pleads that some or all of the additional costs would have been incurred in any event by reason of the fact that the assumed operational net income between March 2019 and March 2021 would not have been sufficient to service the debt: Annex 4 to the Defence, para. 36A(ii). This is common ground, but EWH’s claim is pursued on the basis of the difference between the position it would have been in if the plant had been completed at the date of termination and the actual position.

M+W pleads that EWH is not entitled to claim any sum in relation to alleged additional finance costs in excess of the costs that have been incurred in funding the other termination costs: Annex 4 to the Defence, para. 36A(iii). No coherent basis for such limitation is offered in either the general law or pursuant to the terms of the contract, and I reject M+W’s argument.

M+W’s further argument (pleaded at paragraph 36A(iv) of Annex 4 to the Defence) that the claim should be limited to March 2021 is common ground. There is no claim beyond 31 March 2021.

The experts also reviewed Mr Burgess’s assumptions. Mr Hodgen considered that they were reasonable. Indeed, Mr Burgess’s assumptions were based on actual costs paid by EWH, contracts with third parties and matters put forward by M+W. Mr Hodgen agreed in cross-examination that his review of Mr Burgess’s calculations was dependent upon the reasonableness of the assumptions and that many of the assumptions concerned technical matters that were not within his area of expertise. He also conceded the obvious point that the calculation of loss is only as good as the assumptions while Mr Isaac conceded that he had not been given any instructions as to the reasonableness of the underlying assumptions.

Although he gave oral evidence, Mr Burgess was not cross-examined about this head of claim or about any of his calculations or assumptions. If M+W wished to challenge the assumptions then it was incumbent upon them to put such case properly to Mr Burgess. The forensic accountants could then have assisted the court not with commentary upon assumptions that were outwith their expertise but with the adjustments that might need to be made to the financial models in the event that the court accepted one or more of the challenges.

One particular matter that was explored and upon which the court has substantial evidence is the reasonableness of the assumption that the net calorific value of the Fuel would have been at the design point of 12.5 MJ/kg. The calorific value is directly relevant to the required tonnage of RDF since in order to generate the contracted annual output of 750,000 MWh one would need to gasify Fuel with a total energy of 2,700,000,000 MJ (1MWh = 3,600 MJ). At the design point of 12.5 MJ/kg, that would require 216,000 tonnes of Fuel. Thus, as one increases the net calorific value of the Fuel, the lower the required throughput of Fuel but equally the lower the gate revenue.

There is certainly evidence that I consider more fully in the context of defect 23 (see paragraphs 549-561.3 below) that achieving a consistent supply of Fuel with a net calorific value anything like 12.5 MJ/kg proved difficult during the commissioning phase. That said, as Andrew Mayo explained in his evidence, there is a limit to the extent to which fuel suppliers can and will be willing to bend to meet the irregular, unpredictable and modest demands of a plant during commissioning. By contrast, once a plant is operational, it is easier to achieve a more consistent and stable supply. EWH entered into Fuel Supply Agreements with Geminor, Veolia and Biffa that specified RDF between 9-18 MJ/kg. Supply of RDF meeting that requirement would satisfy the RDF specification in the EPC contract of 8-20 MJ/kg, but would not without more guarantee that the tighter Fuel specification of 10-16 MJ/kg would be met, let alone ensure that the average net calorific value of the Fuel would have been at the design point of 12.5 MJ/kg.

There is, however, other evidence that would support the ability to source RDF that would allow the design point to be achieved. In particular, M+W’s fuel expert, Michael Brown, briefed Mr Isaac that residual waste produced in the UK typically has a net calorific value in a wide range between 6-8 and 21-23 MJ/kg. More importantly, he advised that the mode value (i.e. the most frequent value within samples of residual waste in the UK) is around 9-13 MJ/kg. The midpoint of Mr Brown’s suggested range is of course 11 MJ/kg and would not indicate that there should be any long-term issue in obtaining a supply of RDF that, after processing, could be blended to meet the design specification.

Mr Isaac also points to the limitations of the contracted minimum commitments in the Fuel Supply Agreements but fairly accepts that he is not an expert in the availability of RDF. I am satisfied that it was reasonable to assume that sufficient RDF was readily available in the market.

