My principal judgment in this case was handed down on 20 December 2022 and can be found at [2022] EWHC 3275 (TCC), (2022) 206 ConLR 40. It ran to some 856 paragraphs and resolved the major issues in this litigation. In this second judgment I deal with the outstanding matters in issue between the main contractor, MW High Tech Projects UK Limited (“M+W”), and the gasifier subcontractor, Outotec (USA) Inc. (“Outotec”).

For the reasons explained below, I make the following further findings in the third-party proceedings:

On 16 December 2022, EWH, M+W and M+W’s parent company (M+W Group GmbH) entered into a settlement agreement by which the M+W companies agreed to make a payment in full and final settlement of EWH’s claims. On behalf of Outotec, Adrian Williamson KC and Paul Bury contend that this settlement has “utterly changed the landscape.” They submit that the proper legal analysis is that M+W cannot now recover any sums upon its contribution claim and cannot rely upon the defence of abatement unless it can prove that the settlement was reasonable; the settlement included specific sums attributable to Outotec’s breaches of contract; and those specific sums are themselves reasonable. They contend that M+W ought to have pleaded an amendment to reframe its case on the basis of the settlement but has failed to do so. Having failed to plead or prove that any ascertainable and reasonable part of the settlement sum was attributable to Outotec’s breaches of contract, it is submitted that the contribution claim and the defence of abatement must now fail.

Jonathan Acton Davis KC and William Webb KC, who appear for M+W, reject this analysis. They contend that the true effect of the Civil Liability (Contribution) Act 1978 following the settlement of EWH’s claims against M+W is as follows:

Further, they contend that settlement has no impact on the issue of abatement which is not a freestanding claim but a defence to the price of goods and services.

There is a line of authorities that where a main contractor settles an employer’s claim, he can seek to recover a contribution from a subcontractor not by first proving his own liability to the employer but by proving:

There is a statutory basis for no longer requiring the main contractor to prove its own liability to the employer. Section 1(4) of the Civil Liability (Contribution) Act 1978 provides:

It is, however, important to understand that this line of authorities does not obviate the need for the main contractor to prove the subcontractor’s breach of contract: see Fletcher & Stewart Ltd v. Peter Jay & Partners (1976) 17 B.L.R. 38.

In the leading case of Biggin, the claimant settled an arbitration arising out of the supply of defective roofing materials. It then sought to recover the settlement sum in an action against the supplier. At first instance, Devlin J, as he then was, found that the settlement sum was irrelevant to the issue of quantum and dismissed the claim holding that the claimant was required to prove its actual loss, being its actual liability to the customer. Somervell LJ, as he then was, disagreed. At page 361 he explained:

Singleton LJ added, at page 325:

And at page 326:

In essence, the Court of Appeal in Biggin recognised that it may be proportionate not to require a main contractor who has settled the employer’s claim to provide strict proof of its liability to the employer but only the reasonableness of its settlement. Conversely, in my judgment, once a case has been pleaded and tried on the basis that such proof was required, it is not proportionate to require the matter to be reopened and proved on a different basis because of a post-trial settlement. While not essential to my decision, I venture the view that the rationale for the rule in Biggin does not in any event prevent a main contractor from eschewing the shortcut of seeking to prove the reasonableness of the settlement and instead seeking simply to prove its liability to the employer and then in turn its claim for contribution. To reframe Brett J’s question, upon the court concluding that the £1,000 settlement was excessive, why should the plaintiffs in his case not recover the lesser sum of £110 that was the true value of Hicks’ claim?

M+W does not plead or argue its case on the basis of the settlement. Indeed, it could not have done so since the settlement took place long after trial and only shortly before my first judgment was handed down. I reject Outotec’s submission that the claim for contribution must fail because M+W has not pleaded or sought to prove loss caused by its reasonable settlement of specific heads of claim. At trial, it was essential for EWH to prove M+W’s liability for breaches of the main contract and the loss that flowed from such breaches; and then for M+W in turn to prove Outotec’s liability for breach of the subcontract. The case having been tried on this basis, then - whatever the position might be where there is a pre-trial settlement - it is not appropriate now to reopen matters and require M+W to prove its contribution claim on the basis of the reasonableness of the post-trial settlement.