In the absence of any other proper challenge, I accept Mr Burgess’s evidence and his calculation of the additional financing costs, subject to the issue of causation and the modest amendments made to his calculations by the accountants.

Accordingly, EWH is entitled to recover the additional financing costs to cover the delayed completion of the plant. Had M+W been liable for the full period of delay until 1 April 2021, I would assess such damages in the sum of £53,119,794. There is accordingly no need to consider the alternative claim pleaded at paragraph 56 of Appendix 6 to the Particulars of Claim.

Following termination, EWH re-engaged a number of subcontractors in order to complete the construction work. In addition, it engaged further contractors who had not been previously involved in the project at Hull. It claims its costs incurred with these contractors in the total sum of £19,457,624.02.

By Annex 4 to the Defence, M+W puts EWH to proof but does not assert a positive case. It pleads, at paragraph 20:

“EWH is required to prove:

M+W alleges that EWH did not need to re-engage seven subcontractors, being Outotec, Field System Design, Siemens, Sutco, Konecranes, Protec and Ultrasure Fire, because it had the benefit of assigned subcontracts. Further, EWH had the benefit of collateral warranties from Outotec, Field System Design, Siemens and Sutco. It then pleads, at paragraph 22:

“In the circumstances, EWH is required to prove that it reasonably mitigated its loss by taking the following steps:

(i)

Insofar as any of the subcontractor’s work was defective, it should have required the subcontractor to remedy that work at no extra cost; and

(ii)

Insofar as the subcontractor sought additional payment directly from EWH, it should have insisted that any such payment would be solely in accordance with the payment terms found in the original subcontract between M+W and the subcontractor.

(iii)

Generally, insofar as any of the subcontractor (sic) have been paid in excess of the negotiated subcontract sum between M+W and the subcontractor, EWH is required to prove why such additional payments have been made and that they flow from reasonable behaviour on the part of EWH.”

By a solicitor’s letter dated 13 March 2019, EWH formally required M+W to assign all of its subcontracts. By a series of letters dated 26 April 2019, M+W purported to assign some 282 subcontracts and purchase orders to EWH. Originally M+W argued that it had only assigned the future benefits of the subcontracts; alternatively, that the subcontracts had been novated. Either way, M+W denied any liability for unpaid sums payable under the assigned or novated subcontracts. It was only by O’Farrell J’s judgment on the preliminary issues in this case, reported at [2020] EWHC 2537 (TCC), 192 ConLR 79 and handed down on 24 September 2020, that it was established that the true effect of the assignment of the Outotec subcontract was that:

Mr Burgess explains the approach followed by EWH at paragraphs 182-275 of his first witness statement. For smaller works, local contractors were used who could be engaged relatively quickly and cheaply. Where there were more substantial works, EWH re-engaged M+W’s subcontractors or brought in other trusted suppliers. EWH elected to contract directly with the subcontractors (who are still referred to as such despite the direct instruction) but appointed Black & Veatch as its agent so that it could manage the subcontractors.

Re-engaging M+W’s subcontractors had the benefits of speed and potentially of saving costs in that they already knew the project. Mr Burgess explains, at paragraph 185.2:

“Time was crucially important. Post-termination, the walk-downs, investigations and [Outstanding Work Lists] made it clear that the works were not as close to completion as M+W had reported and the prospect of losing the benefits of the funding arrangements was thrown into sharp focus. The need to meet conditions precedent, and preserve the funding provided by the [Contract for Difference] and the EU grant, was a significant influence on EWH’s drive to complete the works without delay.”

Mr Wilcock adds that it made sense to re-engage M+W’s subcontractors since EWH believed that the remaining work was mainly commissioning and they would know the plant better than new contractors. Further, Mr Burgess reasoned that re-engagement avoided the difficulty of seeking to get new contractors to take responsibility for work carried out by others. He also explains the difficulty caused by M+W’s failure to accept the true position on assignment. M+W wrote to the subcontractors claiming that EWH would thereafter deal with all matters under the subcontracts. Since M+W refused to make further payments to the subcontractors, they naturally looked to EWH for payment.

On 28 March 2019, EWH issued notices under the collateral warranties provided by Outotec, Sutco and SPIG requiring each subcontractor to enter into new contracts with EWH. Clause 4.2 of the warranties provided, however, that EWH was required to pay “a sum equal to the amount due” on execution of the new contracts. Agreement of the amounts due became complicated both because the subcontractors were in dispute with M+W as to the true balance and because EWH sought to maintain that the amount due was limited to the sums payable under the latest payment certificates.

Ultimately, EWH concluded that it needed to enter into fresh agreements. That was not, however, altogether straightforward:

Mr Roberts explains that the subcontractors were engaged to remedy defective work and complete the outstanding work.

Fichtner’s October 2018 report recorded that the design phase was “substantially complete”, procurement was “close to completion with all major subcontracts placed” and that M+W advised that manufacturing was “substantially complete.” Fichtner then reported:

“Fichtner has inspected the works being completed on Site during this period including external fuel feed conveyors, gasifier train, and BOP.

Fichtner considers that the quality of the construction works carried out on Site is in general to a reasonable standard.”

Mr Gordon notes that the total milestone payments made to M+W totalled £138,579,345. Given that the contract price was £153,848,878, the unpaid contract price at termination was £15,269,533. He then estimates that the actual work outstanding at termination was valued at circa £5.9 million:

Against that, Mr Gordon notes that EWH seeks around £42 million for the costs to completion. He then reports, at paragraphs 467-468 of his report:

“467.

I would typically expect costs to be higher following a termination due to various factors such as the supply chain’s appetite for risk, the piecemeal nature of the work remaining and the lack of commercial tension in the supply chain when a project is knowingly in distress. Whilst my calculation is rudimentary it does provide an indication as to the order of magnitude of costs EWHL has incurred in completing the post termination works as compared to what it may have incurred.

468.

I am unable to explain the reasons for such a significant difference. It is a matter for the Court to decide whether such reasons are related to a difference in scope or other issues for which M+W is not liable.”

Ms Nash challenges this analysis:

M+W’s pleading appears to reverse the burden of proof. It is for M+W to plead and prove EWH’s alleged failure to mitigate its losses. In any event, I reject M+W’s argument that EWH failed to mitigate its losses by re-engaging subcontractors rather than insisting that they complete the outstanding works pursuant to the assigned subcontracts and or through the collateral warranties. Indeed, such argument is rather difficult given M+W’s own contemporaneous actions in seeking to deny its liabilities for monies owed under the subcontracts and arguing that there was no assignment of accrued rights.

There is clear evidence that subcontractors would not return to site under the subcontracts without resolving their disputes with M+W unless EWH was prepared to pay all sums owed by M+W. Furthermore, time was an important factor given EWH’s mounting losses, estimated by the parties at £84,800 per day, from further delay. In addition, I am satisfied that it was not unreasonable to re-engage the subcontractors on a time-and-materials basis. Indeed, it would have been very difficult for EWH to have sought fixed-price contracts without a very clear understanding of what precisely remained to be done.

Accordingly, I am satisfied that M+W has not discharged the burden of proving that EWH failed to mitigate its losses by its procurement strategy. In any event:

While there was cross-examination as to the reasonableness of the re-engagement strategy, there has been no challenge to the lay evidence called by EWH that the work undertaken by the re-engaged subcontractors was to remedy defective works and take the project to completion. If M+W wished to argue that additional works were undertaken then it was incumbent upon it to challenge the evidence called by EWH on this issue and to put a positive case that EWH is wrongly seeking to pass on a liability for such additional works.

I am satisfied upon the evidence before me that the works undertaken were accordingly within the scope of M+W’s contractual obligations.

Limiting EWH to its pleaded claims, the subcontract costs are agreed by the forensic accountants on a figures-as-figures basis in the sum of at least £19,422,445.71:

I award EWH damages in this sum. Of course, it is agreed between the parties that the sum of £15,269,533, being the costs saved by termination of the EPC contract, must be deducted from the termination claim. After setting off this sum, the net liability for the subcontract costs is a little over £4 million.

Following termination, EWH engaged additional contractors to provide commissioning support. Mr Burgess explains the approach followed by EWH at paragraphs 301-305 of his first witness statement. Commissioning support was obtained on an ad hoc basis as required by Black & Veatch. The service was typically required quickly so as not to delay more significant works.