The position in respect of abatement is more straightforward. Abatement has nothing to do with the main proceedings but is a true defence to Outotec’s claim for the outstanding price under the subcontract.

Even where a contribution claim is not pursued on the basis of a settlement, I accept that it might be capped by the terms of the settlement in the event that the main contractor successfully mitigated its loss by settling the employer’s claim at a discount. The burden of pleading and proving that the main contractor’s loss was successfully mitigated and therefore the quantum of the avoided loss would, however, be on the subcontractor: Thai Airways International Public Co. Ltd v. KI Holdings Co. Ltd [2015] EWHC 1250 (Comm), [2016] 1 All E.R. (Comm) 675, Leggatt J as he then was, at [83]-[92]. Outotec has not taken up that challenge.

By Appendix 4 to the Particulars of Claim, EWH sought damages of around £12 million in respect of thirty-three different defects. In my principal judgment, I dealt with the seven claims (defects 28, 23, 17, 26, 9, 32 and 24) with an individual pleaded value in excess of £500,000. It is, however, necessary briefly to revisit defect 17.

Thereafter, and following M+W’s concession in its closing submissions in respect of defect 16, it is only now necessary to consider the following nine defect claims:

Following the settlement of the main proceedings it now suits M+W for the court to find that EWH’s remaining defect claims are made out and then to order that Outotec pay a contribution in respect of such liability or that M+W is entitled to abate its outstanding liability for the price of the subcontract works. Fortunately, however, I have the benefit of the evidence and argument presented at trial when M+W’s interests were best served by seeking to defend EWH’s claims.

At paragraph 611 of my principal judgment, I said:

Upon seeing my draft judgment, EWH lodged written submissions seeking to justify an award of an additional £307,646:

Having correctly submitted at trial that EWH’s pleaded claim bore very little relationship to the remedial works and that the quantum was “incomprehensible”, M+W’s interests are of course now better served by a finding attributing real value to defect 17. With some reticence, it now simply adopts and puts forward EWH’s submissions. I reject those submissions and conclude that EWH only succeeded in establishing M+W’s liability in the sum of £1,423.86.

At paragraphs 742-749 of my principal judgment, I have already dismissed the contribution claim in respect of the claims pleaded at (i) and (ii) of defect 17. Since these were the only claims on which EWH proved some loss, it follows that M+W’s contribution claim is dismissed.

By Appendix 4 to the Particulars of Claim, EWH pleaded that M+W was in breach of paragraph 4.6.4 of Schedule 22D of the EPC contract in that:

In fact, the first three allegations fell away since at trial EWH did not seek to pursue a case on the basis that stairs should have been specified and installed at various locations. Rather, EWH limited its case to its complaint that a number of ladders were defective.

The pleaded claim at Appendix 4 to the Re-Amended Particulars of Claim pursues damages in respect of a substantial number of ladders:

I reject EWH’s reliance on the 2016 editions of the British Standards which were introduced after the date of the contract:

In his first witness statement, Matthew Poole explained that Fichtner carried out an inspection of the ladders in March 2020. In a table at paragraph 338 of his statement, Mr Poole set out the detailed findings and recommended remedial work in respect of thirty-four ladders. His evidence was not challenged. Further, while the parties each called expert evidence in respect of the alleged defects, this did not challenge the findings in the inspection report:

Dr Edgar identified six different categories of defect:

By its closing submissions, M+W accepted that proof of any of these six matters would amount to a defect and a breach of the EPC contract. Accordingly, the only issue on liability in the main proceedings is whether EWH has established the presence of one or more of these defects. As to that, I accept the accuracy of Fichtner’s findings. Further, it is common ground between the parties’ technical experts that the ladders were defective in that they failed to comply with:

The quantum experts have not assessed the remedial costs on a ladder-by-ladder basis. Instead, they have approached the valuation exercise in two ways:

The per-defect approach was proposed by Simon Richards, M+W’s technical expert who reviewed the number of defects in respect of each ladder helpfully stripping out matters that would only be a breach of the subsequent 2016 British Standard. Dr Edgar agreed in cross-examination that some of the defects, such as the failure to paint the top rungs of the swing gates, were pretty trivial while others were more significant. While not instructed to consider quantum, Dr Edgar commented on Mr Richards’ approach of valuing defect 7 on a per-defect basis. He said that the approach had the advantage of simplicity but that it would not give an accurate assessment of quantum since the remedial cost for defects would vary significantly. He therefore advised that homogenising the cost of each of the different defects would not lead to an accurate assessment.

Outotec’s quantum expert, Andrew Drennan, rejected both approaches. He reported that without full substantiation of the actual and forecast costs for each ladder, it was not possible to value the claim for defect 7. He rejected any valuation that purported to allocate costs on a pro-rata basis.

Both EWH and M+W’s approaches relied on extrapolation of the remedial costs already incurred. Neither is perfect but I do not consider that it is appropriate simply to give up because quantification of EWH’s undoubted loss is difficult. Dr Edgar is right to criticise Mr Richards’ suggested approach as homogenising the remedial costs at the defects level. I agree, however, with M+W’s submissions and Mr Gordon’s oral evidence that such approach at least has the advantage that it is more granular and sophisticated than homogenising the remedial costs at the ladder level regardless of the number of defects in each ladder.

I would therefore have awarded EWH damages calculated on the basis of a pro-rata assessment of the defects which, upon Mr Richards’ analysis of the defects, would have led to a total liability of £125,253.14 comprising £44,559.99 in respect of past remedial costs and £80,693.15 in respect of future costs.

M+W seeks a contribution from Outotec in respect of ladders 1-2, 10-16 and 26 in Appendix 4 in the sum of £102,109.35. Notification is conceded.

At Annex A to its closing submissions, EWH helpfully drew together the expert evidence on the issue of defects in respect of the individual ladders. Focusing just on those ladders in respect of which M+W seeks a contribution:

The contribution is sought in respect of EWH’s pleaded claim which ascribed a total value of £76,955.55 to the claims for these eight ladders:

These ladders represent 29% of the EWH’s total pleaded claim for future remedial costs. Since EWH would only have recovered £80,693.15 for all future costs, I consider that the maximum appropriate contribution would be £23,401.01, being 29% of such sum.

In its closing submissions, M+W accepts that some of the alleged defects did not fall within the scope of Outotec’s supply and that therefore it cannot recover a full contribution. Specifically, it is conceded that painting was not within the scope of Outotec’s works. That is a factor in respect of seven of the eight ladders. Dr Edgar confirmed, however, that it was an example of a relatively trivial cost.

Doing the best that I can upon the material before me, I therefore conclude that it would be just and equitable to order Outotec to pay a contribution of £20,000 in respect of defect 7.

This defect relates to damage to the baghouse filter bags and cages in compartments 3 and 5 in the baghouse. It was first identified in November 2019 after an extended shutdown caused by termination of the EPC contract. The bags in the affected compartments were sitting in the Air Pollution Control Residues (“APCR”) that sit at the bottom of the baghouse. Dr Edgar considered six different causes of this defect:

These causes mostly arose from failures in respect of the installation, maintenance or operation of the plant. Such causes were variously the responsibility of M+W, EWH or Black & Veatch. The only cause for which Outotec might be responsible is the level detectors. That said, Dr Edgar considered that the principal reason why the bags in compartments 3 and 5 failed was because the bottoms of these bags were left submerged in APCR and suffered alkali corrosion. I accept that evidence. Indeed, I consider that the fact that this defect only affected the bags that were submerged in APCR is significant.