By Annex 4 to the Defence, M+W puts EWH to proof but does not assert a positive case. It pleads, at paragraph 17:

“EWH is required to prove:

M+W alleges that EWH did not need to re-engage seven subcontractors, being Lowe Engineering, Airlines & Compressors; BSB Engineering Services, BKW Instruments, Halcyon Drives, Weightron Bilanciai and Suez Water Technologies & Solutions, because it had the benefit of assigned subcontracts. It then pleads, at paragraph 19:

“In the circumstances, EWH is required to prove that it reasonably mitigated its loss by taking the following steps:

(i)

Insofar as the subcontractor sought additional payment directly from EWH, it should have insisted that any such payment would be solely in accordance with the payment terms found in the original subcontract between M+W and the subcontractor.

(iii)

Generally, insofar as any of the subcontractor (sic) have been paid in excess of the negotiated subcontract sum between M+W and the subcontractor, EWH is required to prove why such additional payments have been made and that they flow from reasonable behaviour on the part of EWH.”

Again, M+W’s pleading appears to reverse the burden of proof. It is for M+W to plead and prove EWH’s failure to mitigate its losses. In any event, I reject the mitigation argument. As explained above:

Accordingly, I am satisfied that M+W has not discharged the burden of proving that EWH failed to mitigate its losses by its procurement strategy in respect of commissioning support.

If M+W wished to argue that the commissioning support was not within the scope of M+W’s contract then it was incumbent upon it to challenge the evidence given by Mr Burgess and his explanation of the support provided on a contractor-by-contractor basis at pages 22-24 of Exhibit RB1.

The forensic accountants have agreed the cost of commissioning support in two different sums:

As explained above:

I am satisfied that Mr Gordon is right to deduct at least the cost of removing the Unacceptable RDF. Whether he was right also to deduct the cost of removing the out-of-specification material is a moot point since the burden is on EWH to prove its losses and I am not provided with an alternative figure comprising the deduction of just the cost of removal of the Unacceptable RDF. I therefore award the alternative sum of £1,973,985.34 under this head.

EWH never intended to operate and maintain the plant. Rather, it entered into a contract with its chosen Operation & Maintenance (“O&M”) contractor, Cofely Workplace Limited, later known as Engie Services Limited. By such contract, Engie agreed to provide O&M services for the period of ten years after Take Over. The contract also required Engie to provide services during a 12-month mobilisation period before the planned Take Over.

It is common ground that upon termination of the EPC contract, the plant could not simply be mothballed pending the appointment of a replacement contractor and that certain urgent maintenance was essential in order to safeguard the plant. Indeed, M+W stressed the importance of eight different processes, some of which required daily attention, by its solicitor’s letter of 5 March 2019. Mr Burgess explains that an immediate appointment was required, and that the only sensible choice was to instruct Engie to undertake this additional work. A fee of £40,000 per fortnight was agreed. EWH attempted to negotiate a reduced charging structure but Engie did not yield, and Mr Burgess explains that EWH therefore put significant effort into finalising terms with Black & Veatch in order to keep the period of these additional costs as short as possible.

EWH claims £71,428.57 being the costs between 7 March (when Engie agreed to take over care and control of the site) to 1 April 2019 (when Black & Veatch took over as principal contractor). M+W pleads that the claim should be further limited because Black & Veatch was appointed on 22 March 2019. Mr Burgess answers that point. He explains that while the Black & Veatch contract was signed on 22 March, the company did not take over the site until 1 April. Otherwise, EWH is simply put to proof.

I am satisfied that this claim is made out and award the sum of £71,428.57.

As already explained, the mobilisation period was 12 months prior to the contractual Take Over date. Upon the project being delayed, Engie was entitled to charge an extended mobilisation fee of £3,125 per day, subject to indexation.

Engie was entitled to terminate the O&M contract upon the failure to start commercial operations by a longstop date of 9 July 2019. By a notice given on 12 August 2019, Engie exercised its contractual right to terminate the O&M contract on ninety days’ notice. Despite attempts to renegotiate the contract, by a further letter dated 12 November 2019 Engie confirmed that the contract would terminate the following day. EWH therefore claims the extended mobilisation fee from the termination of the EPC contract to the termination of the O&M agreement. The quantum of such claim is agreed in the sum of £877,963.34.