M+W asserts that Outotec was in breach of its obligation under paragraph 3.2.1 of Appendix B of the subcontract in that the boiler operating campaign life was less than 7,500 hours of operation “within normal operating parameters” and without requiring a shutdown for manual cleaning. For the reasons explained at paragraphs 567-575 of my principal judgment, such breach is not established. The case is, however, also put on the basis of Outotec’s alleged failure to carry out a competent design and supply sound materials. In my judgment, that allegation is made out.

The contribution claim is, however, dismissed:

It is common ground that a section of the refractory lining failed in September 2019. EWH alleges that such failure was caused by M+W’s poor installation and workmanship. Assuming for present purposes that such claim is made out, I would in any event dismiss the contribution claim:

Paragraph 2.14 of Schedule 22C to the EPC contract provided:

There is substantial common ground in respect of defect 10:

The principal issues are therefore to determine how many non-compliant motors were installed and which of these motors were critical.

I reject M+W’s argument that EWH failed to mitigate its losses by failing to require M+W’s subcontractors to replace non-compliant motors. EWH’s contract was with M+W and it is not explained why it was unreasonable to seek to hold M+W to its contract or alternatively how doing so has caused any additional loss.

Again, it is of course only now necessary to consider in further detail the claims in respect of motors for which a contribution is claimed.

Paragraph 2.12.4(P) of Appendix A to the Outotec subcontract specification was at least as demanding, and in some respects more demanding, than the EPC contract. Thus, I accept that insofar as M+W was liable to EWH for motors supplied by Outotec, Outotec was itself in breach of the subcontract.

M+W claims a contribution of £3,491.62, comprising:

M+W provided a useful table together with its closing submissions that pulled together Fichtner’s evidence as to defects, Andrew Ashenhurst’s evidence as to criticality, and Wendy Crispin’s evidence as to whether a particular motor was supplied by Outotec. Subject to notification, I consider that the contribution claim is made out in the sum now claimed of £3,491.62. It fails, however, for want of notification:

Although other provisions were relied upon at trial, this defect was pleaded as a breach of paragraph 6.2.8(11) of Schedule 22B to the EPC contract which required M+W to provide “furnace inspection equipment, including doors for inspection in the upper part of the gasifier/furnace chamber and between the convection passes.” EWH contends that M+W failed to provide adequate furnace inspection equipment in the upper part of the chamber and specifically that it did not provide doors allowing access for inspection of the gasifier.

It is common ground that M+W was in breach of contract in failing to provide access doors as required by paragraph 6.2.8(11). While EWH did not specifically plead a failure to provide appropriate rope access nozzles, I accept that such allegation is encompassed by the overarching complaint of inadequate furnace inspection equipment. Mr Linwood sought to suggest that the one-inch rope nozzles provided were adequate. I prefer, however, the evidence of Dr Edgar and Mr Richards that the nozzles were inadequate for safe rope access and that M+W was accordingly in further breach of the EPC contract.

The experts have agreed the quantum of defect 3 in the sum of £27,481.46. I would, however, have limited the award in favour of EWH to the slightly lower pleaded sum of £27,447.29.

Again, I reject M+W’s argument that EWH failed to mitigate its losses by not requiring M+W’s subcontractor to remedy these defects.

Outotec concedes that access doors should have been provided. In view of my finding in respect of the rope nozzles, I consider that Outotec was again in breach of the subcontract.

Subject to notification, I consider that it would be just and equitable to order a contribution in the full sum of £27,447.29.

By its Further Information provided on 3 April 2020, M+W pleaded that notice of this defect (albeit it was in error described as defect 2) was given by Mr Meakin’s letter dated 19 November 2018. Outotec challenges that such letter was received and there is simply no evidence to the contrary. Indeed, the only witness to refer to the letter is Luca Carlassara of Fichtner and he does not appear to have known of the letter contemporaneously. The contribution claim therefore fails for want of notification.