Other than simply putting EWH to proof, M+W takes two points:

The problem with the mitigation argument is that the option under clause 4.2 had to be exercised before the mobilisation date which was in April 2017. There is no evidence that at that date EWH ought to have anticipated that the project would fall into delay. I note that M+W has neither pleaded nor adduced any evidence as to the length of deferment that it contends EWH should then have anticipated. Accordingly, M+W has failed to establish the alleged failure to mitigate EWH’s loss.

For the reasons explained above, the Delay Damages Cap covers, among other additional costs and losses, the extended mobilisation fee payable up until 4 March 2019 but is of no relevance post-termination.

Accordingly, subject to clause 45.3 and any further causation argument, I award EWH the additional extended mobilisation fees paid of £877,963.34.

Engie’s termination left EWH in need of a new O&M contractor. EWH therefore contracted with Bioenergy Infrastructure Services Limited (“BISL”). EWH now pursues two claims in respect of the BISL contract:

BISL is related to Bioenergy Infrastructure Holdings Limited, one of the major shareholders in EWH through its parent company. M+W therefore pleads that the BISL contract was not entered into at arm’s length and puts EWH to proof that it mitigated its loss by properly carrying out a competitive tender and obtaining the best available price: Annex 4 to the Defence, para. 30(ii). By its closing submissions, M+W submits that the claims “cannot survive” the evidence of Mr Hodgen that EWH replaced Engie as the O&M contractor by contracting with a related company for an additional £14 million without any procurement process.

Mr Burgess explains that Engie underestimated the cost and complexity of the O&M services required under their contract with EWH, and that the contactor effectively took advantage of the opportunity offered by the missed longstop date to escape unattractive commercial terms. The parties entered into commercial negotiations recognising that any new contract was always going to be more expensive once it had been appreciated that the original O&M agreement had under-priced staffing and risk. The new O&M contract would also not be able to benefit from the terms of the EPC contract that had then been terminated.

EWH then decided to take the O&M contract “in house” by engaging BISL. In doing so, EWH acknowledges the conflict of interest. Mr Burgess explains that such conflict was managed by the directors appointed by Bioenergy leaving all decisions about the BISL contract to the other members of the board. In any event, the BISL contract was in large measure placed on terms that had been negotiated with Engie but upon which Engie was ultimately not willing to contract. Mr Burgess adds that the open issues in the aborted negotiation with Engie were resolved in EWH’s favour.

None of this evidence was challenged and I accept it as accurate. Instead, M+W focused its firepower on establishing from EWH’s forensic accounting expert, Mr Hodgen, the fact of the relationship between Bioenergy and BISL; that there had been no procurement process; and that it is reasonable to assume that Bioenergy will have benefitted from any profits made by BISL. None of these propositions were ever in dispute between the parties.

In my judgment, M+W’s argument risks inviting the court to reverse the burden of proof. It is for M+W to plead and prove the alleged failure to mitigate EWH’s losses. A failure to conduct a proper procurement exercise or the award of a replacement contract other than at arm’s length might readily lead to an inference that the claimant failed to mitigate its losses, but the evidence before the court is that EWH essentially contracted with BISL on terms that can be benchmarked against the Engie negotiations. There is simply no evidence before the court that EWH overpaid. Accordingly, I reject the argument that EWH failed to mitigate its losses.

M+W argues that these claims are subject to the Delay Damages Cap: Annex 4, para. 30(iii). For the reasons already explained, the Delay Damages Cap did not apply post-termination of the EPC contract and I reject M+W’s argument that these claims are excluded by such cap.

M+W pleads that the claim for O&M costs is too remote in that it arose out of “a particular contractual arrangement with Engie which was unusual and which M+W had no reason to know about”. Alternatively, relying on clause 45.1, it argues that it is an excluded claim for consequential indirect losses: Annex 4, para. 31.

In response, EWH points out that the EPC contract expressly recorded that M+W had been provided with a copy of the Engie contract. Further, EWH relies on clause 45.1A, which provides:

“The Purchaser and Contractor agree that any losses, expenses or other liabilities of the Purchaser in respect of … the O&M Contract arising from a breach of the Contractor’s obligations provided elsewhere under this Contract are direct losses.”