This defect can be taken shortly:

EWH alleges that, in breach of paragraph 6.4.7 of Schedule 22B to the EPC contract and the overarching design duty at clause 3.4, M+W failed adequately to design the boiler screen hopper and multicyclones which form part of the boiler ash extraction system. In consequence, boiler ash was not removed and these parts became blocked. I reject EWH’s alternative argument that it can establish liability on the basis that defect 33 is a symptom of the wider issue of slagging in view of my conclusions at paragraphs 533-587 in my principal judgment.

M+W’s own expert, Simon Richards, reported that M+W had breached its design obligations because it failed to provide the boiler screen hopper with the insulation required to prevent condensation and the rodding points that would allow the easy removal of blockages. Further, he concluded that the hopper design failed to anticipate that fly ash would or could solidify.

In addition, all three technical experts (Dr Edgar, Mr Richards and Mr Linwood) agreed that the design of the multiclones had resulted in blockages and that the primary issue was the gas-flow rate which was too low and allowed ash to settle on or adhere to the surface of the multiclones and thereby cause blockages.

In my judgment, EWH has established M+W’s liability for defect 33. While the experts agreed quantum in a slightly larger sum, I would, but for the settlement of the main proceedings, have awarded EWH damages in the pleaded sum of £20,145.61.

For these reasons, I consider that Outotec was in breach of its own obligations under paragraph 1.3.4.8 of Schedule 1 to the subcontract. Subject to notification, I would therefore have ordered Outotec to pay a contribution in that sum. I have, however, already dismissed the contribution claim for want of notification at paragraph 726 of my principal judgment.

EWH alleges that the design of the hydrated lime dosing system was defective in that the dosing could not be adequately controlled. The problem appears to have arisen from blockages in the balance line between the volumetric feeders and the scrubber. M+W admits that the design was defective in that there was no means to isolate the feeder hoppers and control the flow of hydrated lime. As between EWH and M+W, quantum was agreed in the sum of £11,700. Such sum represented the cost of installing new knife gate valves to isolate the hoppers.

In fact, the suggested valve has never been installed and EWH has instead undertaken works to modify the balance line pipework by introducing a swept bend. Dr Edgar reports that these modifications appear to have been successful and that accordingly there is no need to install an isolation valve or carry out any further works.

I dismiss the claim for contribution:

This defect, which is said to be worth only a little over £1,000, can be taken shortly:

Outotec seeks the cost of investigating a revised ash discharge system. This was not a variation as defined by clause 16.1 of the subcontract, namely:

Rather this is a claim for work done with a view to a potential variation. Clause 16.3 provided:

Claims for variations requested by the Contract Manager are valued pursuant to the machinery under clause 18: see clause 16.2. Payment can also be claimed for potential variations but such claims are subject to a different contractual regime. Clause 16.7 provided:

Clause 19 makes prompt notification of Outotec’s intention to make such a claim a condition precedent of M+W’s liability:

Notice pursuant to clause 19.1 is simply of an intention to claim additional payment. Outotec was then required, by clause 19.2, to submit its detailed claim for payment “as soon as possible thereafter.”

Outotec relies on an instruction in respect of the potential variation at meetings in or around July and August 2016. Wendy Crispin explains the work that was done between mid-July and 29 September 2016. She does not assert that any notice of intention to claim payment was given but says that Outotec sent a Project Change Order to M+W on 2 October 2016 asserting a claim for $10,023.30 in respect of the engineering, administrative and project management time that had already been spent on the proposed variation.

M+W deny contemporaneous receipt of the Project Change Order. Curiously, it withdrew paragraph 101 of Matthew Crawley’s first statement but not paragraph 77 of his second statement. His unchallenged evidence was therefore that the Project Change Order was not in fact uploaded to the shared portal until 24 April 2017. This evidence is supported by two matters:

I therefore find on the balance of probabilities that the Project Change Order was sent to M+W in April 2017 and that there was no contemporaneous notification of an intention to claim for this proposed variation. Even if it had been sent in October 2016, I would not in any event consider that document to be the early notice of an intention to make a claim required by clause 19.1. Rather it was an ex post facto claim for payment of the kind envisaged by clause 19.2. In my judgment, the purpose of the contractual scheme is that warned of an intention to claim for speculative work done on a potential variation, M+W should be given the opportunity to ask Outotec to desist from carrying out such work.

Accordingly, I dismiss the claim for variation 3.

Outotec seeks the cost of assisting with the Access, Lifting and Maintenance Study. By a Variation Order dated 6 March 2018, Outotec asserted that M+W requested its assistance with the study by emails dated 9, 14 & 21 February and 1 March 2018. It then relied on an email chain between Outotec, M+W and FBW Engineering Services Limited:

Mr Morén sent the so-called Variation Order to FBW on 6 March. His covering email added:

Since this exchange had been copied to M+W, Robert Lettice picked this up. He and Tim Lakeman correctly characterised the order as a request for the issue of a variation. It was plainly so on the face of Mr Morén’s email.

Clause 16.1 of the subcontract is clear:

There is no plea or evidence that M+W directly instructed the variation now claimed. Further, there is no evidence that FBW purported to instruct Outotec to carry out further work in response to Mr Morén’s email of 6 March. Even if it had, there is no plea or evidence that FBW was authorised to instruct a variation or that M+W is estopped by some representation from denying FBW’s apparent or ostensible authority.

In the alternative, Outotec claims payment for the additional work undertaken pursuant to clause 19. That machinery is, however, expressly limited to claims for additional payments not arising out of a variation. Further, as discussed above, any claim under clause 19 is subject to a condition precedent that Outotec must first give prompt notice of its intention to claim payment. While the email and attachment of 6 March 2018 certainly gave notice that Outotec would expect to be paid for any work done in supporting FBW’s work on the Access, Lifting and Maintenance study in the event that its Variation Order was signed and returned, it wasn’t.

Accordingly, the claim for variation 29 is dismissed.

Outotec seeks the cost of assisting M+W with the assessment under the Dangerous Substances and Explosive Atmosphere Regulations 2002 (“DSEAR”).

This claim is also dismissed:

Outotec seeks the cost of assisting M+W with additional meetings and in locating documentation.

As a general proposition, I accept M+W’s argument that assisting a main contractor with documentation in respect of subcontract works is an inherent part of a subcontractor’s responsibilities. That said, the unchallenged evidence of Carol Kemp makes clear that this usual process became far more onerous and time-consuming for the subcontractor because of M+W’s disorganisation and lack of familiarity with the agreed procedures for document control. The problem, however, with this claim is clause 21.6 of the subcontract which provides:

Given the breadth of this provision, I consider that the claim for this variation must fail:

Outotec seeks the cost of additional site advisory work between April 2018 and 7 February 2019. Its pleaded case relies on the following matters:

Variation 32 is claimed in respect of mid-week overtime while variation 34 is claimed in respect of weekend working.

Paragraph 1.1 of the subcontract specification provides:

Paragraph 1.2 identifies the scope of works. Such provision includes:

Further, paragraph 1.3 identifies the scope of services and includes:

Outotec was therefore contractually required to provide all necessary on- and off-site advice and support. There was no contractual limit on the number of hours that were to be provided or upon the working hours that were required.

I accept M+W’s submission that without some agreed baseline, it is difficult to establish that any resource required by the main contractor was extra-contractual. It is not enough simply to point to requests for additional support or overtime or weekend working. Such requests might be properly characterised as extra contractual if Outotec could first prove the appropriate contractual baseline, but equally they might be seen simply as a request that it was now necessary for Outotec to provide further resource to meet its existing contractual commitment.