M+W argues that clause 45.1A only applies to losses in respect of the O&M contract with Engie and not any other O&M contract that EWH might enter into. Such submission misses the point that these claims for additional O&M costs:

I therefore conclude that these claims are caught by clause 45.1A and that such costs are recoverable as direct losses.

There is no dispute between the experts as to the calculations of these losses. Accordingly, and subject to the further issue of causation, I would have awarded the pleaded sum of £4,189,085.98 in respect of the additional costs of the BISL contract until 31 March 2021 and the sum of £14,031,648 in respect of the additional costs of the BISL contract over the first ten years of operation.

Subject to the issue of causation, I would have awarded £19,170,125.89 under this head:

The remaining termination claims can be taken more quickly. In a number of instances, M+W again relies on the Delay Damages Cap. I have already rejected that argument in respect of post-termination losses at paragraphs 319-320 above and do not repeat that analysis. In some instances, M+W relies on the argument that the costs are not costs of completion as allowed by clause 44.6. Again, I have rejected that argument at paragraphs 391-393. Otherwise, M+W simply puts EWH to proof of its losses but has not challenged the evidence called in support of these heads of claim. In those circumstances, I award in each case the sums agreed by the experts subject only to the proviso that no award will exceed the pleaded sums.

By paragraph 14.8.1.5 of Schedule 14 to the EPC contract, M+W was required to pay for major consumables, comprising lime, urea, powdered activated carbon, sand and gas oil, used prior to Take Over. The clause excluded the cost of the lime, powder activated carbon, urea and sand at times when steam was being directed to the turbine resulting in power export and revenue for EWH. The forensic accountants have agreed EWH’s claim for the additional cost of major consumables in the pleaded sum of £4,924,884.62 and I award damages in that sum.

By clause 14.8.1.6 of Schedule 14 to the EPC contract, M+W was required to pay for minor consumables which included, but were not limited to, boiler water chemicals, water treatment plant chemicals, red diesel, lubricants and bottled gases. I award the sum agreed by the experts of £20,117.21.

The cost of technical support during the delayed period to Take Over is agreed on a figures-as-figures basis in at least the pleaded sums, and I award £1,895,578.25 under this head:

The EPC contract required M+W to provide certain spare and wear parts. It is not disputed that M+W had not provided all such parts at the date of termination. EWH claims and I award the sum of £1,387,108.43 as agreed by the quantum experts on a figures-as-figures basis.

By paragraph 14.8.1.2 of Schedule 14 to the EPC contract, M+W was required to pay for the cost of electricity prior to Take Over. The forensic accountants have agreed EWH’s claim for the additional cost of electricity in a sum in excess of the pleaded sum of £1,409,098.57. Again, limiting EWH to its pleaded claim, I award that sum.

By paragraph 14.8.1.7 of Schedule 14 to the EPC contract, M+W was required to pay for the cost of water prior to Take Over. The forensic accountants have agreed EWH’s claim for the additional cost of electricity in the sum of £168,090.02 and I award that sum.

EWH claims the cost of construction insurance cover between the date of termination and 31 March 2021 in the sum of £1,209,814.06. I award these costs as claimed.

M+W was responsible for the cost of site security. The experts have agreed the security costs incurred with Rock Security Solutions prior to the engagement of BISL as the replacement O&M contractor in the sum of £662,673.95, and I award that sum.

It was necessary for EWH to lease land on Dalton Street that was adjacent to the plant during the construction works. The experts have agreed the additional costs incurred between termination and 31 March 2021 in the sum of £144,706.32, and I award that sum.

In addition, there were sums outstanding at termination. M+W simply puts EWH to proof but the experts have agreed the outstanding liability for consumables in the sum of £2,195,848.27 and for electricity in the sum of £290,542.32. I award those sums.

By Appendix 4 to the Particulars of Claim, EWH sought damages of around £12 million in respect of thirty-three different defects. Seven claims are significant in value and represent the vast majority of the pleaded claim:

M+W’s core obligations were set out at clauses 3.1, 3.1A, 3.2 and 3.4 of the EPC contract:

“3.1

In consideration of payment by the Purchaser, the Contractor shall regularly and diligently carry out and complete the Works in accordance with the Contract and ensure that the Plant as constructed and completed shall comply with the Contract, including (without limitation) meeting any performance specifications set out the Specification and/or the Schedules and/or the Contractor’s Proposals.

3.1A The Contractor shall be responsible for the design of the whole of the Plant. Any design provided by or on behalf of the Purchaser (whether contained in a Contract Document or provided in a Variation Order or otherwise) shall be verified by the Contractor.

3.2

All work carried out by the Contractor shall be carried out with sound workmanship and materials, safely and in accordance with good engineering practice and Legislation and shall be to the reasonable satisfaction of the Project Manager.

3.4

Without derogation from any other provision, and as a separate and independent obligation, the Contractor shall design the Works and every part of the Works:

(a)

using all the skill and care reasonably to be expected of duly qualified and experienced designers undertaking the design of works similar in scope, size, complexity and character to the Works or such part of the Works; and

(b)

in accordance with Good Industry Practice.”

I have already commented upon the importance of statements of case defining and confining the issues before the court. Those observations are particularly apposite to EWH’s defects case. Mr Williamson is right to submit that a defects claim should be straightforward to plead but yet the defects claim is in part pleaded in vague and general terms.

Although predominantly in an industrial setting, the plant is in close proximity to some houses and commercial properties. The plant is designed to operate continuously 24 hours a day 7 days a week. That said, deliveries can only take place between 07:00-19:00 and the front loaders and shredders can operate an additional hour until 20:00. EWH alleges that the noise levels both on and off site failed to comply with contractual obligations, the planning consent, Environmental Permit and relevant legislation and industry standards.

EWH started to receive complaints about off-site noise pollution in April 2018. Complaints variously described the noise as a constant background droning noise, like a large kettle boiling, or an aircraft taking off. By a letter dated 21 August 2019, the Environment Agency formally notified EWH that it was minded to suspend the Environmental Permit because it had identified that the noise emissions were causing “serious pollution” outside the site. It specifically identified two discrete sources of off-site noise, being the Air-Cooled Condensers and the stack. The Agency advised:

“We consider that continuing to operate the ACCs and the Stack without appropriate noise mitigation measures to prevent, or where that is not practicable, to minimise noise risks causing further serious pollution in the form of noise to nearby sensitive receptors.”

EWH was given seven days to satisfy the Environment Agency that it could identify and implement appropriate measures to prevent or minimise the noise in order to remove the risk of serious pollution.

EWH immediately instructed Fichtner and Black & Veatch to inspect the plant and report. They identified no fewer than eight items of plant that required mitigation and recommended both short-term and long-term solutions.

The Environment Agency issued compliance assessment reports on 9 and 18 October, 7 November and 18 December 2019 identifying issues with a “prominent howl noise”; a “continuously present and very prominent whine noise” such as to cause “a significant effect on human senses”; a noise like a “jet engine”; and a “whooshing noise.” On 20 December 2019, the Environment Agency again issued a formal warning of its intention to suspend the permit. It regarded the short-term measures proposed to prevent or minimise noise pollution to be inadequate. Officers particularly noted “a roar, akin to a jet engine sound that was present continuously at a level likely to have a significant impact on sensitive receptors, suspected to be emanating from the stack.” This time, a month was given to satisfy the agency as to the remedial plan.

EWH engaged acoustic consultants and submitted revised addenda to its noise management plan in both January and March 2020. Further short-term and long-term mitigation measures were proposed. A further compliance assessment report on 16 April 2020 advised a breach of permit in that “jet engine” noises had been recorded during a site visit in March. This was assessed as a category 2 impact, namely:

“Noise abnormal and prolonged enough to cause significant effect on human senses. This includes mild noise that occurs so frequently as to cause a greater degree of disturbance than would otherwise be expected.

•

The noise would be disturbing or annoying by way of volume, duration, or characteristics.

•

Abnormal means that the noise that is significantly louder or more intrusive and offensive than the normal operational noise climate, affecting people either inside or outside noise sensitive premises.”

A further compliance assessment report on 27 April 2020 notified a breach by reason of a “high flying jet engine type noise.” The report stated that measurements in Cornwall Street had found that the rating level of the noise was +13dB above the background level.