Outotec responds that M+W has failed to call any evidence on these variations. The burden is, however, on Outotec to establish a separate contractual entitlement to these variations on the basis that M+W instructed additional work. Mr Morén simply asserts in his evidence that the claim was for advisory personnel and commissioning resources “over and above those that [Outotec] had included within the subcontract.” Whatever Outotec’s own internal calculations as to the likely level of support upon which it priced this contract, that does not of itself prove that the advice and support required by M+W was outwith the contract.

In my judgment, Outotec has not discharged that burden and these variation claims therefore fail. Again, the separate claim under clause 19 is hopeless since this was either additional work (in which case it was a variation and cannot be claimed under clause 19) or work that was in any event required under the subcontract (in which case there can be no claim for additional payment).

I have already addressed the law of abatement at paragraphs 807-822 of my principal judgment. For the reasons then explained, M+W is entitled to abate the outstanding purchase price due under the subcontract by reference to the defects in Outotec’s works. At paragraph 822 of my judgment, I invited the parties to address me further on how the defence of abatement would operate in practice in this case.

Mr Acton Davis KC and Mr Webb KC submit that there was no market for the Outotec plant; there being relatively few projects of this nature in the world at any given time and the plant being manufactured specifically for this particular project to Outotec’s own proprietary design. In the absence of any market, they submit that the defective plant would inevitably be resolved by remedial work such that the reduction in value of the plant can only sensibly be assessed by reference to the remedial costs. Such approach is, they submit, supported by Multiplex Constructions (UK) Ltd v. Cleveland Bridge UK Ltd [2006] EWHC 1341 (TCC), (2006) 107 ConLR 1, in which Jackson J, as he then was, confirmed that the cost of cure can, in an appropriate case, be used in isolation to determine the diminution in value.

Mr Williamson KC and Mr Bury submit that M+W has failed properly to plead its abatement defence and that it is now too late to claim that there is no market value such that its right to abate should be assessed on the basis of the cost of cure. Relying on Jackson J’s further observations in Multiplex at [653], they submit that M+W would have to plead expressly the diminution in value caused by the various breaches of the subcontract. By way of example, they point to the fact that the award that would have been made in respect of defect 28 had it been notified includes the costs of identifying defects. A similar claim was, they submit, rejected by Jackson J at [659] as not being a claim for abatement.

Mr Acton Davis KC and Mr Webb KC respond that it is too late now for Outotec to complain that abatement is not adequately pleaded.

It is right that Outotec only took two contractual points at paragraph 19A of its Defence and Counterclaim when it argued that any right to abate had been assigned or was in any event excluded by clause 45.2 of the subcontract. I rejected both arguments in my principal judgment. Following my earlier judgment, the issue is not whether M+W is entitled to rely on the defence of abatement but how such defence operates in this case. I specifically sought help with that issue since the case appeared to be argued on the assumption that the remedial costs for each defect should quantify the extent of the abatement without any further analysis of the true diminution in value of this plant. That is the point with which I am now concerned. It is not really a pleading point but a question of proof upon which M+W bears the burden. Outotec argued the point pithily right from paragraph 71 of its opening submissions at trial:

In Multiplex, Jackson J said, at [652]:

I accept Outotec’s submissions that the true measure of abatement is the diminution in value of the subcontract plant. Equally, M+W is right to contend that such diminution in value can sometimes be ascertained by considering the cost of remedial works.

I accept that it might be difficult to identify a market for the subcontract plant in this case for the reasons advanced by M+W. While there might be few similar projects, the plant is not, however, unique and indeed there was evidence before the court of a number of other broadly contemporaneous projects just in the UK. It is for M+W to prove its defence of abatement and I cannot, without evidence on the point, determine on the balance of probabilities that the task is impossible and that, as a matter of generality, the difference in value of the defective subcontract plant is necessarily greater than the claimed remedial costs.

The defence of abatement therefore fails, with one exception, by reason of the lack of evidence before the court as to the diminution in value of the subcontract plant. The exception is defect 28. In my judgment, the diminution in value of the plant by reason of Outotec’s breaches of its obligations to ensure compliance with:

Not only were these bespoke items that had been manufactured to M+W’s order and installed at the Hull plant but, without modification, they could not be operated within the limits of the contract or permit. Unless these and other noise pollution issues were resolved there was a real risk that the plant might lose its permit and be required to cease operations. While what was deemed too noisy for safe operation in Hull might conceivably be acceptable in a more remote location, I am on the balance of probabilities satisfied that the defence of abatement in respect of defect 28 should be assessed on the basis of the remedial costs.

Further, I reject Outotec’s analogy with the general costs of Sandberg in identifying defects in Multiplex. Costs properly incurred in investigating the noise issue and designing an appropriate remedial plan are properly included in the costs of cure. The defence of abatement therefore succeeds in the sum of £377,492.16.

A short further point arises because of the fact that the milestones are claimed in US dollars while the abatement claims are in pounds sterling. In my judgment, the proper analysis is that where Outotec’s claim for payment of a particular milestone has been abated then the sum to be awarded in respect of that milestone is reduced at the point such milestone fell due for payment. Accordingly, it is necessary to convert the abatement into US dollars at the time of the abatement in order to identify the outstanding US dollar liability in respect of that and other milestones.

Since the abatement in respect of the defect 28 breaches of the subcontract arises in respect of the plant covered by milestones 7.1-7.6, I conclude that the value of the abatement should be converted to US dollars at the exchange rate applicable on 11 May 2017, namely £1:US$1.29472. The value of the abatement is therefore $488,746.65.

Outotec seeks enhanced interest upon the outstanding milestones and variations pursuant to clause 41.8 of the subcontract. The sub-clause provides:

It is common ground that there was no relevant pay-less notice under clause 41.7 and no certification or notification of a liability to make a payment under clause 41.4. Outotec therefore relies on the catch-all provision that M+W did not make payment “under any other provision of the subcontract by the Final Date for Payment.”

These interest provisions are therefore dependent upon there being a Final Date for Payment. Such term is defined at clause 41.5:

Accordingly, there is a Final Date for Payment in any case where there has been certification and notification of a liability to make a payment under clause 41.4. Where there has first been certification and notification of a liability under clause 41.4 and then a pay-less notice under clause 41.7 then there is again a Final Date for Payment as defined by clause 41.5. There is, however, some tension between the definition of Final Date for Payment and the references to clause 41.6 and any other residual liability for payment in clause 41.8.

Clause 41.6 provides:

This is problematic since both the payment due date and the Final Date for Payment are defined in clause 41.5 by reference to a case where there has been notification of a liability under clause 41.4. The true meaning is, however, clear:

It is more difficult to make sense of the application of clause 41.8 to other residual liabilities for payment such as for variations given that the Final Date for Payment is defined by clauses 1.1 and 41.5 in terms that makes the term only applicable to claims for instalments under clause 41. While the issue is academic since the variation claims have been dismissed, I venture the tentative view that, upon a proper construction of the subcontract, enhanced interest cannot be claimed upon variations. Such construction does not deprive the residual category of all meaning since it would be apt to cover cases caught by clause 41.11, which provides:

Accordingly, enhanced interest is payable under clause 41.8 upon:

Outotec submits that, even where enhanced interest is not payable under clause 41.8, the court should award interest pursuant to s.35A of the Senior Courts Act 1981 at the same level as the parties have agreed in the subcontract. Such submission has only to be stated to be rejected. In such eventuality, enhanced interest will not be payable under the contract precisely because the case is outwith the narrow circumstances in which the parties have agreed the payment of such interest.