By Appendix 4 to the Particulars of Claim, EWH pleaded four allegations. The first three allegations were pleaded as breaches of clauses 3.1, 3.4 and 7.1, paragraphs 1.2 and 2.4.3 of Schedule 22A and/or paragraph 24.3.6(9) of Schedule 22B of the EPC contract. The particulars were that:

“i)

… the noise levels at the plant and/or at the relevant NSR locations failed to comply with the requirements prescribed by the Planning Consent, the Environmental Permit application, the Environmental Permit and/or all relevant legislation and industry standards;

(ii)

… the noise levels at the plant and/or at the relevant NSR locations do not enable EWH to obtain the necessary approvals and/or to operate the plant in accordance with the Planning Consent, the Environmental Permit application, the Environmental Permit and/or all relevant legislation and industry standards;

(iii)

… M+W has failed to provide all the silencers, acoustic equipment, louvers and/or other systems necessary to ensure that the design and operation of the plant comply with the Planning Consent, the Environmental Permit application, the Environmental Permit and/or all relevant legislation and industry standards.”

Further, there was a general allegation:

“(iv)

Generally, the level of noise emitted from the plant, its instrumentation, equipment and/or components fails to comply with all the relevant contractual requirements as set out above or otherwise.”

In addition to core obligations at clauses 3.1, 3.1A, 3.2 and 3.4, EWH relies on clause 7.1 of the EPC contract:

“The Contractor shall ensure that on completion, the Plant, as proposed to be operated (as stated in or to be deduced from the Contract) complies with:

The Take Over procedures were at Schedule 15 to the EPC contract. Test 14 upon Take Over was defined, at section 15.3.2 as “demonstration of noise levels as defined in section 15.3.2.1 and 15.3.2.2 below.” Section 15.3.2.1 provided:

“For noise sources that are not located inside a building (outdoor noise sources):

(1)

the Contractor shall demonstrate compliance with the sound pressure levels listed in Schedule 15 Appendix A; and

(2)

the Contractor shall design and build the Plant in accordance with the drawing appended at Schedule 15 Appendix A.

For noise sources that are located inside a building (indoor noise sources):

(1)

the Contractor shall demonstrate compliance with the sound pressure levels listed in Schedule 15 Appendix B;

(2)

the Contractor shall not be allowed to increase the number of indoor noise sources by more than 10% compared to the number of indoor noise sources listed in Schedule 15 Appendix B. Additional indoor noise sources shall have a guaranteed maximum sound pressure level of 85 dBA or less; and

(3)

in any case, the Contractor shall keep the Project Manager informed of any change in location and number of indoor noise sources.

Moreover, the Contractor shall demonstrate compliance with the sound pressure levels listed in Table 15.2 below.”

Measurement of noise levels was to be carried out in accordance with the provisions at section 15.3.2.2.

The following provisions of Schedule 22A are also relevant:

“1.2

The Plant shall comply in all respects with all the latest … relevant legislation including but not limited to:

•

the Environmental Permit and the associated conditions;

•

the Planning Consent; …

•

Control of Noise at Work Regulations 2005 …

2.4.3

Noise

The Contractor shall demonstrate that the noise limits set out in Schedule 15 have been fully complied with.”

Paragraph 24.3.6(9) of Schedule 22B required M+W to provide “all necessary silencer, acoustic equipment, louver and other systems necessary to ensure that the Plant meets the action levels in the European Directive on Noise and that the Plant is compliant with the limits set out in the Planning Consent.”

Condition 30 of the Planning Consent provided:

“The development hereby approved shall be carried out and operated in accordance with Parsons Brinckerhoff report dated July 2015 or as subsequently amended and approved ...”

Paragraph 3.4.1 of the Environmental Permit provided:

“Emissions from the activities shall be free from noise and vibration at levels likely to cause pollution outside the site, as perceived by an authorised officer of the Environment Agency, unless the operator has used appropriate measures, including, but not limited to, those specified in any approved noise and vibration management plan to prevent or where that is not practicable to minimise the noise and vibration.”

As already noted, upon Take Over M+W was required to comply with the absolute limits in sound pressure levels specified in Appendices A (external plant) and B (indoor plant). While not undertaken for this purpose, work done by Sol Acoustics shows that a significant number of items of plant failed to comply with these limits: