The Hon. Mr Justice Ramsey:
- These proceedings concern liability for a fire which occurred on 27 June 2004 during the course of the construction of a recycling facility to dispose of domestic waste in Leicester. The fire broke out in part of the plant known as the Ball Mill.
- On 2 May 2003, Biffa Leicester Limited ("Biffa Leicester") entered into a PFI contract with Leicester City Council ("LCC") for the collection, recycling and disposal of Leicester's domestic waste ("the PFI Contract"). The PFI contract necessitated the construction of the recycling plant which was located at Bursom ("the Plant"). A key part of the Plant was the Ball Mill. The Ball Mill is, in essence, a large rotating drum which contains steel balls with a total weight of some 50 tonnes.
- The operation of those balls is intended to break down the waste into smaller material which can then be separated. Organic material is used for anaerobic digestion and composting at a plant at Wanlip which generates electricity from methane. Paper and plastics are used as a fuel for cement kilns, such fuel being known as "floc". Inert material is disposed of in landfill.
- A feature of the combined plant at Bursom and Wanlip was that, in accordance with statutory regimes, it enabled the amount of landfill to be reduced and allowed electricity to be produced which came from a renewable resource. This meant that financial benefits would accrue from the operation of the Plant in the form of statutory incentives.
- Also on 2 May 2003, the land at Bursom together with buildings and structures constructed upon it was demised by LCC to Biffa Leicester for a term of 25 years.
- As often happens in PFI contracts, Biffa Leicester entered into a back-to-back contract on 2 May 2003 ("the Works Agreement") with an associated company Biffa Waste Services Limited ("Biffa Waste"), by which Biffa Waste effectively undertook to Biffa Leicester to discharge Biffa Leicester's obligations in respect of the construction of the plant.
- Biffa Waste then engaged a German company, Maschinenfabrik Ernst Hese GMBH ("MEH"), to design and build the relevant plant under a contract known as the "Design and Build Deed", also dated 2 May 2003. It contemplated that MEH would sub-contract the supply of the Ball Mill to a Swedish company, Outokumpu Wenmec AB ("OT"). MEH also entered into a warranty dated 2 May 2003 in favour of Biffa Leicester ("the Direct Agreement").
- MEH, in turn, sub-contracted the work to the Fourth Party, an associated company, Hese Umwelt GMBH ("HU"). On about 12 June 2003, HU entered into a contract with OT to design, supply and install the Ball Mill at the recycling plant.
- The Ball Mill first ran in March 2004. On 2 April 2004 a Certificate of Practical Completion was issued by Biffa Waste to MEH relating to both Bursom and Wanlip. The Ball Mill was then ready for commissioning tests. Early tests indicated that modifications had to be made to the Ball Mill to increase throughput. These modifications included work to the fixing arrangements to the grates in the Ball Mill by replacing lifter bars with clamping bars.
- After some of the modifications had been carried out, further works ("The Welding and Grinding Works") were necessary to repair and protect fastening bolts to clamping bars to the grate. This work was performed by personnel from the Third Party ("Pickfords") on 26 and 27 June 2004. During the course of a tea break on 27 June 2004 a fire broke out, causing substantial damage to the Ball Mill and to other parts of the recycling plant at Bursom.
- Biffa Waste and Biffa Leicester who, as appropriate, I shall refer to as "Biffa", bring these proceedings against MEH and OT to recover losses suffered as a result of the delay to the operation of the plant caused by the fire. The reinstatement costs have been recovered from an insurance policy taken out by LCC under the PFI Contract and which covered the loss. The Third Party has taken no part in the proceedings. The Fourth Party has admitted liability to indemnify MEH in respect of any liability to Biffa. It is understood that the Third and Fourth Parties are insolvent.
- By a Claim Form and Particulars of Claim dated 8 August 2006, Biffa commenced these proceedings against MEH as the First Defendant and OT as the Second Defendant. Defences were served in October 2006 and Replies in January 2007. Amended Particulars of Claim, an Amended Defence of the First Defendant, a Re-Amended Defence of the Second Defendant and a Re-Amended Reply to the Defence of the Second Defendant have been served.
- MEH issued Additional Claims against OT, HU and Pickfords.
- The hearing was originally ordered to deal with all issues of liability and quantum. It became apparent that the scope of the expert issues would need further time and that it was not possible for it to be prepared prior to the hearing. In addition, there were certain issues in relation to quantum which could be dealt with in advance of determining the whole of the quantum case. As a result, the issues dealt with at the hearing covered liability and certain quantum issues.
- The issues as finally formulated are set out in Appendix 1 to this judgment.
- Before dealing with the specific issues, it is convenient to consider some general matters.
- The main factual evidence at the hearing concerned the events leading up to the fire and the involvement of various people in those events. The evidence is contained in documents and witness statements and, in the case of witnesses called to give evidence, in the oral evidence which I heard.
- In terms of oral evidence, Biffa called Mr Ray Nattrass who was employed as project manager by Biffa Waste for the project. He is a chartered mechanical engineer and oversaw the construction and completion of the work at both Bursom and Wanlip. Biffa then called Mr Michael Davis who had been the general manager of Biffa Leicester since May 2003 and before that was business development manager for Biffa Waste and first became involved in the PFI project in 2000. He is a qualified surveyor. Neither Mr Nattrass nor Mr Davis were present on the site at the time of the fire nor had they any direct involvement in the events of that weekend.
- MEH then called three witnesses. First they called Mr Manfred Brix. He has worked for various companies within the Hese Group since 1992. For this project he was employed to act as the "Richtmeister" or Senior Supervisor for HU. He was permanently on site to oversee the construction of the Plant. The second witness called on behalf of MEH was Mr Bernhard Grosse-Erwig who was the project engineer for HU responsible for the Plant. He carried out the general design of the Plant and co-ordinated the activities of the sub-contractors who carried out the work. The third witness called was Mr Gisbert Groeble who was directly involved on behalf of HU in the design and specification of the Ball Mill. He was therefore involved in discussions with OT. In terms of the MEH witnesses, Mr Brix was present on site on 27 June 2004 and was involved in the operations being carried out in the Ball Mill on that day. Mr Groeble was not on site but was involved in discussions with OT concerning the work which was being carried out on 27 June 2004.
- Mr Tommy Nygren was called on behalf of OT. He is an engineer and was employed by OT to co-ordinate project operations. He was involved in discussions with Hese from 2002 for the supply of the Ball Mill at the Plant. He made arrangements for erectors from Millteam Sweden AB ("Millteam") to carry out the work of erecting the Ball Mill. He was not present on site but made arrangements for Pickfords to supply materials, plant and welders for the weekend of 26/27 June 2004. He also contacted Millteam and arranged for Mr Peter Isaksson and Mr Mikel Ek to travel to the site for the weekend of 26/27 June 2004.
- Generally I formed the impression that the witnesses gave evidence of what had happened in 2004 to the best of their recollection. There were elements of the evidence where certain witnesses put a gloss on what they had previously said or what had happened in June 2004 which I did not find convincing. In particular, this applied the evidence of Mr Brix where he tried to minimise his involvement in the events of 27 June 2004 and the evidence of Mr Nygren when he was explaining the role performed by OT on the weekend of 26/27 June 2004 and the involvement of OT with Millteam and Pickfords in the supervision and execution of the work being carried out on that weekend. In making my findings of fact I have therefore had to assess to what extent the evidence of such matters could be relied upon.
- Where the witnesses were called then, obviously, I could assess the witness and the weight to be given to their evidence. However, OT also submitted witness statements from Mr Isaksson and Mr Ek which were signed as being true. Neither Mr Isaksson nor Mr Ek were called to give evidence. I did not have a full explanation of the position. They are not employed by OT and one of them has left Millteam with whom OT obviously had some possible influence. A Civil Evidence Act notice was served and they are both located outside the jurisdiction of this court.
- Biffa submits that I should draw an adverse inference from the absence of Mr Isaksson and Mr Ek. I was referred to the principles set out in the judgment of Brooke LJ in Wisniewski v. Central Manchester Health Authority  PIQR P324, a judgment with which the other members of the court agreed.
- At P340 Brooke LJ said:
"From this line of authority I derive the following principles in the context of the present case:
(1) In certain circumstances a court may be entitled to draw adverse inferences from the absence or silence of a witness who might be expected to have material evidence to give on an issue in an action.
(2) If a court is willing to draw such inferences, they may go to strengthen the evidence adduced on that issue by the other party or to weaken the evidence, if any, adduced by the party who might reasonably have been expected to call the witness.
(3) There must, however, have been some evidence, however weak, adduced by the former on the matter in question before the court is entitled to draw the desired inference: in other words, there must be a case to answer on that issue.
(4) If the reason for the witness's absence or silence satisfies the court, then no such adverse inference may be drawn. If, on the other hand, there is some credible explanation given, even if it is not wholly satisfactory, the potentially detrimental effect of his/her absence or silence may be reduced or nullified."
- Biffa submits that I should draw the inference that had Mr Isaksson and Mr Ek been called as witnesses their evidence would have been adverse to OT's case. This is a case where I have had some explanation for the absence of Mr Isaksson and Mr Ek although it is not wholly satisfactory. Despite this I consider, in all the circumstances, that I should treat the absence of Mr Isaksson and Mr Ek as going to the weight that I can attach to their statements and, in particular, as going to the weight that I can attach to those statements as support for other evidence. I do not consider it appropriate to draw an adverse inference.
- In addition, there were statements made in manuscript by the Pickfords' personnel. These were produced in the days after the fire and sent to Mr Chris Jones at Pickfords. They are not in the form of witness statements and none of the Pickfords' personnel have been called as witnesses. As appears below, the statements are contradicted by the CCTV camera evidence of what happened at the Plant on 27 June 2004. Regrettably, I have come to the conclusion that in important respects these statements are unreliable.
Background to the Fire
The Modifications to the Lifters
- During warm commissioning of the plant at Bursom it became apparent that the Ball Mill was not achieving the required throughput of material. At a meeting between HU and OT in Gelsenkirchen, Germany on 27 April 2004 modifications were agreed in an attempt to increase the throughput. These modifications included modifications to alter the "lifters" on the grates.
- These lifters or lifter bars acted both as bars to lift material in the operation of the Ball Mill and also as fastening devices for the grate. The proposal was to change them so that they no longer protruded by 135 mm from the face of the grate but instead were made flush with the face of the grate. They became known as clamping bars.
- On 30 April 2004 Mr Nygren of OT sent Mr Groeble of HU an email attaching two drawings of the new lifter bars which showed the proposal for the existing bars to be removed and new clamping bars to be substituted. The new clamping bars were to be recessed into a rebate in the face of the gate. The bolts which had fixed the existing lifter bars protruded some 70 to 90 mm above the face of the grate and the drawing showed that these bolt heads were to be cut-off. The bolts were then to be welded to the underside of the clamping bar. Later on 30 April 2004 Mr Nygren also sent an email attaching an alternative design.
- On 30 April 2004 Mr Nygren also contacted Mr Colin Shore of Pickfords asking whether he could supply the clamping bars shown on the drawing.
- On 3 May 2004 Mr Groeble of HU said that he accepted Mr Nygren's original proposal of 30 April 2004, rather than the alternative and in his email to Mr Nygren of OT said: "As you are aware, the responsibility of this rebuilding stays in your hand because you are the ball mill experts and suppliers."
- Mr Groeble then prepared a document with the title "Method Statement for works inside of the Ball Mill" dated 3 May 2004 which set out the scope of the works, contained a Risk Assessment for works inside the Ball Mill and also had a section referring to a "Briefing Confirmation".
- On 4 May 2004 Mr Chris Jones of Pickfords sent Mr Nygren prices for carrying out the supply of the clamping bars and for machining the grates in Pickfords' machining shops. He added "who will be paying for the engineers over the next two weekend periods?"
- Mr Nygren responded to Mr Jones on 5 May 2004 to say: "Regarding engineers we [intend] to send men from Sweden but in case we need additional man power we allow us to turn to you and are ready to pay in such a case".
- On 5 May 2004 Mr Nygren also wrote to Mr Groeble enclosing revised drawings and stating:
"This is to confirm that we are prepared to do the rebuilding of the mill discharge grate according to the discussions at Gelsenkirchen April 27th and information exchanged up to now.
Pickford Vangard has confirmed possibility to manufacture lifter plates and has also confirmed discussions with Hese and is prepared to do the machining of the grates during coming weekends. Kristian is prepared to go to Leicester and additional men are coming from Sweden. If even more men are necessary we will use the men Pickford has prepared for this job."
- When the grates were being dismantled and machined between 7 and 9 May 2004 cracks and defects were discovered in the grate sections. Mr Groeble wrote to Mr Nygren several times. On 28 May 2004 Mr Nygren responded.
"We have noticed what has happened with the grate plate on the grate in the mill in Leicester.
A set of plates made in Hardox will be manufactured urgently most probably by Pickford in England. Attached drawing is sent to Pickfords to get their opinion and possibilities of an urgent manufacturing.
We are talking to Swedish manufacturer in case Pickford will have problem."
Modifications to the bolts on the clamping bars
- The necessary changes to the clamping bar arrangements were, it seems, carried out in May 2004. On 1 June 2004 Mr. Groeble wrote to Mr Nygren and reported concerns about the fixing of the bolts to the clamping bars. He said this:
"Fixing bolt of the grate: We are afraid that the present solution is not sufficient. We think that the wearing of the fixing bolts caused by the balls during running the mill is that high, that the surface of the bolts will become worn very soon. Due to that the screw connection will loosen and will cause much more trouble.
From our point of view there are some possibilities to solve this problem. E.g to create a hard facing on top of the bolts, or to countersink the bolts in some way."
- On 18 June 2004 Mr Groeble wrote to Mr Nygren listing concerns about the removal of the tool container which OT had on site. He said:
"But the most serious thing in connection with the tool container are the screws of the grate which come loose in very short time. It can not be acceptable that our staff has to retighten the screws after every day (and for this work they are using the tools which are in the container). So you have to find a solution for this big, time-consuming problem! "
- Over the weekend of 19/20 June 2004 it seems that some welding was carried out as a repair to the bolt heads on the clamping bar. It would appear that this was carried out by Pickfords at the request of HU.
- There were various concerns about the Ball Mill and this led to a meeting being held between representatives of OT and HU as Gelsenkirchen on Monday 21 June 2004. Under item 2 of the Protocol document produced after that meeting, the following was noted under Further Actions:
"Screws for fastening the grate come loose constantly.
A new bolt protection for example in the form of a "square washer" (executed as a "hat") will be manufactured and welded on top of the bolt from the inside of the mill. Attention, suitable weld rods and welding machines (400V) are required. This washers will be made out of Hardox. Outokumpu will probably order the washers and the welding from Pickfords Vanguard and will send in addition to that a supervisor to Bursom site. At the same time the nuts will be changed into loc-nuts.
New Grate Segments
The five new grates segments are on the way to Leicester and will be changed against the cracked ones at the same time.
All works to be carried out in agreement with Manni Brix."
- The action for that item was noted as being carried out by OT and it was stated "work to be carried out at the weekend starting 3 July 2004". However a note was added "Please check if it will be possible to start this step one week earlier, 26th, 27th, 28th, June 2004 perhaps with a Member of Metso, Rugby.
- On 23 June 2004 Mr Nygren sent a fax to Colin Shore at Pickfords saying:
"We need before end of this week 84 plates/washers according to item 3 on drawing 11805314 Rev 2. Design of plates can be discussed.
Please advise soonest your possibility to provide help"
- The drawing attached to that fax showed a square "washer" with a round hole in the centre which was to be welded over the bolt heads on the clamping bar.
- By 23 June 2004 the repair carried out on 19/20 June 2004 was reported to be ineffective. Mr Groeble wrote to Mr. Nygren on that day to say:
"As you have been informed already by phone, the repair welding of the fastening screws at the inside of the mill shows such great wearing already after one production day, that we are afraid that more screws will become loose and cause big damages at the bearing of the mill. Manni Brix [of HU] said, that from his point of view he has to stop the mill latest on Friday because of the damage risk! You see, the situation is very serious and needs to be solved at once! It is unconditionally necessary to realise the repair of this defect as soon as possible, latest of the complete grate without any more disturbances. For the repair it is also necessary that you send one or two men for supervising and performing the necessary tasks."
- Mr Groeble then continued to press for action. In an email on 24 June 2004 he said:
"Again some more screws became loose and it looks like there has been no repair during the last weekend, every welding seam is worn out again! Now at that situation it is urgently unconditionally necessary to have a responsible person from your company at site this weekend to decide what to do and to supervise the actions! Our men at site can't continue their work, because they are busy with the mill."
- On 25 June 2004 Mr Groeble informed Mr Nygren:
"and again the plant came to some standstills due to loose screws at the grate. Yesterday three screws were loose, this morning two and later again three. You see, we have to interrupt the production regularly just to retighten the screws. I do hope that after this "repair" weekend this problem is solved."
- In the meantime on 24 June 2004 Mr Nygren received an e-mail from Robert Preston at Pickfords. He quoted for the following:
"To manufacture 84 washer plates from Hardox steel 110 mm square complete with 60 mm holes our cost is £12.00 each giving total of £1008.00
To provide 2x welding sets (hired) complete with 100 metres cabling with 6x boxes welding rods including delivery and collection is
|Welders £240.00 each set
|Cabling £12.00 each set
|Rods £72.00 per box (manganese cobalt all positional)
|Delivery and collection
To provide 2x welders over weekend Sat 26th+Sun 27th our cost £960.00."
- Mr Preston asked for acceptance by fax and on 24 June 2004 Mr Nygren copied and pasted the email into another document which he then faxed to Pickfords. He said "this fax is to confirm that costs are accepted by us". As appears below, this formed the relevant contract between OT and Pickfords in relation to Pickfords involvement in work to the Ball Mill for OT over the weekend of 26/27 June 2004.
- On the e-mail from Mr Preston, Mr Nygren made a manuscript note making reference to Mr Ek and Mr Isaksson who were also contacted on that day. They worked for Millteam who had an agreement with OT under which they provided labour and equipment to erect and install equipment supplied by OT. They had previously supplied labour and equipment to erect the Ball Mill at Bursom. Mr Nygren made arrangements for Mr Ek and Mr Isaksson to attend site on that weekend.
The Events of 26/27 June 2004
Saturday 26 June 2004
- Mr Isaksson says in his note made after the fire that at about 7.30 a.m. on Saturday 26 June 2004 he and Mr Ek "entered the mill to inspect what was the problem and what to do. Earlier made weldings should be ground around bolts at the discharge end and be replaced by new weldings and reinforcement washer." He said that Pickfords were assigned to perform the work and that the responsible person at factory was Mr. Brix of HU. He stated that all the personnel seemed to be aware of what they were doing and had the situation under control and that they had carried out welding in the mill earlier.
- Mr Isaksson says that he "questioned if they were aware of the danger of fire and informed that watering should be made properly and to have fire-extinguisher and hose available. These were also available and the information was that watering is made carefully." He says that neither he nor Mr Ek performed any hot work in the Ball Mill or nearby during 26 June.
- In his witness statement Mr Isaksson says that he and Mr Ek arrived at site on the morning of Saturday 26 June and went to meet Mr Brix who, he says, was in charge and supervising the works as he had been when Mr Isaksson was previously on site. He says that Pickfords were already working at the site. He says that Pickfords were working inside the Ball Mill, putting steel washers around the existing bolts using welding equipment. There were two men inside the ball mill, one welding and one grinding. There was another Pickfords' employee passing tools to them. In addition there may have been two other men from Pickfords, making five in total.
- He says that what Pickfords were doing seemed to be "ok" but "we had not been asked to supervise what they were doing." He says he had, however, been asked before he left Sweden to check if they had the right welding tools and check if their welding was "ok". He says that he and Mr Ek suggested to Mr Brix that instead of the Hardox washers that were being used Pickfords should use washers made of Bofors steel. He states that he and Mr Ek inspected a hatch which needed repair as Pickfords were not working on this part of the Ball Mill but did not find the right tools to complete this repair. He says that there was not much for them to do on the Saturday nor on the Sunday when they returned to the site.
- Mr Ek in his note made soon after the fire states that on Saturday 26 June the day started with inspection of the weldings done on the day before. He says that everything looked "OK". He says that he could see that the water hose and fire extinguisher were in place. He says that because Pickfords had two men inside the Ball Mill, they decided to look at the inspection hatch because the fastening bolt had broken quite often. He says that he spent time searching for material to modify the fastening on the hatch. He adds that he also helped the men from Pickfords to find tools that they needed for dismounting the nuts on lifter bolts. He obtained these tools from OT's container outside the building. He says that when Pickfords stopped working for the day, he and Mr Isaksson went inside and checked their work.
- In his witness statement Mr Ek says that on arrival they met Mr Brix who was in charge at the site. He then repeats much of what is in his contemporary note. In particular he mentions seeing that Pickfords had a water hose and fire extinguisher in place near to where they were working inside the mill. He also says that when Pickfords stopped working he and Mr Isaksson went inside the Ball Mill and checked what they had been doing. Their work looked "OK".
- Mr Askwith, the Pickfords foreman, in his manuscript statement states that on Saturday, before starting work in the Ball Mill, he obtained the necessary Hot Work Permit from Mr Brix. He says that they proposed to start the work as instructed by Mr Brix and the representative of OT under their supervision. He adds that prior to starting the works on the Ball Mill it had to be cleared of debris.
- Mr Gary Deehan of Pickfords in his manuscript statement says that he arrived at site and the first job was to assist one of HU's staff in "clearing inside the Ball Mill of all combustible material to our ability". He says that after this had been done Mr Brix came down and inspected the Ball Mill. He states that he asked Mr Brix if it was definitely safe to weld inside and said "yes it was" because two members of OT's staff had previously welded inside on the same plates and there had been no problems. He says that Mr Brix then instructed them to bring up two fire extinguishers one powder and the other water and they also brought a hose pipe from below and dampened down inside the Ball Mill, making everything wet. He says that Mr Brix and the two members of OT's staff were supervising the work inside. He says that Mr Brix was always supervising throughout the day, until 4 pm. He says that they were then instructed to stop grinding and welding, to restore the electrical appliances and to wet the inside of the ball mill watching for fires until the end of the work shift at 5:00pm.
- Mr Brix says at para.10 of his witness statement that Pickfords were specifically required by Millteam to first check the old welding of the bolts inside the Ball Mill and grind them clean and were then required to fix the newly manufactured ring washers ("hats") to the top of the heads of the bolts to protect them from wearing. He says that Mr Ek and Mr Isaksson from Millteam were present from the morning of Saturday 26 June 2004 until they left the site towards the end of the following week, to oversee the grinding and welding works for the duration of the repair.
- Mr Brix refers to Mr Askwith being issued with a hot work permit on the Saturday although he cannot find a copy. He also says that the "Briefing Confirmation" on the final page of Mr Groeble's method statement of 3 May 2004 was completed by Mr Askwith, in his presence, prior to the commencement of grinding and welding work. Mr Brix also says that he does not recall assisting the Pickfords welders with the clearing out of the debris inside the Ball Mill on the Saturday.
Sunday 27 June 2004
- Mr Isaksson says in his note that he and Mr Ek arrived at site at about 7:30am on the Sunday and entered the mill to inspect the progress of work. He says that there was no sign of heat nor smoke. He says that he and Mr Ek worked on the discharge side outside the Ball Mill. He refers to the fact that he and Mr Ek took a coffee break sometime between 9:30-9:45am and that Pickfords were still inside the Ball Mill. He says that between 10.15 – 10:20am he walked to the OT container to get some more coffee and when he returned he saw the personnel from Pickfords. His written statement is to the same effect.
- Mr Ek in his note says that on the Sunday he helped Pickford with tools and to take away a safety cover on the discharge end which was in the way for nut dismounting. He says that at around 10:00am he and Mr Isaksson went out for a cup of coffee and after 10 to 20 minutes somebody saw smoke coming out from the ventilation.
- Mr Askwith says in his manuscript statement that on Sunday 27 June he obtained a new Hot Work Permit and set up the area as on the Saturday 26 June before commencing work. He states that whilst working in the Ball Mill only two men could work at one time with another man stood behind them with the hose. He says that at 10:00am they stopped for break time and that "When we left the Ball Mill area the whole area was hosed down and one man was left in the area as a precaution." He says that at about 10:25am from the canteen they noticed smoke at the far side of the building.
- Mr Gary Deehan says in his manuscript statement that he arrived at site on the Sunday at 7:20am. He says that Mr Brix inspected the Ball Mill and instructed that it was safe to commence grinding and welding and issued Pickfords with a hot work permit. He states that everything was the same as Saturday: fire extinguishers were on the platform, a fire hose and fire watchman was stationed at the entrance to the Ball Mill. After wetting down inside the ball mill, he and others carried out our grinding and welding duties. Elliot Ibbotson was the fire watchman with the hose. He says that Mr Brix and OT were supervising the work. At 9:45am all grinding and welding work was stopped and the entire area was wetted down and inspected before the men went for a tea break at 10:00am. Elliot Ibbotson who was the fire watchman inside the Ball Mill was asked to stop outside the Ball Mill on the platform and prepare work for after tea break. He says that at 10:20am he finished his break and made his way back to the Ball Mill and saw smoke coming out.
- Mr Tom Deehan of Pickfords says in his manuscript note that on Sunday he started work at 8:00am inside the Ball Mill after receiving instructions from Mr Brix to continue grinding existing welds alongside other members of staff who were doing the welding. At 9:20am he says that he had finished grinding. He states that after the fire watchman and he had finished damping down with a hosepipe he left the Ball Mill. After preparing other work he says he had a tea at 10:00am. When the break was over he says he left the cabin at 10:20am and saw white smoke coming out of the Plant.
- In his manuscript note Mr Elliott Ibbotson of Pickfords says that on the Sunday he helped the welders from 8:00am. He states that the Ball Mill was cleared of waste and damped down before the work proceeded. He says that he then fire watched with a hosepipe, water and powder extinguisher until around 9:50am when the welders stopped work and the area was then damped down again before the welders went for break at about 10:00am. He says that he was left bringing the steel plates from the grating up to the steps of the Ball Mill preparing for the welders' return. He states that at approximately 10:25am Gary Deehan returned from his break saying that there was a fire in the Ball Mill. He then inspected inside the Ball Mill and tackled the fire for about 10 minutes.
- Mr Brix says in his witness statement that he remembers being at the Ball Mill when the Pickfords' employees arrived and he recalls that soon after arriving on site, John Askwith commenced the wetting down process inside the Ball Mill ready for the welding works to take place. He says that although he was there to meet the Pickfords team when they arrived and to carry out his own checks around the Ball Mill prior to any works starting, he did not consider that he was a supervisor of Pickfords. He says that the only reason that he was there to meet Pickfords was to ensure they arrived and to give them the Hot Work Permit. He says that once he had done this and had made sure that they had everything they needed, he returned to his office, away from the Ball Mill, leaving the Millteam/OT personnel to supervise the welding operation. He states that as the Millteam employees were present, it was neither necessary nor practical to maintain a watch over the Pickfords' employees as they did the welding and grinding work.
- The CCTV photographs tell a markedly different story to that in the manuscript statements of the Pickfords' personnel. At 9:30am to 9:32am flashes are seen from inside the Ball Mill on the CCTV camera which is in the inlet feeder chute into the Ball Mill. There is obviously welding and/or grinding work being carried out in the Ball Mill. Mr Ibbotson is seen to enter the chute at 9:36am and then comes and goes until 9:57am when he leaves the chute. There is evidence that wetting down was carried out in a short period between 9:56:20am and 9:56:47am but welding continues thereafter. At 10:00am two men, Mr Askwith and Mr Gary Deehan, can be seen leaving the Ball Mill.
- The CCTV then shows no further activity in the inlet chute until the fire breaks out at about 10:23am. Mr Ibbotson does not return to the Ball Mill, nor do Mr Askwith or Mr Gary Deehan, until after the fire has started.
The Grinding and Welding Works
- In relation to the Grinding and Welding Works, I have come to the following conclusions based on the evidence:
(1) OT designed the "top hat" washer solution to overcome failures in the design or workmanship of the clamping bar arrangements which they had designed and installed in early May 2004.
(2) The "top hat" washer solution required welding to be carried out in the Ball Mill at a stage when that piece of machinery was being commissioned and therefore had combustible waste present in it.
(3) OT carried out the installation of the "top hat" washer solution by:
(a) Obtaining the manufacture of the washers from Pickfords;
(b) Hiring particular pieces of welding equipment from Pickfords;
(c) Hiring two welders from Pickfords to work on two days;
(d) Hiring two plant erectors from Millteam.
(4) OT carried out the design and installation of the "top hat" washer solution as part of their obligations under the contract between OT and HU.
- I consider that HU carried out the management of the site by issuing the method statement produced by Mr Groeble and the Hot Work permits completed by Mr Brix. Mr Brix was also involved in removing combustible materials from the Ball Mill and making initial checks of the precautions taken by Pickfords at the Ball Mill.
- The Millteam supervisors, Mr Isaksson and Mr Ek, carried out a more general supervisory role than their recent statements suggest. It is evident that Mr Isaksson and Mr Ek were involved in ensuring that the work being carried out resolved the problem. Mr Isaksson's first task after arriving at site was to enter the Ball Mill to inspect what the problem was and what to do about it. They were also there to ensure that Pickfords' personnel received tools from OT's container and Mr Ek refers to helping Pickfords find the necessary tools. Both Mr Isaksson and Mr Ek refer to checking fire precautions. Mr Isaksson questioned the Pickfords' personnel to see that they were aware of the damage of fire and he informed them that watering should be carried out properly and that a fire extinguisher and hose should be available. Mr Ek said that on his inspection he could see that the water hose and fire extinguisher were in place.
- Mr Nygren of OT in his evidence sought to limit the scope of supervision provided by Millteam. He described them as a supervisor from a technical point of view but not from a safety point of view. However, Mr Nygren accepted that, as set out in paragraph 16 of his witness statement, OT had provided a container at site in which OT kept a health and safety regulation manual, including a method statement, risk assessment, COSHH assessment and safety data sheets both in English and Swedish. He says that he had referred Millteam to these details on many occasions. He also accepted that Mr Isaksson would have had authority to say to Mr Askwith that Mr Askwith should not work in a dangerous way and he would have expected Mr Askwith to comply with it. I do not consider his evidence in re-examination detracted from these answers, as I have said. I was not impressed with the distinction which Mr Nygren tried to draw in relation to supervision. Nor was I impressed with the distinction Mr Nygren sought to draw as to instructions which he expected Millteam to give Pickfords. He said that he would not expect Millteam to give instructions as to how to do the job but rather to give instructions if Pickfords did not weld in a proper way or if they used the wrong type of electrodes. I do not consider that there is any practical distinction to be drawn between those two types of instruction.
- Some emphasis has been placed on Mr Nygren's apparent surprise when he heard that Pickfords were already carrying out work when Mr Isaksson and Mr Ek arrived on site. In his evidence Mr Nygren said that he did not know who told Pickfords what to do. However, as can be seen from the drawings the work to the "top hat" washer was indicated on the drawings produced by OT.
- Pickfords' personnel considered that they were supervised by Mr Brix and the "OT supervisors", the latter being a reference to Millteam. I take into account the fact that the statements by Pickfords' personnel are not truthful in relation to the events leading up to the fire and that it was evidently in their interests to try to shift responsibility onto others. However they mention the involvement of Mr Brix and the "OT Supervisors" in relation to events on Saturday and this is consistent with the evidence of Mr Brix and the contemporaneous reports of Millteam. Mr Jones of Pickfords in his report, made before the statements had been taken from the Pickford employees, said that when the fire started Pickfords were being supervised by Manfred Brix (who issued the permit to work) and the two OT engineers.
- Pickfords' personnel were aware of the risks that fire would be caused by their welding/grinding work if they did not take proper precautions in the form of adequately protecting combustible material, properly wetting down the area and maintaining a proper fire watch.
The cause of the fire.
- Both Biffa and MEH engaged experts to assist the court in deciding on the cause of the fire. Mr David Bailey of Dr JH Burgoyne and Partners LLP was instructed on behalf of the Claimants and Mr David Tucker was instructed on behalf of MEH.
- The experts have issued three joint statements in which they have reached complete agreement. As a result, it was not necessary for them to be called but their conclusions were that:
(1) The fire was caused by the activity of Pickfords;
(2) The most probable ignition source was welding/grinding sparks;
(3) Combustible waste material is considered the most likely item first ignited and it most probably was material on the trommel grate side of the grating.
- These conclusions are not challenged and I find that they are entirely consistent with the evidence I have heard. I therefore accept that the fire was caused by the welding or grinding activities of Pickfords which ignited waste combustible waste material on the trommel side of the grating.
- The experts consider that there were a number of failings which caused or contributed to the fire.
- First, they criticise the method statements produced by Mr Groeble of HU on 3 May 2004. It was, of course, prepared not for the work being carried out on 26 June 2004 but for the work carried out in May 2004 to replace the lifter bars with clamping bars. The experts point out that the method statement does not define "the work area" which they consider should have included the trommel side of the grating; it does not make clear whether monitoring should be continuous and what actions were to be taken in the event of fire; it proposes an impracticable solution of keeping the area free of combustible materials and whilst there are instructions as to wetting down, there are no instructions specifically relating to the presence of combustible materials on the trommel side of the grating.
- Secondly, they criticise the Hot Work Permit issued by Mr Brix of HU dated 27 June 2004 regarding the removal of combustible materials, the definition of the works area and how monitoring would be undertaken. They also point to a monitoring period of 15 minutes following the completion of hot work which is contrary to the 1 hour in the method statement. In the "precautions" which Mr Brix signed to confirm that he had checked for hazards, the experts say that Mr Brix appears to have failed to appreciate the hazard posed by the presence of combustible materials on the trommel side of the grating.
- Thirdly, they consider that it was the direct responsibility of Mr Askwith, as Pickfords' foreman, to ensure that a continuous watch was kept and he failed to do so. In addition they would have expected Mr Askwith to have been alert to the issue of material on the trommel side of the grating.
- They consider that had the trommel side of the grating been wetted down and had regular inspections been made of the trommel side of the grating, any smouldering would have been discovered at an early stage and readily extinguished. The fire would not have started.
- I consider that the failures of the various personnel which amounted to a lack of skill and care and which caused or materially contributed to the fire were as follows:
(1) The method statement prepared by Mr Groeble of HU and used by Mr Brix of HU was inadequate in identifying the risk of fire on the trommel side of the grating. Had the risk been properly identified adequate precautions could have been taken to avoid the fire.
(2) The Hot Work Permit used by Mr Brix of HU did not properly identify the hazard posed by the presence of combustible material on the trommel side of the grating. Had it done so then proper precautions could have been taken to avoid the fire.
(3) Mr Askwith of Pickfords failed to ensure that a continuous watch was kept in the period of either 15 minutes or 1 hour after the hot work had ceased in the Ball Mill. Either period would have ensured that the smouldering fire was discovered and readily extinguished.
(4) Mr Askwith and Mr Gary Deehan of Pickfords should have been aware of the risks of ignition of combustible material on the trommel side of the grating. Had they properly dealt with or mitigated those risks by preventing sparks from reaching the material, the fire would not have occurred.
(5) Mr Askwith and Mr Gary Deehan of Pickfords failed to ensure that the welding area was properly wetted down after welding. There is very little evidence of any wetting down between the period of 9:30am and 10:00am. Had the area been properly wetted the fire would not have occurred.
- I therefore conclude that the fire was caused or materially contributed to by the negligence of personnel of HU and Pickfords, as set out above.
The Claims by Biffa Leicester and Biffa Waste against MEH and OT
Liability of MEH to Biffa Waste in Contract
- Biffa Waste relies on the following express terms of the Design and Build Deed:
(1) Clause 8.1(a) which provides:
"The contractor shall with the due care and diligence that would be expected of a competent professional experienced in carrying out activities of a similar nature, scope and complexity to those comprised in the Works design, execute and complete the Works and remedy any Defects therein in accordance with the provisions of the Contract. The Contractor shall provide all superintendence, labour, materials, Plant, Contractor's Equipment and all other things whether [of] a temporary or permanent nature required in and for such design, execution, completion and remedying of any Defects so far as the necessity for providing the same is specified in or is reasonably to be inferred from the Contract."
(2) Clause 8.2 which provides:
"The Contractor will subject to the provisions of Clause 8.3 take full responsibility for its own operations on Site in respect of adequacy stability and safety and methods of construction and all statutory and legal requirements."
(3) Clause 15.1 which provides:
"The Contractor shall provide all necessary superintendence during the execution of the Works and as long thereafter as the Employer may reasonably consider necessary for the proper fulfilling of the Contractor's obligations under this Contract. The Contractor or a competent and authorised representative approved of by the Employer which approval may at any time be withdrawn shall give its whole time to the superintendence of the Works."
(4) Clause 36.1(g) which provides:
"All materials Plant and workmanship shall be: …
(g) in accordance with Good Industry Practice"
Under Clause 1.1.25:
""Good Industry Practice" means the exercise of that degree of skill, diligence, prudence, operating practice and foresight which would reasonably and ordinarily be expected from a skilled and experienced person of the appropriate profession or practice seeking in good faith to comply with their contractual obligations, complying with all applicable legislation, licences, regulations, consents, authorities, directions and applicable codes of practice and engaged in the same or similar type of undertaking and under the same or similar circumstances and conditions as that in which the relevant matter lies."
- Biffa Waste submits that under clauses 8.1(a), 8.2, 15.1 and 36.1(g) of the Design and Build Deed MEH agreed with Biffa Waste that it would carry out its duties under that contract with reasonable skill and care. Biffa Waste also pleads an implied term to that effect.
- Further Biffa Waste relies on clause 4.1 of the Design and Build Deed by which MEH agreed that it would "be responsible for the acts, defaults and neglects of any Sub-Contractor its agents, servants or workmen as fully as if they were the acts, defaults or neglects" of MEH.
- MEH admits the provisions of the Design and Build Deed and the implied term. In my judgment Biffa Waste correctly submits that the effect of these contractual provisions was that MEH owed Biffa Waste a contractual and non-delegable duty to carry out its duties under the Design and Build Deed with reasonable skill and care.
- On the basis of the findings set out above, it is evident that MEH were in breach of that non-delegable duty to carry out its duties under the Design and Build Deed with reasonable skill and care.
Liability of MEH to Biffa Leicester in Contract
- Under the Direct Agreement between Biffa Leicester and MEH (to which Biffa Waste was also a party) clause 2.1 provides:
"The Contractor warrants to Biffa Leicester that it has complied and will continue to comply with the terms of the supply contract and that it has exercised and will continue to exercise in the performance of its duties and obligations whether contained in or implied by the Supply Contract the due skill, care, expertise and diligence to be expected of a competent and experienced professional carrying out works of a similar size, scope and complexity."
- I accept that, as Biffa Leicester submits, the effect of this provision was, in summary, that MEH warranted to Biffa Leicester that it had complied and would comply with its obligations to Biffa Waste and had exercised and would continue to exercise the necessary skill, care and diligence.
- Having found that MEH was in breach of its duties under the Design and Build Deed, it follows that MEH failed to comply with the terms of the Design Deed and therefore was in breach of the Direct Agreement.
MEH's contractual liability for damages for delay
- In the Design and Build Deed clause 47.1 provides for liquidated damages for delay in the following terms:
"If the Contractor fails to comply with the Time for Completion in accordance with Clause 48 for the whole of the Works within the relevant time prescribed by Clause 43 or shall fail to comply with clause 43.2 then the Contractor shall pay to the Employer the relevant sum stated in Schedule 12 as liquidated damages for such default and not as a penalty (which sum shall be the only monies due from the Contractor for such default) for every week or part week which shall elapse between (a) the Time for Completion and that date stated in a Taking Over Certificate of the whole of the Works or (b) the date specified in part B of Schedule 3 and the date the task specified in Part B of Schedule 3 is actually completed. The Employer may without prejudice to any other method of recovery deduct the amount of such damages from any monies due or to become due to the Contractor. The payment or deduction of such damages shall not relieve the Contractor from its obligation to complete the Works or from any other of its obligations and liabilities under the Contract and shall be without prejudice to any other right or remedy of the Employer. The Contractor acknowledges that the level of liquidated damages is a genuine pre-estimate of the loss that would be suffered by the Employer if the Contractor fails to meet the time for Completion and is not intended to constitute and does not constitute a penalty on the Contractor."
- Clause 2.1 of the Direct Agreement has already been referred to above. Clause 2.2 provides:
"The Contractor shall subject to the terms of this agreement owe no liability, duty or obligation to Biffa Leicester which is greater than would have existed if Biffa Leicester had been named as Provider under the Supply Contract."
- Biffa contends that clause 47.1 of the Design and Build Deed has only a limited effect on the liability of MEH to pay damages to Biffa Waste and that clauses 2.1 and 2.2 of the Direct Agreement, when read with Clause 47.1 of the Design and Build Deed, also have a similarly limited effect on the liability of MEH to pay damages to Biffa Leicester.
- In summary Biffa submits that:
(1) Clause 47.1 imposes an exhaustive remedy of liquidated damages in relation to MEH's liability to Biffa Waste for "simple" delay, that is delay which is not caused by a breach of any obligation in the Contract except failure to complete on time.
(2) Clause 47.1 does not prevent Biffa Waste from claiming unliquidated damages for delay which is caused by breach of any obligation in the Contract other than failure to complete on time.
(3) Clauses 2.1 and 2.2 of the Direct Agreement give Biffa Leicester an entitlement to unliquidated damages for "simple" delay and those damages are limited by Clause 2.2 to the figure of 0.75% per week up to a maximum of 7.5% of the Contract Price.
(4) Clauses 2.1 and 2.2 of the Direct Agreement give Biffa Leicester an entitlement to unliquidated damages for delay which is caused by breach of any obligation other than "simple" delay.
(5) Biffa Leicester has a cause of action in tort which is unaffected by the provisions as to liquidated damages and they recover unliquidated damages for delay which are not limited.
- At this stage I shall deal with the contractual arguments in (1) to (4) above. I shall then consider (5) when I deal with the impact of the contractual provisions on the duty of care.
- MEH contends that any losses suffered by Biffa Waste as a result of delay fall to be compensated by the operation of clause 47.1 and that Biffa Waste cannot recover damages for delay in excess of the cap on liquidated damages for delay of 7.5% of the Contract Price under Schedule 12 to the Design and Build Deed.
- In relation to any losses suffered by Biffa Leicester as a result of delay, MEH contends that the effect of clause 2.2 of the Direct Agreement is that Biffa Leicester cannot recover damages for delay because the payment of the liquidated damages under the Design and Build Deed was intended to satisfy any damages for delay recoverable both by Biffa Leicester and by Biffa Waste.
- MEH contends that Biffa Leicester cannot recover damages for delay in tort or that, in any event, the liability of MEH to Biffa Leicester in tort for damages for delay would be no more extensive then liability in contract.
Clause 47.1 of the Design and Build Deed
- I consider first, the provisions of Clause 47.1 of the Design and Build Deed. This clause provides for liquidated damages for delay. Under Clause 43 there are a number of obligations relating to completion. Clause 43.1 states that the whole of the Works shall be completed in accordance with the provisions of Clause 48 (the Taking over Certificate) by the Time for Completion. Clause 43.2 provides that MEH shall complete any task specified in Part B of Schedule 3 by the date specified or such extended time as may be allowed under Clause 44.
- Time for Completion is defined in Clause 1.1.49 as the time stated in Part A of Schedule 3 (or as extended under Clause 44 or reduced under Clause 44.3). Part A of Schedule 3 provides: "Time of completion for the whole of the Works (save for achieving biogas production and generated electricity tests at Wanlip described in Schedule 2.0 of the Plant Specification) 18 June 2004 (with commissioning operations to start no later than 18 April 2004)".
- Part B of Schedule 3 provides dates or a period of time for different tasks under a heading of "time for sectional completion".
- As a result, there are a number of contractual obligations as to time under Clauses 43.1 and 43.2 which, if breached, would ordinarily give rise to a claim for damages for breach of contract in an unliquidated amount.
- Clause 47.1 deals both with the position where MEH "fails to comply with the Time for Completion in accordance with Clause 48 for the whole of the Works within the relevant time prescribed by Clause 43" and also where MEH fails "to comply with clause 43.2".
- Clause 47.1 then provides that if there is such a failure then MEH shall pay Biffa Waste "the relevant sum stated in Schedule 12 as liquidated damages for such default and not as a penalty (which sum shall be the only monies due from the Contractor for such Default) for every week or part week which shall elapse between (a)the Time for Completion and that date stated in a Taking Over Certificate of the whole of the Works or (b) the date specified in part B of Schedule 3 and the date the task specified in Part B of Schedule 3 is actually completed." (emphasis added).
- As Biffa accepts, the phrase in parentheses, "which sum shall be the only monies due from the Contractor for such Default", would have the effect of making Clause 47.1 the exclusive remedy for such delay. This would be consistent with the general position that a liquidated damages clause in a contract covers "all the damages for non-completion" or "constitutes an exhaustive agreement as to the damages which are or are not to be payable by the contractor in the event to the failure to complete the works on time": see Temloc Ltd v. Errill Properties Ltd (1987) 33 BLR 30 at 38 to 40.
- Clause 47.1 then includes this provision: "The payment or deduction of such damages shall not relieve the Contractor from its obligation to complete the Works or from any other of its obligations and liabilities under the Contract and shall be without prejudice to any other right or remedy of the Employer."
- Biffa submits that this wording opens up a claim by Biffa Waste against MEH for damages for delay where that delay is not simply a breach of the requirements of Clause 43, which it refers to as "simple" delay. Thus, in this case, on the basis of delay caused by the pleaded breaches of Clauses 8.1(a), 8.2, 15.1 and 36.1(g), Biffa submits that Biffa Waste is entitled to unliquidated damages which are not affected by Clause 47.1.
- MEH submits that the distinction between a breach of Clause 43 and breaches of other terms of the contract leading to delay is not one which is properly made. MEH relies on Piggott Foundations Ltd v. Shepherd Construction Ltd (1993) 67 BLR 48 and Surrey Heath Borough Council v. Lovell Construction Ltd (1988) 42 BLR 25 and submits that the position is correctly stated in Keating on Construction Contracts (8th Edition) at para 9-006. It is submitted by MEH that the sentence in Clause 47.1 relied on by Biffa merely acts as a reminder that the obligation to pay liquidated damages does not relieve MEH of its other obligations under the Design and Build Deed. If it were read as Biffa contends, MEH submits that it would conflict with and deprive the earlier phrase in parentheses of any meaning.
- I accept MEH's submission. The sentence relied on by Biffa commences by reminding MEH that the payment of liquidated damages does not relieve MEH of its obligation to complete the Works or from any other obligations or liabilities under the contract. When read in context, I do not consider that the other liabilities can include a liability to pay unliquidated damages for delay for breach of other provisions of the Design and Build Deed.
- The phrase that the payment of liquidated damages "shall be without prejudice to any other right or remedy of the Employer" when read with the words in parentheses must refer to a right or remedy which is not a monetary right or remedy. The words in parentheses make it clear that liquidated damages shall be "the only monies" due from MEH for such failure to complete. If a contractor fails to complete the employer has rights and remedies other than damages. In this case these include rights in relation to rates of progress in Clause 46.1 and termination under Clause 59.1 or at common law. It is those other rights which are not prejudiced. However if liquidated damages are the only monies payable for failure to complete, that must exclude other remedies for payment of damages.
- Further I do not consider that the provisions of clause 47.1 can be construed to draw a distinction between a "simple" failure to complete and a failure to complete caused by the breach of another obligation under the Design and Build Deed. First, I do not consider that it is possible to draw a distinction between a "simple" failure to complete and a failure to complete caused by breach of another obligation. If there is a failure to complete then liquidated damages are "the only monies" due for such default. If there is a breach of another obligation and that breach causes a failure to complete then liquidated damages are still the only monies due for that default, that is a breach of contract causing a failure to complete on time.
- Secondly, I do not accept that a liquidated damages clause which only applied to a case where there was simply a failure to complete on time without a breach of any other provision would make commercial sense. The purpose of the liquidated damages clause is, as Lord Upjohn said in the Suisse Atlantique case, for the benefit of both parties: "the party establishing breach by the other need prove no damage in fact; the other must pay that, no less and no more." Assessment of damages for delay is a difficult process as the expert evidence in this case has shown. The advantage of certainty in the sum payable as liquidated damages provides advantages to both sides. If that benefit were limited to cases of "simple" delay but not to cases where that "simple" delay had been caused by breach of another obligation, the commercial purpose would disappear. A party wishing to avoid liquidated damages and argue for no loss or a smaller sum would attempt to find some other breach of an implied or express term to hang the delay on. A party seeking to uphold the clause would be trying to disprove that another breach was the cause of the delay.
- In the context of the Design and Build Deed, Clause 41.1 also makes the argument difficult because it provides that "the Contractor shall proceed with the works with due expedition and without delay" which would be capable of giving rise to another breach for "simple delay". If the Liquidated Damages provision applied only to those cases where there was no other breach then such a construction would neither be consistent with the phrase in parentheses nor give sensible commercial meaning to the liquidated damages provision.
- I consider that my view is consistent with the decision of His Honour Judge Gilliland QC in Piggott Foundations Ltd v. Shepherd Construction Ltd  67 BLR 48 at 68 where he held that there was a liquidated damages provision and that this provision "prevents the defendant from seeking to avoid the overall limitation of damages to £40,000 by claiming as a head of general damages for the breach of any other provisions or obligation under the contract such damages which have resulted from the failure of the plaintiff to complete the piling work within the period of 10 weeks." The same consistency is implicit in the decision of His Honour Judge Fox-Andrews QC in Surrey Heath Borough Council v. Lovell Construction Ltd (1988) 42 BLR 25 where at 37 he found that the liquidated damages were an exhaustive remedy for delay where a building had been damaged by a fire.
- In Keating on Construction Contracts (8th Edition) at para 9-006 the issue of whether liquidated damages are an exhaustive remedy for delay caused by breach of an obligation other than the obligation to complete is dealt with. It is stated that "It is suggested that the solution is primarily a question of the construction of the contract in question. If, as in most (if not all) cases, the clause is clearly expressed to be or, as a matter of proper construction appears to be, a complete remedy for delayed completion then it matters not why the contractor failed to complete by the due date…The fact that the delay is due to a breach of contract by the contractor as opposed to merely going slow, cannot affect the nature or quality of the loss which the liquidated damages is intended to compensate. In reality, in such situations, there are two breaches: the carrying out of the defective work…and the failure to complete by the due date. Neither the employer nor the contractor can avoid liquidated damages by simply relying on the first breach."
- I consider that this passage correctly sets out the position. In this case, on a true construction of the Design and Build Deed, Clause 47.1 provides a complete remedy in damages for delayed completion. As a result, in my judgment, Biffa Waste cannot recover from MEH in respect of delay caused by the breaches of the Design and Build Deed, other than liquidated damages under Clause 47.1.
- Biffa also claims the costs of running the plant with a temporary liner. This raises the question of whether the recovery of liquidated damages precludes the recovery of any costs incurred in reasonable mitigation of delay. Biffa contends that the costs of mitigation are recoverable. MEH submits that they are not.
- The cost of taking reasonable mitigating steps is generally recoverable as part of the damages for the breach: see The World Beauty  P 144 at 156 per Winn LJ. As stated above, liquidated damages are an exhaustive remedy for delay. That exhaustive remedy therefore includes any damages which could be recovered as damages for a failure to complete. Where, as here, Biffa took reasonable mitigating steps to avoid delay loss then I consider that the cost of taking such steps is treated as being included in the pre-estimate of loss which forms the basis of the liquidated damages clause. Clause 47.1 of the Design and Build Deed provides that liquidated damages "shall be the only monies due from the Contractor for such default" and to permit further damages to be recovered for the reasonable costs of steps to mitigating that default would, in my judgment, be contrary to the express terms of that provision.
- As a result, Biffa cannot recover the cost of taking reasonable steps to mitigate delay as an extra head of damages because those damages are included within the exhaustive remedy of liquidated damages.
Clause 2.2 of the Direct Agreement
- I now consider the position of Biffa Leicester under the Direct Agreement with MEH. Clause 2.1 has the effect of also giving Biffa Leicester rights where there is a breach of the Design and Build Deed between Biffa Waste and MEH. Where there is such a breach, then MEH is in breach of the warranty that it would comply with the terms of that Deed. That would generally lead to Biffa Leicester having an entitlement to damages for breach of the Direct Agreement based on breach of the Design and Build Deed.
- Clause 2.2 however affects that general provision. It limits the "liability, duty or obligation" of MEH to Biffa Leicester to the liability, duty or obligation which would have been owed to Biffa Leicester if Biffa Leicester had been named in place of Biffa Waste under the Design and Build Deed.
- Biffa submits that the effect of Clause 2.2 is to provide that Biffa Leicester can recover unliquidated damages from MEH but those unliquidated damages are limited in the case of "simple" delay, to the weekly amount of liquidated damages and are also limited to the "cap" on liability of 7.5% of the Contract Price. Otherwise the unliquidated damages are unlimited. For the reasons given above, I do not consider that there is a valid distinction under the Design and Build Deed between damages for "simple" delay and damages for delay caused by other breaches of that Deed.
- MEH submits that if Biffa Waste recovers liquidated damages for delay which are Biffa Waste's exhaustive remedy for delay then Biffa Leicester would not be entitled to either liquidated or unliquidated damages for delay under the Direct Agreement. MEH contends that the provisions of the Direct Agreement have to be read in the context of both the Works Agreement between Biffa Leicester and Biffa Waste and the Design and Build Deed. MEH's case is that the assessment of liquidated damages in clause 47.1 must be taken to have been a pre-estimate of the losses of both Biffa Waste and Biffa Leicester in the event of a delay.
- It is necessary to consider the reason for the Direct Agreement between non-contiguous parties in the contractual chain for this project. It is now common where buildings or other projects are developed for sale or lease to a building owner or in the context of a PFI project for contractors and consultants to provide warranties to building owners, financiers or people leasing, using or otherwise benefiting from the building or project. These warranties are provided so that the beneficiary can be assured of a remedy against the parties who design and construct buildings or other projects in the event that there is breach of the underlying contract to which the beneficiary would otherwise be a third party.
- The provision of warranties ensures that the beneficiary does not have to rely on an action in contract against the next party in the contractual chain who may have no assets or, particularly in the case of a PFI contract, might be an associated company. The warranty also avoids the difficulties of establishing a duty of care against the contractor and consultants following Murphy v. Brentwood DC  1 AC 598. It also avoids the "legal blackhole" which might arise if the project owner, lessor, occupier or user suffered the loss but another party retained the cause of action.
- The result of the increased use of warranties is that in many cases a party may give a number of warranties to different participants in a project. When such legal rights are given to two or more parties in relation to the same transaction, the arrangement overcomes the prospect of the "legal blackhole" or other problems in obtaining a remedy but, as Lord Millett said in his dissenting speech in McAlpine Construction v. Panatown  1 AC 518 at 595, the existence of rights by a number of parties raises the "spectre of double recovery" or multiple recovery.
- In this case, Biffa's case on quantum demonstrates that there has been uncertainty as to whether Biffa Leicester or Biffa Waste suffered certain losses caused by delay. In principle, if Biffa Leicester suffered losses caused by a delay in completion it could bring proceedings against MEH under the Direct Agreement or it could bring proceedings against Biffa Waste for breach of the time obligations under the Works Agreement between Biffa Leicester and Biffa Waste. If Biffa Leicester pursued the latter course or Biffa Waste was concerned that it might be liable to Biffa Leicester then Biffa Waste could claim against MEH for both its own losses caused by delay and any sums which it had paid or was liable to pay to Biffa Leicester under the Works Agreement for that delay.
- In such circumstances, MEH could face liability for overlapping damages both to Biffa Leicester under the Direct Agreement and to Biffa Waste under the Design and Build Deed. That was a problem which Lord Goff of Chieveley and Lord Millett had to deal with in Panatown having reached the conclusion that both the employer, Panatown and the building owner, UIPL, had causes of action against McAlpine, the contractor, and could recover the cost of remedying the defects.
- Lord Goff at 560 considered that UIPL would generally leave it to Panatown "to enforce its more valuable rights under the building contract, rather than have recourse to its more uncertain remedy under the [Duty of Care Deed] under which it has to prove negligence on the part of McAlpine." However at 561A, he considered the position where UIPL suffered damage distinct from that covered by Panatown's claim. In those circumstances, as he pointed out at 561C "a successful claim by UIPL against McAlpine in respect of such damage could not give rise to any double recovery." At 561D he said that if any such possibility should exist, it could be disposed of by joinder of the relevant party or parties to the proceedings in the manner indicated by in the speech of Lord Millett.
- Lord Millett at 595 A to C said this:
"By giving the third party a cause of action, it raises the spectre of double recovery. Even though the plaintiff recovers for his own loss, this obviously reflects the loss sustained by the third party. The case is, therefore, an example, not unknown in other contexts, where breach of a single obligation creates a liability to two different parties. Since performance of the primary obligation to do the work would have discharged the liability to both parties, so must performance of the secondary obligation to pay damages. Payment of damages to either must pro tanto discharge the liability to both."
- Lord Millett then considered the relationship between the proceedings commenced by Panatown and proceedings commenced by UIPL. He said at 595 D to E:
"While, therefore, I do not accept that Panatown's claim to substantial damages is excluded by the existence of the [Duty of Care Deed], I think that an action like the present should normally be stayed in order to allow the building owner to bring his own proceedings. The court will need to be satisfied that the building owner is not proposing to make his own claim and is content to allow his claim to be discharged by payment to the building employer before allowing the building employer's action to proceed."
- In the present case, the existence of a cause of action by both Biffa Leicester and Biffa Waste against MEH gives rise to similar problems of double recovery. In the absence of a liquidated damages provision, the court could stay proceedings or stay a judgment to ensure that there was not double recovery by both Biffa Leicester and Biffa Waste in relation to the same heads of damage.
- The liquidated damages clause has two effects on this position. First, it defines the liquidated amount to be paid per week by MEH to Biffa Waste as an exhaustive remedy for delay. Secondly, it limits the overall liability of MEH to Biffa Waste for delay to 7.5% of the Contract Price.
- If Biffa Waste were permitted to recover liquidated damages and Biffa Leicester were permitted to recover unliquidated damages there would, in my judgment, be double recovery. The fact that, as I have found, Biffa Waste and MEH have agreed that Clause 47.1 provides an exhaustive remedy for failure to complete in accordance with clause 43 means that any additional sum recovered by Biffa Leicester would amount to recovery of damages in addition to the exhaustive recovery. If Biffa Leicester recovered additional damages then MEH would have to pay twice for the breach of Clause 43: once for the exhaustive remedy and a second time for a sum in excess of the exhaustive recovery. Such a spectre of double recovery is no more acceptable than it would have been in Panatown.
- In this context, clause 2.2 of the Direct Agreement contemplates that the liability of MEH to Biffa Leicester should be no greater than if Biffa Leicester had been named as provider under the supply contract. If Biffa Leicester had been named as the provider in the supply contract then Biffa Leicester would have been entitled to liquidated damages. Equally, if Biffa Leicester were named as provider, either instead of or together with Biffa Waste then the liability of MEH would be limited to paying liquidated damages to one party or jointly to the two parties.
- Whilst Clause 2.2 is phrased as a limit on liability, liquidated damages are the exhaustive remedy and when read with clause 47.1, I consider that this amounts to an agreement both that damages are limited to the value of the liquidated damages but also an acceptance that liquidated damages are an exhaustive remedy.
- I therefore consider that clauses 2.1 and 2.2 of the Direct Warranty give Biffa Leicester an entitlement to damages but on the basis that any payment of liquidated damages is an exhaustive remedy for the particular delay. This does not mean that both Biffa Leicester and Biffa Waste can make a recovery for the same delay. By using the mechanism of a stay as indicated in Panatown, I consider that the Court can overcome the spectre of double recovery.
- If MEH pays Biffa Waste the liquidated damages under Clause 47.1 then MEH has complied with the terms of the Design and Build Deed and has no remaining liability so that Biffa Leicester can recover nothing. Meanwhile, I consider that Biffa Leicester's claim should be stayed.
Liability of MEH to Biffa Leicester and Biffa Waste in Tort
- In paragraph 25 of the Amended Particulars of Claim it is pleaded that MEH owes Biffa Waste and Biffa Leicester a duty to exercise reasonable care and skill in undertaking its duties under the Design and Build Deed.
- At paragraph 30 and 30A of the Amended Particulars of Claim Biffa Waste and Biffa Leicester plead that the grinding and welding works were extra or ultra-hazardous and that MEH knew of the inherent hazards. On that basis it is pleaded that MEH owed Biffa Waste and Biffa Leicester a particular and non-delegable duty to take reasonable care and to ensure that reasonable care was taken by those carrying out the grinding and welding works to ensure that a fire did not ignite in the Ball Mill.
- MEH pleads that at paragraphs 25 and 43 of the Amended Defence that any duty of care was co-extensive with and circumscribed by the terms of the Design and Build Deed and the Direct Agreement but denies that it owed a non-delegable duty.
- In order for MEH to have liability in tort, there are two matters which must be established on the facts of this case. First, MEH must owe a duty of care to Biffa Leicester and Biffa Waste if during the course of the work at the plant damage is caused by fire which leads to financial loss through delay in commissioning of the plant. Secondly, because Biffa Leicester and Biffa Waste do not allege that the fire was caused by the negligence of MEH, its agents, servants or workmen or those for whom that were vicariously liable, MEH's liability must arise under a non-delegable duty so that MEH is liable in negligence for the negligence of MEH's Sub-Contractors and the agents, servants or workmen of those Sub-Contractors. In particular, Biffa Leicester and Biffa Waste contend that there was negligence on the part of HU and Pickfords.
- I first consider the question of whether there is a duty of care. I will then deal with the issue of non-delegable duties which also arises in relation to the liability of OT.
- In considering whether MEH owed a duty of care to Biffa Leicester and Biffa Waste the following issues arise:
(1) Did Biffa Leicester or Biffa Waste have sufficient proprietary or possessory interests in the Ball Mill?
(2) What is the impact of the contractual relationship created by the Design and Build Deed and by the Direct Agreement on the existence of any duty of care in relation to loss caused by delay consequential on the fire?
Possessory or Proprietary Interest
- An issue is raised as to whether Biffa Waste and Biffa Leicester have sufficient proprietary interest in the plant so as to give rise to a duty of care in respect of damage caused to the plant. I will deal with a similar issue in relation to MEH below.
- The need for some form of proprietary or possessory interest, in order to found a cause of action in negligence was set out in the speech of Lord Brandon in Leigh & Sillavan Ltd v. Aliakmon Shipping Company  AC 785, at 809 where he said:
"…there is a long line of authority for a principle of law that, in order to enable a person to claim in negligence for loss caused to him by reason of loss or damage to property, he must have had either the legal ownership of or a possessory title to the property concerned at the time when the loss or damage occurred, and it is not enough for him to have only contractual rights in relation to such property which have been adversely affected by the loss of or damage to it."
- In relation to Biffa Leicester, as part of the arrangements' with LCC, there was a head lease dated 2 May 2003 by which LCC leased the premises at Bursom to Biffa Leicester for 25 years. The premises are broadly defined to include "the buildings and other structures now or from time to time during the terms contracted on them". When the Ball Mill and other plant were installed it therefore became part of the premises and Biffa Leicester had sufficient interest to impose a duty of care in relation to damage to the premises.
- In relation to Biffa Waste, it entered into the Works Agreements with Biffa Leicester under which it carried out the design and construction of the Works on a back-to-back basis. Under the Design and Build Deed between Biffa Waste and MEH, under which Biffa Waste was the Employer and MEH was the Contractor, MEH then carried out those Works. MEH supplied the necessary materials and goods to construct the Works and the relevant provisions as to proprietary interest were as follows in Clauses 18.1 and 18.2:
"18.1 Unfixed materials and goods delivered to or placed upon the Site which constitute part of the Plant shall become the property of the Employer on crossing the boundary to the Site and shall not be removed without the consent of the Employer, except for use upon the Works. The Contractor shall remain responsible for loss or damage to the same until otherwise provided in the Contract.
18.2 Where materials and goods shall become fixed or incorporated as part of the Works such materials and goods shall (if they have not already become so) become the property of the Employer but the Contractor shall remain responsible for loss or damage to the same until otherwise provided in the contract."
- On that basis I am satisfied that Biffa Waste had a sufficient interest to impose a duty of care in relation to damage to the plant.
Liability in Tort arising from the Fire
The nature of the duty in this case
- The present case concerns allegations of negligence in causing a fire and the loss which is sought to be recovered is economic loss for delay consequential on that fire.
- I consider that, as Roskill J said in the well known and judicially approved passage in Margarine Union G.m.b.H. v. Cambay Prince Steamship Co. Ltd.  1 Q.B. 219, 251-252
"In my judgment, there is nothing in Hedley Byrne to affect the common law principle that a duty of care which arises from a risk of direct injury to person or property is owed only to those whose person or property may foreseeably be injured by a failure to take care. If the plaintiff can show that the duty was owed to him, he can recover both direct and consequential loss which is reasonably foreseeable, and for myself I see no reason for saying that proof of direct loss is an essential part of his claim. He must, however, show that he was within the scope of the defendant's duty to take care."
- As a result, this is a claim which must be founded on principles which apply to cases where there is physical injury or damage to property not, as in Hedley Byrne, pure economic loss.
- Before considering the particular contractual provisions in this case and their impact on the duty of care it is necessary to establish the relevance of the contractual provisions in relation to the existence, scope and extent of any duty of care.
The Impact of the contractual regime
- Where the parties have regulated their relationship on the basis of a contract, then as the law has developed this will not preclude a duty of tort existing between the same parties either in parallel or in addition to the contractual duties.
- In Henderson v. Merrett Syndicates Ltd  2 AC 145, whilst the House of Lords was considering liability for pure economic loss, Lord Goff reviewed generally the question of the existence of the relationship between contractual duties and duties arising in tort. At 191 he expressed his agreement with the following summary of the position as set out by Le Dain J, delivering the judgment of the Supreme Court of Canada in Central Trust Co. v. Rafuse (1986) 31 D.L.R. (4th) 481, which Lord Goff said was to the same effect as that reached by Oliver J. in Midland Bank Trust Co. Ltd v. Hett, Stubbs & Kemp  Ch. 384:
"A concurrent or alternative liability in tort will not be admitted if its effect would be to permit the plaintiff to circumvent or escape a contractual exclusion or limitation of liability for the act or omission that would constitute the tort. Subject to this qualification, where concurrent liability in tort and contract exists the plaintiff has the right to assert the cause of action that appears to be the most advantageous to him in respect of any particular legal consequence."
- In Henderson, in the course of considering liability based on the principle established in Hedley Byrne v Heller  AC 465, Lord Goff said this at 193H to 194 B:
"My own belief is that, in the present context, the common law is not antipathetic to concurrent liability, and that there is no sound basis for a rule which automatically restricts the claimant to either a tortious or a contractual remedy. The result may be untidy; but, given that the tortious duty is imposed by the general law, and the contractual duty is attributable to the will of the parties, I do not find it objectionable that the claimant may be entitled to take advantage of the remedy which is most advantageous to him, subject only to ascertaining whether the tortious duty is so inconsistent with the applicable contract that, in accordance with ordinary principle, the parties must be taken to have agreed that the tortious remedy is to be limited or excluded."
- In relation to the contractual chain, I was referred to the passage in the speech of Lord Goff in Henderson where at 195H to 196E he deals with the assumption of responsibility which is necessary for the existence of a duty under the Hedley Byrne principle. He said this:
"I wish however to add that I strongly suspect that the situation which arises in the present case is most unusual; and that in many cases in which a contractual chain comparable to that in the present case is constructed it may well prove to be inconsistent with an assumption of responsibility which has the effect of, so to speak, short circuiting the contractual structure so put in place by the parties. It cannot therefore be inferred from the present case that other sub-agents will be held directly liable to the agent's principal in tort."
- Lord Goff then continued by referring to the position in relation to construction contracts. Although setting out the position in the context of the assumption of responsibility required for Hedley Byrne liability, he referred to claims based on physical damage. He said:
"Let me take the analogy of the common case of an ordinary building contract, under which main contractors contract with the building owner for the construction of the relevant building, and the main contractor sub-contracts with sub-contractors or suppliers (often nominated by the building owner) for the performance of work or the supply of materials in accordance with standards and subject to terms established in the sub-contract. I put on one side cases in which the sub-contractor causes physical damage to property of the building owner, where the claim does not depend on an assumption of responsibility by the sub-contractor to the building owner; though the sub-contractor may be protected from liability by a contractual exemption clause authorised by the building owner. But if the sub-contracted work or materials do not in the result conform to the required standard, it will not ordinarily be open to the building owner to sue the sub-contractor or supplier direct under the Hedley Byrne principle, claiming damages from him on the basis that he has been negligent in relation to the performance of his functions. For there is generally no assumption of responsibility by the sub-contractor or supplier direct to the building owner, the parties having so structured their relationship that it is inconsistent with any such assumption of responsibility. This was the conclusion of the Court of Appeal in Simaan General Contracting Co. v. Pilkington Glass Ltd. (No. 2)  QB 758. As Bingham L.J. put it, at p. 781:
"I do not, however, see any basis on which [the nominated suppliers] could be said to have assumed a direct responsibility for the quality of the goods to [the building owners]: such a responsibility is, I think, inconsistent with the structure of the contract the parties have chosen to make.""
- I was also referred to the decision in Co-operative Retail Services Ltd v. Taylor Young Partnership  1 Lloyd's Rep 461 in the Court of Appeal which was upheld in the House of Lords at  BLR 272. In that case, the court considered claims for contribution between consultants and contractors. Questions arose about liability to the employer, CRS, by the main contractor, Wimpey, and the sub-contractor, Hall arising from a fire. For the purpose of preliminary issues the fire was assumed to have been caused by breaches of obligation by Wimpey and Hall.
- There was a joint insurance policy taken out by the CRS as part of its contractual obligations which covered reinstatement costs and professional fees arising from the fire. Wimpey and Hall were covered by that insurance. In relation to consequential losses caused by delay, Wimpey had to pay liquidated damages but was entitled to an extension of time for the fire which was a Relevant Event under the JCT Standard Form of Contract.
- The Court of Appeal held that neither Wimpey nor Hall were liable to CRS for the consequential loss. Brooke L.J. giving a judgment, with which the other members of the Court agreed, said this in relation to Wimpey at para 75:
"the Schedule 1 losses and the Schedule 2 losses (the cost of the reinstatement work and the professional fees attendant on that work) are completely provided for under this contractual scheme, and there can be no question of Wimpey being liable to CRS for anything once this contractual scheme has worked itself out even if otherwise allegations of negligence might have been sustained against them. Similarly, so far as the Schedule 3 losses are concerned (being damages at large for delay), the parties have agreed to a tariff of liquidated damages in the event of late completion, and if the architect grants an appropriate extension of time which covers the delay to the works caused by the fire, not even liquidated damages will be payable. In Temloc Ltd v Errill Properties Ltd (1987) 39 BLR 30 Nourse LJ said at p 39:
"If (1) clause 24 is incorporated in the contract and (2) the parties complete the relevant part of the appendix ... then that constitutes an exhaustive agreement as to the damages which are or are not to be payable by the contractor in the event of his failure to complete the works on time.""
- In relation to Hall, they were domestic sub-contractors. Under the sub-contract, Wimpey was obliged to ensure that the main contract insurance policy covered Hall and waived rights of subrogation. Hall's obligations to reinstate work and its entitlement to extensions of time mirrored the provisions in the main contract. Hall were therefore covered under a contractual scheme by the joint insurance policy, but the question of liability for the consequential delay was in issue. The Court of Appeal was referred to the decision in Norwich City Council v. Harvey  1 WLR 828 and British Telecommunications PLC v. James Thomson & Sons (Engineers) Ltd  1WLR 9.
- Brooke LJ accepted Hall's submission that the overall contractual framework provided a complete answer. It was not fair, just and reasonable to impose a duty of care on a sub-contractor vis-à-vis an employer against the contractual background and that the existence of a direct warranty between Hall and CRS did not affect the position. At para 81 he said
"If CRS asserted that it had suffered damage, following a fire, by reason of Hall's breach of warranty, Hall would have a defence to that claim to the effect that CRS had sustained no loss which it could recover from Hall because a single contractual scheme was in place, buttressed by a joint all risks policy to which it, CRS and Wimpey were all named as insured, which provided that the cost of restoration caused by fire (and the associated professional fees) would be covered by that policy, which would be procured by Wimpey. As to the Schedule 3 claim, Mr Acton-Davis observed that CRS brought no such claim against his clients: indeed their insurers' solicitors had expressly asserted in correspondence that they had no claim. The reason for this was that under the contractual framework the risk of delay caused by fire was expressly provided for and the parties knew where the relevant risks were to fall and assented to this scheme. In any event, if no duty was owed by Hall in respect of the physical damage caused by the fire, a Schedule 3 claim for consequential losses could not found a successful negligence action on its own, being a claim for pure economic loss which no recognisable principle of the evolving law of negligence would support. These submissions appear to me to be well-founded."
- In British Telecommunications v. James Thomson Lord Mackay of Clashfern, with whom the other members of the House of Lords agreed, had to consider the liability of a domestic subcontractor for a fire. Nominated sub-contractors, but not domestic sub-contractors, were covered by the contractual scheme of project insurance. In an action by the employer against the sub-contractor, Lord Mackay adopted as a concise summary of the law the speech of Lord Steyn in Marc Rich & Co. A.G. v. Bishop Rock Marine Co. Ltd.  AC 211 at 235-236 where he said:
"But since the decision in Dorset Yacht Co. Ltd. v. Home Office  AC 1004 it has been settled law that the elements of foreseeability and proximity as well as considerations of fairness, justice and reasonableness are relevant to all cases whatever the nature of the harm sustained by the plaintiff. Saville L.J. explained, at p. 1077: 'whatever the nature of the harm sustained by the plaintiff, it is necessary to consider the matter not only by inquiring about foreseeability but also by considering the nature of the relationship between the parties; and to be satisfied that in all the circumstances it is fair, just and reasonable to impose a duty of care. Of course ... these three matters overlap with each other and are really facets of the same thing. For example, the relationship between the parties may be such that it is obvious that a lack of care will create a risk of harm and that as a matter of common sense and justice a duty should be imposed ... Again in most cases of the direct infliction of physical loss or injury through carelessness, it is self-evident that a civilised system of law should hold that a duty of care has been broken, whereas the infliction of financial harm may well pose a more difficult problem. Thus the three so-called requirements for a duty of care are not to be treated as wholly separate and distinct requirements but rather as convenient and helpful approaches to the pragmatic question whether a duty should be imposed in any given case. In the end whether the law does impose a duty in any particular circumstances depends upon those circumstances ...' That seems to me a correct summary of the law as it now stands"
- Lord Mackay then said at 16 D to E:
"The question is whether or not it is fair, just and reasonable to impose a duty of care and in considering that question if the terms of a contract are to be taken into account it must be right to take account of all the terms of the contract that are relevant to the question. In my opinion it is of crucial significance in the present case that a distinction is made between nominated subcontractors on the one hand and domestic subcontractors on the other in the terms of the insurance policy to be provided by B.T. under the contract. In my view the contractual provisions reinforce rather than negative the existence of a duty of care toward B.T. by Thomson in the circumstances of the present case."
- In my judgment these authorities establish the following propositions:
(1) That a duty of care in tort can exist in parallel with or in addition to any contractual duties between the parties. The duty will depend on general principles of forseeability and proximity and such other requirements applicable to the nature of the particular duty.
(2) That, in the case of liability in tort both for pure economic loss in accordance with the principle in Hedley Byrne and for loss arising from personal injury or damage to property, the terms of any relevant contract between the parties or authorised by a party will be relevant to the existence, scope and extent of a duty of care.
(3) The appropriate question in considering the impact of any relevant contractual terms is the same whether the case involves an assumption of responsibility for Hedley Byrne liability or whether it relates to what is just, fair and reasonable when imposing liability in tort for personal injury or physical damage to property.
(4) The test is whether the parties having so structured their relationship that it is inconsistent with any such assumption of responsibility or with it being fair, just and reasonable to impose liability. In particular, a duty of care should not be permitted to circumvent or escape a contractual exclusion or limitation of liability for the act or omission that would constitute the tort.
The decision in Surrey Heath
- I was referred to the decision in Surrey Heath BC v. Lovell Construction  42 BLR 25 where a fire was alleged to have been caused by the negligence of a sub-contractor. The Council sought to recover from Lovell in tort. His Honour Judge Fox-Andrews QC held that the contract made full provision and that there was no room for a duty in tort, alternatively the claim should only be determined in the contractual context. In coming to that conclusion there was a concession by counsel and Judge Fox-Andrews QC relied on the decisions of the Court of Appeal in William Hill Organisation Ltd v. Bernard Sunley (1982) 22 BLR 1; of the House of Lords in Junior Books v. Veitchi  AC 520 and the Privy Council in Tai Hing Cotton Mill v Liu Chong Hing Bank  1 AC 80.
- Both William Hill and Junior Books were cases involving defects in buildings and following the decision of the House of Lords in Murphy v. Brentwood District Council  1 AC 398 the existence of a duty of care in such cases must be based on the principles in Hedley Byrne v Heller: see Murphy at 480F to 480G. The Surrey Heath case involved damage to property and therefore, in my judgment, does not require the assumption of responsibility necessary for liability under Hedley Byrne.
- In addition there are questions about the continued authority of Junior Books: see Murphy at 481E and Henderson v. Merrett at 196E.
- In relation to the Tai Hing case, as Lord Goff said in Henderson v. Merrett at 186B to 186G when reviewing the existence of tortious liability where there is a contract:
"Moreover I myself perceive at work in these decisions not only the influence of the dead hand of history, but also what I have elsewhere called the temptation of elegance. Mr. Tony Weir (XI Int.Encycl.Comp.L. ch.12, para. 55) has extolled the French solution for its elegance; and we can discern the same impulse behind the much-quoted observation of Lord Scarman when delivering the judgment of the Judicial Committee of the Privy Council in Tai Hing Cotton Mill Ltd. v. Liu Chong Hing Bank Ltd.  AC 80, 107:
"Their Lordships do not believe that there is anything to the advantage of the law's development in searching for a liability in tort where the parties are in a contractual relationship. This is particularly so in a commercial relationship. Though it is possible as a matter of legal semantics to conduct an analysis of the rights and duties inherent in some contractual relationships including that of banker and customer either as a matter of contract law when the question will be what, if any, terms are to be implied or as a matter of tort law when the task will be to identify a duty arising from the proximity and character of the relationship between the parties, their Lordships believe it to be correct in principle and necessary for the avoidance of confusion in the law to adhere to the contractual analysis: on principle because it is a relationship in which the parties have, subject to a few exceptions, the right to determine their obligations to each other, and for the avoidance of confusion because different consequences do follow according to whether liability arises from contract or tort, e.g. in the limitation of action."
It is however right to stress, as did Sir Thomas Bingham M.R. in the present case, that the issue in the Tai Hing case was whether a tortious duty of care could be established which was more extensive than that which was provided for under the relevant contract.
At all events, even before the Tai Hing case we can see the beginning of the redirection of the common law away from the contractual solution adopted in Groom v. Crocker  1 K.B. 194, towards the recognition of concurrent remedies in contract and tort."
- I therefore consider that the approach of Judge Fox-Andrews QC in Surrey Heath was based on the authorities which must now to be reconsidered in the light of the decisions of the House of Lords in Murphy and Henderson v. Merrett. In addition, it was based on a concession by counsel founded on those cases. On the current authorities, I consider that the law is set out in the propositions which I have referred to.
- I now turn to consider the liability of MEH and OT to Biffa and the liability of OT to MEH in tort, applying the propositions which I have derived above.
Liability of MEH to Biffa Leicester
- MEH relies on the terms of the Design and Build Deed and of the Direct Agreement and submits that they are inconsistent with a duty of care being owed to Biffa Leicester in tort for the recovery of losses caused by delay consequential on the fire.
The effect of Clause 2.2 of the Direct Agreement
- Biffa submits that in considering whether the contractual terms are sufficient to exclude or limit liability in tort, the court must apply the guidelines set out by Lord Morton of Henryton in Canada Steamship Lines v. The King  AC 192 at p.208 where he said this:
"Their Lordships think that the duty of a court in approaching the consideration of such clauses may be summarized as follows:-
(1) If the clause contains language which expressly exempts the person in whose favour it is made (hereafter called "the proferens") from the consequence of the negligence of his own servants, effect must be given to that provision….
(2) If there is no express reference to negligence, the court must consider whether the words used are wide enough, in their ordinary meaning, to cover negligence on the part of the servants of the proferens….
(3) If the words used are wide enough for the above purpose, the court must then consider whether "the head of damage may be based on some ground other than that of negligence," to quote again Lord Greene in the Alderslade case. The "other ground" must not be so fanciful or remote that the proferens cannot be supposed to have desired protection against it; but subject to this qualification, which is no doubt to be implied from Lord Greene's words, the existence of a possible head of damage other than that of negligence is fatal to the proferens even if the words used are prima facie wide enough to cover negligence on the part of his servants."
- In particular, Biffa submits that there is nothing in Clause 2.2 of the Direct Agreement which would come within the third guideline so as to exclude liability for negligence. Rather, it is submitted that the head of damage in Clause 2.2 may be based on some ground other than negligence and that this is fatal even if the words used are wide enough to cover negligence.
- Biffa contends that these principles apply as much to clauses which seek to limit liability as it does to exclusion clauses. It points to the third guideline in Canada Steamship and the reference to the decision of the Court of Appeal in Alderslade v. Hendon Laundry Ltd  189 at 192 where Lord Greene MR said :
"Where the head of damage in respect of which limitation of liability is sought to be imposed by such a clause is one which rests on negligence and nothing else, the clause must be construed as extending to that head of damage, because it would otherwise lack subject-matter. Where, on the other hand, the head of damage may be based on some other ground than that of negligence, the general principle is that the clause must be confined in its application to loss occurring through that other cause to the exclusion of loss arising through negligence. The reason is that if a contracting party wishes in such a case to limit his liability in respect of negligence, he must do so in clear terms in the absence of which the clause is construed as relating to a liability not based on negligence."
- MEH submits, correctly in my judgment, that the apparent rigour of the guidelines in Canada Steamship has been reduced by subsequent decisions.
- First, Lord Morton's three guidelines have been emphasised to be "helpful guidance on the proper approach to interpretation and not laying down a code…" by Lord Bingham of Cornhill in HIH Casualty and General Insurance Ltd v. Chase Manhattan Bank  2 Lloyd's Rep 61 at para 11.
- In the same case Lord Scott of Foscote similarly said at para 116:
"Lord Morton was expressing broad guidelines not prescribing rigid rules. It cannot be right mechanically to apply the guideline incorporated in his third paragraph so as to produce a result inconsistent with the commercial purpose of the contract in question."
- Lord Hoffmann at para 63 expressed the relevant approach as follows:
"The question, as it seems to me, is whether the language used by the parties, construed in the context of the whole instrument and against the admissible background, leads to the conclusion that they must have thought it went without saying that the words, although literally wide enough to cover negligence, did not do so. This in turn depends upon the precise language they have used and how inherently improbable it is in all the circumstances that they would have intended to exclude such liability."
- Secondly, whilst the guidelines in Canada Steamship were based on Alderslade which involved a limitation of liability clause, it must be remembered that Alderslade was itself a case where there was a limitation of liability clause which did not mention negligence but which the Court of Appeal construed as being capable of applying to a case of negligent loss of articles sent to the laundry.
- In addition, subsequent decisions of the House of Lords have drawn a distinction between exclusion clauses and limitation of liability clauses. In Ailsa Craig Fishing v. Malvern Fishing Co  1 WLR 964, a case involving a limitation of liability clause which did not expressly refer to negligence, it was held that the clause covered liability in negligence. Lord Wilberforce said this at 996:
"Clauses of limitation are not regarded by the courts with the same hostility as clauses of exclusion: this is because they must be related to other contractual terms, in particular to the risks to which the defending party may be exposed, the remuneration which he receives, and possibly also the opportunity of the other party to insure."
- In the same case, Lord Fraser of Tullybelton said at 970 that:
"There are … authorities…which lay down very strict principles to be applied when considering the effect of clauses of exclusion or indemnity: see particularly… Canada Steamship …. In my opinion these principles are not applicable in their full rigour when considering the effect of the clauses merely limiting liability. Such clauses will of course be read contra proferentem and must be clearly expressed, but there is no reason why they should be judged by the specially exacting standards which are applied to exclusion and indemnity clauses. The reason for imposing such standards on these clauses is the inherent improbability that the other party to a contract including such a clause intended to release the proferens from a liability that would otherwise fall upon him. But there is no such high degree of improbability that he would agree to a limitation of the liability of the proferens…"
The other members of the House agreed with the speeches of Lord Fraser and Wilberforce.
- The distinction in Ailsa Craig was subsequently applied in George Mitchell Ltd v. Finney Lock  2 AC 803 where Lord Bridge, delivering the principal speech, said at 814
"… The whole point of Lord Fraser's reference was to express his opinion that the very strict principles laid down in Canada Steamship…as applicable to exclusion and indemnity clauses cannot be applied in their full rigour to limitation clauses."
- In the light of those authorities, I consider that the position may be summarised as follows:
(1) Limitation of liability clauses are construed with less rigour than exclusion of liability clauses or indemnity clauses.
(2) The guidelines in Canada Steamship provide helpful guidance on the proper approach to interpretation but do not lay down a code which prescribes rigid rules to be applied mechanically to interpret a particular clause.
(3) The relevant clause must be construed in the context of the whole instrument and against the admissible background, to ascertain whether the wording, although literally wide enough to cover negligence, did not do so.
(4) In the case of exclusion clauses or indemnity clauses it is inherently improbable that one party intended the clause to release the other party from liability for negligence or impose an indemnity for the other party's negligence. But, in the case of a limitation of liability clause there is no such high degree of improbability.
- Clause 2.2 of the Direct Agreement is a limitation of liability clause. It states that MEH shall owe no liability, duty or obligation to Biffa Leicester which is greater than would have existed if Biffa Leicester had been named as "Provider" under the Design and Build Deed. As I have held above, when read with Clause 47.1 of the Design and Build Deed this means that Biffa Leicester cannot recover more than the liquidated damages for delay under the Design and Build Deed.
- MEH argued that clause 47.1 deals with Liquidated Damages and that liquidated damages clauses are not to be equated with limitation of liability clauses. As Lord Upjohn said in Suisse Atlantique v. NV Rotterdamsche  AC 361 at 421 dealing with a demurrage clause, which is equivalent to a liquidated damages clause, such a provision is "an agreed damages clause for the benefit of both parties and it is not a clause of exclusion or limitation inserted for the benefit of one party only".
- However Clause 47.1 also provides a limit on liability of 7.5 % of the Contract Price and clause 2.2 of the Direct Agreement thereby contains a limitation on liability by reference to the liquidated damages provision. As a result, I consider that it is relevant to consider how limitation of liability clauses affect liability for a common law duty of care.
- Applying the principles which I have set out above, I have come to the conclusion that Clause 2.2 of the Direct Agreement is sufficient to limit MEH's liability in tort for delay caused by negligence.
- First, the present clause is a limitation of liability clause and is to be construed less rigorously than an exclusion clause. Secondly, whilst there is no express reference to "negligence" in Clause 2.2, the reference to "liability" and "duty" is evidently sufficient to cover liability in tort for negligence.
- Thirdly there is nothing improbable about MEH wishing to exclude liability in tort for negligence. Liability is imposed under Clause 2.1 of the Direct Agreement not only for breach of the warranty to comply with the Design and Build Deed but for breach of the warranty "to exercise in the performance of its duties and obligations whether contained in or implied by the Supply Contract the due skill, care, expertise and diligence to be expected of a competent and experienced professional carrying out works of a similar size, scope and complexity." To give Clause 2.2 any proper meaning it must apply to that contractual obligation in negligence. In those circumstances, it must apply to negligence obligations and to construe it as applying to contractual negligence but not a common law duty of care would produce a result inconsistent with the commercial purpose of Direct Agreement, to apply the words of Lord Scott in the HIH Casualty case.
- As a result, in my judgment Clause 2.2 would apply to limit MEH's liability in negligence at common law for delay damages by reference to the liquidated damages clause in the Design and Build Deed.
The Contractual Regime
- MEH also argues that the contractual provisions in this case are inconsistent with the imposition of a duty of care for damages for delay caused by the fire. The relevant contractual regime which applied in this case was as follows.
- First, under the PFI Contract between LCC and Biffa Leicester, Clause 58 required Biffa Leicester to take out the insurance described in Schedule 11 to that agreement, which included Contractors All Risks Insurance to cover "All risks of loss, destruction or damage to the Facilities, the Works and/or the Services from any cause not excluded". The insured parties, apart from LCC and Biffa Leicester, were "sub-contractors and suppliers of any tier and separate or agents acting on their behalf in respect of the facilities, the works and /or the services". The principal exclusions included at para1.3.4 "consequential losses not otherwise insured hereunder".
- Under Clause 58.3 of the Works Agreement between Biffa Leicester and Biffa Waste all insurance proceeds received under any Schedule 11 policy should be applied to reinstate the works.
- Under the Design and Build Deed the insurance provisions include a provision at Clause 21.5 that "Biffa Waste shall insure the Works from their delivery to the Sites. Biffa Waste shall pay to MEH such amount as Biffa Waste shall receive from its insurer in respect of the cost incurred by the Contractor in reinstating and repairing Works damaged or destroyed after delivery to the Sites …". The insurance taken out under the Project Agreement appears to have fulfilled or been treated as fulfilling this obligation.
- Under the agreement between MEH and HU there was no provision as to insurance, although the insurance taken out under the Project Agreement covered HU.
- In the contract between HU and OT Clause 15 required OT to take out certain insurances. Again, although the insurance taken out under the Project Agreement covered OT, there was no contractual term to that effect. Delay damages were limited by Clause 16 to 5% of the contract value which appears to be £1,284,800, giving a figure of £64,240.
- There are no relevant provisions of the agreement between OT and Pickfords or Millteam.
- The contractual position between the parties differs. Whilst there is a limited contractual scheme involving Biffa Leicester, Biffa Waste and MEH, there is no such scheme in relation to HU, OT or Pickfords. The terms of the Design and Build Deed between MEH and Biffa Waste demonstrate that those parties had agreed the contractual allocation of the risks of the reinstatement of physical damage caused to the plant during construction. However the insurance under the Project Agreement expressly excluded consequential loss which arose from the physical damage and there was no agreement that such loss should be insured.
- Unlike the CRS case referred to above, this is not a case where the fire relieves MEH from liquidated damages. Rather, the contractual allocation of risks left MEH with a contractual liability to pay Biffa Leicester and Biffa Waste damages for consequential loss caused by physical damage to the plant.
- In the CRS case the main contractor, Wimpey, was entitled to an extension of time for loss caused by fire under Clause 25.4.3 of the relevant contractual scheme. This does not apply in this case. Equally, as against Hall, the Court of Appeal held that the risk of delay caused by fire was expressly provided for.
- In the present case, MEH is not protected by a contractual scheme which prevents Biffa Leicester and Biffa Waste recovering losses consequential on the fire from MEH. In such circumstances, to the extent that the fire was caused by MEH's negligence, there is no reason why MEH should not owe a duty of care to Biffa Leicester and Biffa Waste in respect of such loss. As I have said, such loss is loss consequent to physical damage. The physical damage caused by the fire gave rise to loss in terms of reinstatement costs and delay costs. In such circumstances, I consider that the question of the recoverability of the delay costs depends on the existence of a duty of care to prevent loss caused by physical damage to property. Given the fact that such loss is not allocated under the contractual scheme then, in my judgment the elements of foreseeability and proximity are made out and I consider that it would be fair, just and reasonable to impose a duty of care on MEH.
- In the CRS case, Brooke LJ stated obiter at 81 that the loss caused by delay as a result of the fire was properly described as "pure economic loss" on the basis that no duty of care was owed by Hall in respect of the physical damage caused by the fire. That might be read to indicate that, contrary to the view that I have expressed, that when a duty of care was not owed in relation to reinstatement costs caused by physical damage the existence of a duty of care in relation to delay costs caused by physical damage should be determined on principles derived from Hedley Byrne and Henderson v. Merrett. Such observations were clearly obiter and the other authorities do not indicate that this is the position, to the extent that those observations are to be read to that effect.
- However, I consider that MEH's duty to Biffa Leicester must take into account the limitation of liability in the terms of the Direct Warranty and the Design and Build Deed. Those parties have so structured their relationship that it would, in my judgment, be inconsistent to impose unlimited liability. In particular, I do not consider that a duty of care should be permitted to circumvent or escape the contractual limitation of liability for the acts and omissions that also constitute the tort.
- I therefore hold that MEH owes a duty of care to Biffa Leicester to prevent consequential loss in respect of physical damage by fire to the plant, but that the duty of care is limited by the terms of Clause 2.2 of the Direct Warranty and Clause 47.1 of the Design and Build Deed. Accordingly, Biffa Leicester cannot recover from MEH damages for tort for negligence which would be inconsistent with the position I have already found to apply under the terms of those agreements.
Liability of OT to Biffa Leicester and Biffa Waste in tort
- Biffa Leicester and Biffa Waste also contend that, as persons with sufficient proprietary interests in the Ball Mill, just as they were owed a duty by MEH, they were owed a duty of care by OT.
- OT submits that it is not fair, just and reasonable to impose a duty of care on it and thereby seek to bypass the contractual regime which the parties carefully put in place in the contractual chain starting from Biffa Leicester and ending with OT. In particular, OT submits that it is not fair, just and reasonable for Biffa Leicester and Biffa Waste to seek to overcome the contractual limitations in the chain, including the limit in terms of liquidated damages and, in particular, the financial cap in the contract between OT and HU of £64,240 for delay.
- In the case of OT, there is no direct agreement between OT and either Biffa Leicester or Biffa Waste under which there was an agreed allocation of the risks of the reinstatement of physical damage caused to the plant during construction. However, the terms of the insurance provided by LCC under the Project Agreement did provide that OT, as a lower tier sub-contractor, would have the benefit of cover under those insurance provisions. OT was therefore a co-insured with Biffa Leicester and Biffa Waste in relation to the reinstatement costs and I consider that this would prevent the recoverability of costs covered by the insurance from OT in tort. Whether the position of a co-insured is that as a matter of law there is no claim for such insured sums or that the duty of care does not extend to the recovery of such sums, the conclusion is the same: see the contractual position set out by Lord Hope in CRS v. Taylor Young  1 Lloyd's Rep 272 at para 65.
- OT is not protected, however, either by a contractual scheme or a scheme of co-insurance which prevents Biffa Leicester and Biffa Waste recovering losses consequential on the fire from OT. In such circumstances, to the extent that the fire was caused by OT's negligence, there is no reason why OT should not owe a duty of care to Biffa Leicester and Biffa Waste in respect of such loss. In my judgment, such loss is loss consequent to physical damage. The physical damage caused by the fire gave rise to loss in terms of reinstatement costs and delay costs. In such circumstances, I consider that the question of the recoverability of the delay costs depends on the existence of a duty of care to prevent loss caused by physical damage to property. Given the fact that such loss is not allocated under the contractual scheme then, in my judgment the elements of foreseeability and proximity are made out and I consider that it would be fair, just and reasonable to impose a duty of care on OT.
- Because there is no contractual relationship between OT and Biffa Leicester or Biffa Waste, there is no relevant exclusion of limitation clause in any contract between those parties. In this case, there was a limitation of liability clause in the agreement between OT and HU which limited OT's liability to £64,240 for delay. Should that provision have an effect upon the scope and extent of OT's duty of care to Biffa Waste or Biffa Waste in respect of delay losses arising from the fire?
- The impact of a contractual chain on a party lower down the chain was referred to in Henderson where Lord Goff said that in cases of physical damage "the sub-contractor may be protected from liability by a contractual exemption clause authorised by the building owner". In this case there is no suggestion that the limitation of liability clause between HU and OT was authorised by any party higher up the chain, in particular Biffa Waste or Biffa Leicester. In the absence of some evidence that the clause was authorised by a party or otherwise to show that it is just, fair and reasonable for the clause to affect the scope or extent of a duty of care to that party, I do not consider that the clause has any such effect.
- Accordingly, in my judgment, OT owes Biffa Leicester and Biffa Waste a duty of care in relation to consequential loss resulting from delay, in so far as the fire was caused by OT's negligence or the negligence of parties for whom it is liable.
Liability of OT to MEH in tort
- In relation to MEH, the first question is whether MEH has sufficient proprietary or possessory interest in the Plant for a duty of care to be owed to it in relation to damage caused to the Plant. As set out above, in Leigh & Sillavan Ltd v. Aliakmon Lord Brandon emphasised that this depends on whether MEH had either the legal ownership of or a possessory title to the Plant. It is not enough for MEH to have only contractual rights in relation to the Plant which have been adversely affected by the loss of or damage to it.
- MEH relies on its position as set out in Clause 20 of the Design and Build Deed under which it is provided:
"The Contractor shall take full responsibility for the care of the Works and materials and Plant for incorporation therein from the Commencement Date until the date of the issue of the Taking-Over Certificate for the whole of the Works when the responsibility for the said care shall pass to the Employer provided that the Contractor shall take full responsibility for the care of any outstanding Works and materials and Plant for incorporation therein which it undertakes to finish during the Defects Liability Period until such outstanding Works have been completed pursuant to Clause 49."
- MEH submits that its position was equivalent to a bailee and that it had a sufficient interest in the Plant for it to be owed a duty of care in respect of damage to the Plant. MEH contends that a bailee in possession has a right to sue a stranger for loss of goods due to the stranger's negligence and refers to The Winkfield  P 42 at 54.
- In The Winkfield mail was lost in a collision at sea and the Postmaster-General as bailee of letters and parcels in transit by post brought proceedings to recover the value of the lost post. The Court of Appeal overruled a previous decision and held that in an action against a stranger for loss of goods caused by his negligence, the bailee in possession can recover the value of the goods, although he would have had a good answer to an action by the bailor for damages for the loss of the thing bailed. In giving judgment, Collins MR at 60 said:
"the root principle of the whole discussion is that, as against a wrongdoer, possession is title. The chattel that has been converted or damaged is deemed to be the chattel of the possessor and of no other, and therefore its loss or deterioration is his loss, and to him, if he demands it, it must be recouped…. As between bailee and stranger possession gives title - that is, not a limited interest, but absolute and complete ownership, and he is entitled to receive back a complete equivalent for the whole loss or deterioration of the thing itself."
- I consider that MEH did have sufficient interest in the Plant. It was the party who had possession of the Plant so that it could perform its obligations under the Design and Build Deed. The rights of MEH were not limited to contractual rights in the Plant which have been adversely affected. It was given responsibility to care for the Plant until Taking-Over and as such had possession of the Plant for that purpose. I therefore consider that MEH is entitled to recover such loss as it suffers arising from damage to the Plant, which would include consequential loss caused by the delay to completion as a result of that damage.
- Did OT owe MEH a duty of care? I consider that the same principles as applied to the duty of care to Biffa Leicester and Biffa Waste apply to any duty of care owed by OT to MEH. Whilst MEH is closer to OT in the contractual chain, that does not alter the position. In relation to the limitation of liability clause between OT and HU, there is no evidence that such a clause was authorised by MEH and I do not consider that there is anything to show that, in considering whether it is just, fair and reasonable to impose liability, the clause should affect the scope or extent of a duty of care to MEH.
- Accordingly, in my judgment, OT owes MEH a duty of care in relation to consequential loss resulting from delay, in so far as the fire was caused by OT's negligence.
Liability of MEH and OT in tort for the fire
- In this case, I have found that the relevant negligence was that of HU and Pickfords. In the case of MEH it is accepted by Biffa that HU was an independent contractor and therefore MEH has no general liability for the negligence of HU's servants and there is no basis for imposing that general liability for the servants of OT. The basis on which Biffa asserts that MEH has liability in tort is because the relevant welding and grinding work was ultra-hazardous and MEH owed a non-delegable duty to Biffa Waste and Biffa Leicester in respect of that work.
- In relation to OT the case is put in two ways. First, it is contended that OT was vicariously liable for the employees of Pickfords because OT had effective control over them so that Pickfords are not to be treated as independent contractors. Secondly, as in the case of MEH it is contended that if OT did not have vicarious liability for the Pickfords employees, then as in the case of MEH, there was a non-delegable duty which OT could not delegate by employing an independent contractor to carry out that work.
- It is convenient first to consider the question of whether OT was vicariously liable for the acts and omissions of Pickfords' employees before considering the law applying to non-delegable duties in relation to both MEH and OT.
- I deal first with the law that applies in establishing vicarious liability. I then deal with the facts and analyse the relationship between Pickfords and OT to see whether it is properly characterised as a relationship of master and servant rather than a relationship between an employer and an independent contractor.
The law of vicarious liability
- The leading authority on this aspect is the decision of the House of Lords in Mersey Docks and Harbour Board v. Coggins & Griffith (Liverpool) Limited  AC 1. In that case the harbour board hired a mobile crane to a firm of stevedores for loading a ship, providing a craneman, Newall, who was employed and paid and liable to be dismissed by it. The general hiring conditions stipulated that the craneman should be the servant of the hirers. In the course of the operation he injured a third person by negligently driving the crane. At the time the stevedores had the immediate direction and control of the operation of picking up and moving each piece of cargo but had no power to direct how the crane should be worked or the controls of the crane manipulated. The House of Lords held that the harbour board, as general permanent employer, was liable.
- The test to be applied was dealt with as follows. Lord Simon considered which party had the authority to direct the manner in which the employee should work the crane. He said at 10:
"The appellant board had engaged Newall, and it paid his wages: it alone had power to dismiss him. On the other hand, the respondent company had the immediate direction and control of the operations to be executed by the crane driver with his crane, e.g., to pick up and move a piece of cargo from shed to ship. The respondent company, however, had no power to direct how the crane driver should work the crane. The manipulation of the controls was a matter for the driver himself. In the present case the accident happened because of the negligent way in which the crane driver worked his crane, and since the respondent company had no control over how he worked it, as distinguished from telling him what he was to do with the crane, it seems to me to follow that Newall's general employers must be liable for this negligence and not the hirers of the apparatus."
- At 12 he continued:
"I would prefer to make the test turn on where the authority lies to direct, or to delegate to, the workman, the manner in which the vehicle is driven. It is this authority which determines who is the workman's "superior." In the ordinary case, the general employers exercise this authority by delegating to their workman discretion in method of driving, and so the Court of Appeal correctly points out that in this case the driver Newall, "in the doing of the negligent act, was exercising his own discretion as driver - a discretion which had been vested in him by his regular employers when he was sent out with the vehicle - and he made a mistake with which the hirers had nothing to do." If however the hirers intervene to give directions as to how to drive which they have no authority to give, and the driver pro hac vice complies with them, with the result that a third party is negligently damaged, the hirers may be liable as joint tort-feasors."
- Lord Macmillan dealt with the test in terms of authority to tell the employee how he was to handle the crane. At 13 he said:
"The stevedores were entitled to tell him where to go, what parcels to lift and where to take them, that is to say, they could direct him as to what they wanted him to do; but they had no authority to tell him how he was to handle the crane in doing his work. In driving the crane, which was the appellant board's property confided to his charge, he was acting as the servant of the appellant board, not as the servant of the stevedores."
- Lord Porter expressed the test in terms of the party entitled to tell the employee the way in which he is to do the work and said at 17:
"amongst the many tests suggested I think that the most satisfactory, by which to ascertain who is the employer at any particular time, is to ask who is entitled to tell the employee the way in which he is to do the work upon which he is engaged. If someone other than his general employer is authorized to do this he will, as a rule, be the person liable for the employee's negligence. But it is not enough that the task to be performed should be under his control, he must also control the method of performing it."
- Lord Uthwatt expressed the test as being authority to control the manner of execution of the act. He said at 21:
"The hirer's powers in this regard are directed merely to control of the job and the part the workman is to play in it, not to control of the workman, and the workman in carrying out the behests of the hirer as to what is to be done is not doing more than implementing the general employer's bargain with the hirer and his own obligations as a servant of his general employer. To establish the power of control requisite to fasten responsibility on him, the hirer must in some reasonable sense have authority to control the manner in which the workman does his work, the reason being that it is the manner in which a particular operation (assumed for this purpose to be in itself a proper operation) is carried out that determines its lawful or wrongful character. Unless there be that authority the workman is not serving the hirer, but merely serving the interests of the hirer, and service under the hirer in the sense I have stated is essential."
- At 23 Lord Uthwatt continued:
"The proper test is whether or not the hirer had authority to control the manner of execution of the act in question. Given the existence of that authority its exercise or non-exercise on the occasion of the doing of the act is irrelevant. The hirer is liable for the wrongful act of the workman, whether he gave any specific order or not. Where there is no such authority vested in the hirer, he may, by reason of the giving of a specific order, be responsible for harm resulting from the negligent execution of that order."
- In the Mersey Docks and Harbour Board case the question was to ascertain which of the two parties was liable. In some cases, particularly on construction projects, more than one party may be liable.
- In Viasystems (Tyneside) Ltd v. Thermal Transfer (Northern) Ltd  QB 510 the claimants engaged the first defendants to install air conditioning in their factory. The first defendants sub-contracted ducting work to the second defendants. That ducting work was being carried out by a fitter and his mate, supplied to the second defendants by the third defendants on a labour-only basis, under the supervision of a fitter working for the second defendants. The fitter's mate, Darren Strang, negligently caused the fracture of the fire protection sprinkler system, resulting in severe flood damage to the factory. At first instance, the claim against the second defendants was dismissed and the third defendants were held to be vicariously liable for the fitter's mate's negligence.
- On appeal it was held that both the second and third defendants were entitled, and in theory obliged, to control the fitter's mate so as to prevent his negligent act and they were jointly vicariously liable for his negligence. May LJ referred
to the decision of the Court of Appeal in Denham v Midland Employers' Mutual Assurance Ltd  2 QB 437.
- At paras 15 to 17 May LJ said this:
"15… Denning LJ referred to the Mersey Docks case  AC 1. He said that such a transfer rarely takes place when a man is lent with a machine. But a transfer does sometimes take place when a man is lent to help with labouring work. He said, at p 444:
"The temporary employer can then no doubt tell the labourer how he is to do the job. The labourer becomes so much part of the organisation to which he is seconded that the temporary employer is responsible for him and to him."
Denning LJ then applied the principles to the facts and continued:
"These results are achieved in law by holding that Clegg became for the time being the temporary servant for Le Grands. There is no harm in thus describing him so long as it is remembered that it is a device designed to cast liability on the temporary employer. The real basis of the liability is, however, simply this: if a temporary employer has the right to control the manner in which a labourer does his work, so as to be able to tell him the right way or the wrong way to do it, then he should be responsible when he does it in the wrong way as well as in the right way. The right of control carries with it the burden of responsibility."
16. In my view, Denham's case, applying the principles in the Mersey Docks case, relevantly states and illustrates those elements of principles most relevant to the present appeal. To look for a transfer of a contract of employment is, in a case such as this, no more than a distracting device; in the present case a misleading one. Darren Strang's employment was not transferred. The inquiry should concentrate on the relevant negligent act and then ask whose responsibility it was to prevent it. Who was entitled, and perhaps theoretically obliged, to give orders as to how the work should or should not be done? In my view, "entire and absolute control" is not, at least since the Mersey Docks case, a necessary precondition of vicarious liability.
17. In the present appeal, Mr Prynne, for the third defendants, correctly formulated the question to determine vicrious liability, substantially as I have outlined it, as who was entitled to exercise control over the relevant act or operation of Darren Strang.…"
- Rix LJ at para 78 agreed that the balance of authority was in favour of a solution where dual vicarious liability was based on the right to control. At paras 79 and 80 he added:
"79 However, I am a little sceptical that the doctrine of dual vicarious liability is to be wholly equated with the question of control. …
I would hazard, however, the view that what one is looking for is a situation where the employee in question, at any rate for relevant purposes, is so much a part of the work, business or organisation of both employers that it is just to make both employers answer for his negligence. What has to be recalled is that the vicarious liability in question is one which involves no fault on the part of the employer. It is a doctrine designed for the sake of the claimant imposing a liability incurred without fault because the employer is treated by the law as picking up the burden of an organisational or business relationship which he has undertaken for his own benefit.
80 One is looking therefore for practical and structural considerations. Is the employee, in context, still recognisable as the employee of his general employer and, in addition, to be treated as though he was the employee of the temporary employer as well? Thus in the Mersey Docks situation, it is tempting to think that liability will not be shared: the employee is used, for a limited time, in his general employer's own sphere of operations, operating his general employer's crane, exercising his own discretion as a crane driver. Even if the right of control were to some extent shared, as in practice it is almost bound to be, one would hesitate to say that it is a case for dual vicarious liability. One could contrast the situation where the employee is contracted-out labour: he is selected and possibly trained by his general employer, hired out by that employer as an integral part of his business, but employed at the temporary employer's site or his customer's site, using the temporary employer's equipment, and subject to the temporary employer's directions. In such a situation, responsibility is likely to be shared. A third situation, where an employee is seconded for a substantial period of time to the temporary employer, to perform a role embedded in that employer's organisation, is likely to result in the sole responsibility of that employer."
- In Hawley v. Luminar Leisure Ltd  IR Rep 307 the Court of Appeal considered what had been said in Viasystems. That case involved a question of whether the nightclub owners or the employer of a nightclub doorman was liable for injuries suffered. In considering what was said in Viasystems, Hallett LJ giving the judgment of the court summarised the position at para 33 as follows:
"Thus, May L.J. focused the court's attention on the question of control. He did not envisage a finding of dual vicarious liability in many factual situations. Rix L.J., however, doubted that the doctrine of vicarious liability should depend solely on the question of control and suggests a broader test of "whether or not the employee in question is so much part of the work business or organisation of both employers that it is just to make both employers answer for his negligence" (see para.79)."
- Hallett LJ then dealt with the finding of dual vicarious liability as follows at para 82:
"82 We turn to the question of dual vicarious liability. We accept that in Viasystems, May L.J. and Rix L.J. framed the question to be asked in that connection in somewhat different ways. As we have indicated May L.J. focused on what he called the core question namely "who was entitled and therefore obliged to control the employee's relevant negligent act so as to prevent it". Rix L.J. advocated a broader or more flexible test. He suggested one should ask whether the negligent employee is so much part of the work, business or organisation of the employers concerned as to make it just for both to answer for his negligence on a no fault basis. He did not say that the degree of control was irrelevant, far from it. The extent to which an organisation can control another's employee will obviously be relevant to the question of how much the employee has become embedded in that organisation. Every case is fact specific and many factors may be relevant. The question of control may not be wholly determinative, but, for as long as Mersey Docks remains the authoritative decision on when responsibility for an employee's tortious acts may pass from a general employer to a "temporary deemed employer", the question of control remains at the heart of the test to be applied."
- From those authorities, I derive the following principles relevant to this case:
(1) The focus of the enquiry is control over the negligent act. The relevant enquiry is to ascertain which party has authority to control the manner in which the employee carries out the work which was performed negligently.
(2) It is control over the manner in which the employee carries out the work not control over what work the employee carries out. Liability attaches to the party who was entitled to give orders as to how the work should or should not be done.
(3) An employee may be given delegated authority as to the manner in which he carries out the work and in such a case it is the party which gave that authority which will be liable if the work is carried out negligently.
The relationship between OT and Pickfords
- In the present case, the relevant arrangements were as follows:
(1) The people carrying out the Welding and Grinding Works were employed by Pickfords who were the general employer.
(2) They were carrying out the Welding and Grinding Works at a site where the effective main contractor was HU who had sub-contracted the relevant work to OT.
(3) OT had engaged Pickfords to supply the materials, the labour and the welding equipment, not to carry out any particular work.
(4) OT had engaged Millteam to provide two employees to be present on site during the Welding and Grinding Works.
- In these circumstances, based on the relevant authorities, I consider that the test is this: was OT entitled and therefore obliged to control the manner in which the employees of Pickfords carried out their work so as to prevent the relevant negligent act?
- Biffa rely on the following matters as showing that OT did have this type of control:
(1) That Millteam was a provider of labour to OT and had actual authority to provide direction to Pickfords as to what work Pickfords was to do and how.
(2) That the welding equipment used by Pickfords was provided as a separate item to the welding personnel rather than as a combined package price.
(3) That OT provided some of the tools used by Pickfords over the weekend.
(4) That Pickfords were simply contracted to provide welders who required direction from OT via Millteam.
- Biffa therefore submits that Pickfords was not employed by OT as an independent sub-contractor but was engaged to provide labour only with the intention that the labour would act in accordance with OT's directions given through Millteam. Biffa contends that in such circumstances OT had the relevant control over Pickfords and is vicariously liable for the negligence of Pickfords personnel on site.
- OT submits that Pickfords were independent contractors and relies on the following:
(1) That Pickfords did not agree to carry out their welding work at the direction or under the control of Millteam. Rather both Millteam and Pickfords were contracted to do certain work and were free to perform the work in their own way.
(2) OT had no presence on site when Pickfords were doing the work and did not control the way Pickfords did it.
(3) There was no agreement with either Millteam or Pickfords that OT should be responsible for the safe method of working. Rather OT was aware that Mr Brix of HU was responsible for this.
(4) That Mr Brix of HU dealt with matters of site safety including issuing the hot work permit.
(5) That Pickfords personnel were qualified welders operating in their general operator's field of operations, using their general operator's equipment and exercising their own discretion as to how to do the work. OT did not control the manner of working.
(6) That Pickfords personnel decided when and how to carry out the work, including engaging additional Pickfords personnel, wetting down the Ball Mill, removing combustible material and taking other fire precautions.
- I have come to the conclusion that in this case the Pickfords employees were not acting as independent contractors but where acting in a role which imposed vicarious liability on OT for their negligence.
- The work which was being carried out on the weekend of 26/27 June 2004 had been discussed between HU and OT at the meeting at Gelsenkirchen on 21 June 2004. The work was to be carried out by Pickfords but OT was to provide supervision. On 23 June 2004 Mr Groeble requested OT to provide one or two men for supervising and performing the necessary work. By 24 June 2004 Mr Groeble said that it was necessary to have a responsible person to decide what to do and supervise the actions. This clearly shows that OT were to supervise the work being carried out on the weekend of 26/27 June 2004.
- OT organised the work which they had designed and which they were carrying out under their contract with HU by engaging Millteam and Pickfords.
- The arrangement with Millteam was that they would provide labour to work for OT in carrying out the installation and maintenance of milling plant. Millteam were to be paid at hourly rates for any labour they supplied. There was also a provision for Millteam to provide equipment but this had to be the subject of a separate agreement. The personnel supplied under this arrangement for the weekend of 26/27 June 2004 both describe themselves as steel erectors.
- The agreement with Pickfords similarly was an agreement for Pickfords to provide welders, provide welding equipment and manufacture the "top hat" washers.
- In setting up those arrangements and sending Mr Isaksson and Mr Ek from Millteam, Mr Nygren was evidently wanting Millteam to be involved in carrying out the operations on 26/27 June 2004. The evidence indicates that there was uncertainty as to what Millteam went to do. Mr Nygren says in his witness statement that Millteam were to go fit the washer plates, essentially with supervision being provided by Mr Brix. In his evidence he cast a wider responsibility on Millteam in terms of supervision and instruction of Pickfords. Mr Isaksson says he was asked to see if he could come up with any ideas for curing the problems of breaking bolts and find a way of protecting them. Mr Ek says the instructions were not very clear but were to help out with some problems which had been found.
- It is highly unlikely that Mr Nygren would engage two Millteam steel erectors to go to fit the washer plates. Given what was said at the meeting in Gelsenkirchen and in the subsequent e-mails from Mr Groeble, the much more likely explanation was that which Mr Nygren gave in his oral evidence that Mr Isaksson and Mr Ek were being sent on site to supervise the work on behalf of OT. As I have found, in carrying out that supervision they were involved in matters of health and safety, in the supply of tools from the cabin and in checking fire precautions, all of which is entirely consistent with their role as supervisors, with the entitlement to instruct Pickfords both how to do the work and as to what work had to be done.
- This indicates that OT through Millteam had the right to control Pickfords' operations. It demonstrates that OT was entitled to control the manner in which Pickfords carried out their work, particularly in terms of taking precautions to avoid fire.
- Reliance is placed by OT on the role of Mr Brix of HU. However, the role of HU in the process has to be seen in its proper contractual context on this construction project. HU were effectively the main contractor and therefore had overall responsibility for all work which was carried out on site. In that role they had responsibilities, for example, in issuing hot work permits and preventing poor performance by sub-contractors. In carrying out such control in relation to Pickfords in respect of the work being carried out on 26/27 June 2004, they could not impose control over Pickfords in relation to the work being carried out unless OT was entitled to exercise that control over Pickfords. I therefore consider that control exercised by HU on 26/27 June 2004 if anything, reinforces the fact that Pickfords were to be controlled in terms of the health and safety aspects by OT. The fact that OT permitted HU to exercise the relevant control over Pickfords does not therefore show that OT did not have the entitlement to exercise that control.
- As a result, I do not find that the matters relied upon by OT lead to the conclusion for which they contend. In particular:
(1) Pickfords would need directions to know what to do and how to do it. The only party who could give those directions would be OT. OT chose to engage Millteam and to use HU site staff to carry out that role on their behalf. It was however OT who was entitled to exercise that control and the fact that it was not done adequately does not reduce the entitlement to control.
(2) The fact that OT did not have a presence on site does not answer the question of who was entitled to control the operations. The fact OT did not do so does not affect the existence of an entitlement to do so.
(3) The involvement of HU as a main contractor in dealing with matters of safety does not detract from the fact that it was OT who was entitled to control Pickfords. Indeed it shows that Pickfords was not free to perform the work in their own way and reinforces the fact that OT was entitled to control Pickford' operations.
(4) The fact that Pickfords supplied specialist welders and equipment and that the welders had a degree of autonomy as to how they made the welds or ground the bolt heads does not affect the question of OT's control. The relevant authority given to Pickfords' personnel who were provided to OT on a labour only basis, came from OT.
(5) The fact that Pickfords personnel carried out the safety precautions which proved inadequate does not show who was entitled to control the operations.
- Accordingly, I find that OT was vicariously liable for the negligence of the Pickfords' personnel which caused or contributed to the fire.
Non-delegable Duties in Tort
- Generally, where a person employs another person to do work, the employing party is not liable at common law for the consequences of the negligence of the other party unless there is a relationship of master and servant between them. As Slesser LJ said in giving the judgment of the Court of Appeal in Honeywill v. Larkin  1 KB 191 at 196: "It is well established as a general rule of English law that an employer is not liable for the acts of his independent contractor in the same way as he is for the acts of his servants or agents, even though these acts are done in carrying out the work for his benefit under the contract."
- However, Slesser LJ referred at 197 to the exception which applies to "extra-hazardous acts, that is, acts which, in their very nature, involve in the eyes of the law special danger to others; of such acts the causing of fire and explosion are obvious and established instances."
- That exception was further considered by Slesser LJ at 197. He referred to Black v. Christchurch Finance Co.  A C 48, 54, a case involving a fire which spread to an adjoining owner's land where the Privy Council stated in their advice:
"The lighting of a fire on open bush land, where it may readily spread to adjoining property and cause serious damage, is an operation necessarily attended with great danger, and a proprietor who executes such an operation is bound to use all reasonable precautions to prevent the fire extending to his neighbour's property (sic utere tuo ut alienum non laedas). And if he authorises another to act for him he is bound, not only to stipulate that such precautions shall be taken, but also to see that these are observed, otherwise he will be responsible for the consequences: see Hughes v. Percival (1883) 8 App. Cas. 443, and authorities there cited."
- Slesser LJ also referred to Holliday v. National Telephone Co.  2 Q B 392, where a passer-by on the highway was injured through the negligence of an independent contractor where the employer was held to be liable. A L Smith LJ said at 399:
"The defence is that the defendants are not liable in respect of the injury sustained by the plaintiff, because it was occasioned by the negligence of an independent contractor for whom they are not responsible. In my opinion, since the decision of the House of Lords in Hughes v. Percival (1883) 8 App. Cas. 443, and that of the Privy Council in Black v. Christchurch Finance Co.  A C 48, it is very difficult for a person who is engaged in the execution of dangerous works near a highway to avoid liability by saying that he has employed an independent contractor, because it is the duty of a person who is causing such works to be executed to see that they are properly carried out so as not to occasion any damage to persons passing by on the highway."
- Slesser LJ then said
"The decision in this case, in our judgment, does not depend merely on the fact that the defendants were doing work on the highway, but primarily on its dangerous character, which imposes on the ultimate employers an obligation to take special precautions, and they cannot delegate this obligation by having the work carried out by independent contractors. This is equally true when the work being done by the independent contractor for the ultimate employer is being done on another person's premises."
- Slesser LJ cited with approval a passage from the judgment of Talbot J. in Brooke v. Bool  2 K. B. 578, 587. In that case the defendant went into the plaintiff's shop, and got another man to help to see if there was an escape of gas. That other man proceeded to investigate, using a naked light. Talbot J. said:
"It is obvious that to examine a place in which an escape of gas is suspected is highly dangerous, unless proper care is taken; and that one of the necessary precautions against disaster is to avoid the use of a naked light. In my opinion the defendant, having undertaken this examination, was under a duty to take reasonable care to avoid danger resulting from it to the shop and its contents, and, if so, he cannot escape liability for the consequences of failure to discharge this duty by getting, as he did, some one to make the examination, or part of it, for him, whether that person is an agent, or a servant, or a contractor, or a mere voluntary helper. This is the principle of such cases as Bower v. Peate 1 Q B D 321; Black v. Christchurch Finance Co.  A C 48; Hughes v. Percival 8 App. Cas. 443; Hardaker v. Idle District Council  1 Q B 335; and see the judgment of Lord Blackburn in Dalton v. Angus 6 App Cas 740. The principle is that if a man does work on or near another's property which involves danger to that property unless proper care is taken, he is liable to the owners of the property for damage resulting to it from the failure to take proper care, and is equally liable if, instead of doing the work himself, he procures another, whether agent, servant or otherwise, to do it for him."
- The facts in Honeywill v. Larkin were that the plaintiffs, Honeywill had installed acoustic equipment in a cinema owned by Denman Picture Houses. They wanted to have photographs taken of their work and obtained permission from Denman. They employed Larkin to take photographs which involved flash photography by igniting magnesium powder. The photographer ignited the flash at a distance of four feet from the cinema curtains and they caught fire. Honeywill subsequently paid sums to Denman and sought to recover them from Larkin. Larkin asserted that they were an independent contractor and therefore Honeywill was not liable to Denman for their actions. Rather, Larkin said that they were the only persons who Denman could sue.
- Slesser LJ dealt with an argument which had found favour at first instance, based on the words of Lord Watson in Dalton v. Angus that the work "was not necessarily attended with risk. It was work which, as a general rule, would seem to be of quite a harmless nature." Slesser LJ said at 200:
"But, with respect, he is ignoring the special rules which apply to extra-hazardous or dangerous operations. Even of these it may be predicated that if carefully and skilfully performed, no harm will follow: as instances of such operations may be given those of removing support from adjoining houses, doing dangerous work on the highway, or creating fire or explosion: hence it may be said, in one sense, that such operations are not necessarily attended with risk. But the rule of liability for independent contractors' acts attaches to these operations, because they are inherently dangerous, and hence are done at the principal employer's peril."
- In my judgment, the principle relevant to this case, to be derived from Honeywill is that a person who employs an independent contractor will be liable for the negligence of that independent contractor where the independent contractor is engaged to carry out "extra-hazardous or dangerous operations". Such operations are those which, in their very nature, involve in the eyes of the law special danger to others and include removing support from adjoining houses, doing dangerous work on the highway, or creating fire or explosion. Such operations are inherently dangerous although if carefully and skilfully performed they will cause no harm. The employer is under a non-delegable duty to see that all reasonable precautions are observed, otherwise he will be responsible for the consequences. The employer is liable even if he has stipulated that all reasonable precautions should be taken by the independent contractor, together with an indemnity.
- OT submits that the principle should not be applied in this case for the following reasons:
(1) The concept of extra-hazardous acts and the decision in Honeywill has been severely criticised and it is submitted that the case should be limited to its particular facts, which are very different from this case. OT relies on the decisions cited by Professor Atiyah in Vicarious Liability in the Law of Torts at p.372, Bottomley v. Todmorden Cricket Club  EWCA Civ 1575 and Stevens v. Broadribb Sawmilling Co Pty Ltd 160 CLR 16.
(2) In Honeywill the tortfeasor was not carrying out work for the benefit of the building owner but was carrying out work for Honeywill which was not of any benefit to the building owner. Here, Pickfords were carrying out work for the benefit of the Claimant building owners.
(3) In the Scottish case of MTM Construction Limited v. William Reid Engineering Limited  SLT 211 the court found that an intermediate contractor was not liable in tort for the acts of an independent contractor. Where there was a contractual chain, it was held that it was only the ultimate employer and the party who carried out the works who had liability for the negligent performance of works which are extra-hazardous and inherently dangerous resulting in loss to a third party.
(4) Welding on a building site is not an ultra-hazardous activity.
(5) That there cannot be strict liability on OT where the Claimants had run the risk of damage from the dangerous thing or where the works were carried out for the benefit of the Claimants. In such circumstances, it must be shown that OT were negligent.
- I first deal with the criticism of the decision in Honeywill. This has come from three sources. First, Professor Atiyah in his chapter on "The Dangerous Operations Doctrine" in Vicarious Liability in the Law of Torts, points out that there is no sound definition of "extra-hazardous" activities and he says that the decisions "have produced some quite preposterous distinctions arising out of the difficulty of saying what is an inherently dangerous operation." He sets out cogent reasons why the exception might be the subject of re-consideration by the House of Lords. He refers to dicta in Hughes v. Percival (1883) 8 App Cas 443 at 447 and Rainham Chemical Works v. Belvedere Fish Guano  2 AC 465 at 477 and 490, 491, together with the decisions in Daniel v. Metropolitan Railway (1871) LR 5 HL 45 and Read v. Lyons  AC 156 which cast doubt on the exception.
- Secondly, the High Court of Australia in Stevens v. Broadribb Sawmilling Co Pty Ltd 160 CLR 16 by a majority held that the exception had no place in Australian law. Mason J at 30 referred to the elusive nature of the distinction between acts that are extra-hazardous and those that are not. He stated that the traditional common law response to the creation of a special danger is not to impose strict liability but to insist on a higher standard of care in the performance of an existing duty. Similar reasons were given by Wilson J and Dawson J at 39 to 44 who referred to Professor Atiyah's views.
- Thirdly, in Bottomley v. Todmorden Cricket Club  EWCA Civ 1575 an argument based on Honeywill was raised in a case concerning injuries caused during a pyrotechnics display. Brooke LJ, with whom Waller and Clarke LJJ agreed, said that it had not been necessary for the Court of Appeal to consider the criticisms of Honeywill by Professor Atiyah or in Stevens v. Broadribb. He said that Honeywill was binding on the Court of Appeal "although it may well be that the House of Lords today would prefer to avoid subtle distinctions between what is and is not "extra-hazardous" and would follow Mason J" in relation to the traditional common law response.
- Clearly, the decision in Honeywill is binding on me. However, I observe that the concept of what is a "hazardous" or "extra-hazardous" activity is a difficult one to apply to cases which come before the Technology and Construction Court. Many activities in the construction industry are potentially hazardous. The classification of hazards and the use of risk assessments are more consistent with an approach where, as Mason J said, the creation of greater danger imposes a higher duty of care than an uncertain divide between levels of hazard which impose liability on the person who employs competent independent contractors and those which do not.
- I do not consider that Honeywill is to be limited to its facts and I turn to the other arguments put forward by OT to overcome or distinguish the decision in Honeywill. First, OT seeks to distinguish Honeywill on the ground that in that case the tortfeasor, Stein, was not carrying out work for the benefit of Denman the cinema owner but was carrying out work for Honeywill. It is said that here, Pickfords were carrying out work for the benefit of Biffa. It is submitted that whilst Honeywill might have had a non-delegable duty to the third party cinema owner, there is no similar reason to impose such a duty on OT in relation to the Claimants.
- Where there is a non-delegable duty, a party who has a duty to another party cannot delegate that duty to an independent contractor so as to avoid that liability. Thus in Honeywill, a duty was owed by Honeywill to the cinema owner in relation to a fire caused by the activity of taking photographs and Honeywill could not avoid liability by employing an independent contractor.
- In Bower v. Peate (1876) 1 QBD 321 the owner of premises was liable to the owner of adjacent premises when he employed an independent contractor who in the course of underpinning withdrew support which damaged the adjacent premises. The owner could not delegate the duty to the independent contractor. In Dalton v. Angus (1880-81) L.R. 6 App.Cas. 740, the owners of an adjoining house employed an independent contractor to pull down their house and carry out excavation. The contractor agreed to shore up adjoining buildings and make good all damage. The contractor employed a sub-contractor upon similar terms. The house was pulled down, causing the Plaintiffs' building to be deprived of lateral support, causing damage. Lord Blackburn approving Bower v. Peate said at 829 : "a person causing something to be done, the doing of which casts on him a duty, cannot escape from the responsibility attaching on him of seeing that duty performed by delegating it to a contractor. He may bargain with the contractor that he shall perform the duty and stipulate for an indemnity from him if it is not performed, but he cannot thereby relieve himself from liability to those injured by the failure to perform it."
- In this case I have held that OT was under a duty of care to Biffa and MEH for damage caused by fire in relation to loss caused by consequential delay. The impact of the "extra-hazardous" activity is that OT cannot delegate to Pickfords the duty owed to Biffa and MEH.
- Secondly, OT relies on the Scottish first instance decision by Lord Abernethy in MTM Construction Limited v. William Reid Engineering Limited  SLT 211. In that case, the proprietors of a property engaged main contractors, MTM, to carry out works to that property. MTM engaged William Reid to carry out steel work as a subcontractor and William Reid, in turn sub-sub-contracted welding work to another party. A fire broke out whilst the welding work was being carried out on the premises and caused damage. MTM sought to recover for damage to their plant and commenced proceedings against both William Reid, the first defender and the sub-sub-contractor, the second defender. The proceedings against William Reid were based on a non-delegable duty arising from the extra-hazardous welding activity. The action against William Reid was dismissed on the basis that "only the ultimate employer has a co-existent liability (together with the party who carried out the works) for the negligent performance of works which are extra-hazardous and inherently dangerous resulting in loss to a third party." Further it was held that, in any event "any such liability for the negligent actings of the second defender must lie with the pursuers just as much as with the first defenders…the pursuers can no more delegate responsibility for the negligent performance of the works to an independent contractor than the first defenders can."
- OT submits that it is an intermediate party like the first defender in MTM and is not the ultimate employer or the party who carried out the work and therefore, like the defender, cannot be held. Alternatively, if OT is liable then so is Biffa and MEH and therefore neither Biffa nor MEH can recover.
- The concept of the "ultimate employer" or "principal employer" was derived from Honeywill where Slesser LJ used those terms, referring to Honeywill. However, I find nothing in Honeywill to suggest that there is a limit on the application of the principle so that only an ultimate employer and the party carrying out the hazardous activity will be liable.
- In Honeywill there were only the two parties and Honeywill was liable to the cinema owner for the negligence of the independent contractor carrying out the extra-hazardous activity. However, where there is a contractual chain, I do not consider that an intermediate party can escape liability. In Dalton v. Angus the facts as set out by Thesiger LJ in the Court of Appeal at (1878) 4 QBD 162 at 164 to 165 show that the owners contracted with Dalton to have the work carried out and Dalton, in turn, sub-contracted the work to Newby & Thorpe. Both the owners and Dalton were liable for the extra-hazardous activities of Newby & Thorpe. The fact that Dalton was held liable shows that it is not just the ultimate employer, the owners, and the party carrying out the extra-hazardous activity, Newby & Thorpe, who will be liable. Rather this shows that an intermediate party such as Dalton cannot escape liability.
- Nor do I consider that the fact that there is a chain of duties can prevent recovery. In a typical situation, contractors would owe a duty to the owners which they could not delegate in respect of extra-hazardous activities. The owners would owe a duty to the adjoining builders which they could not delegate. The fact that both parties owed a non-delegable duty would not prevent a party higher up the chain who might have a non-delegable duty from recovering from a party further down the chain who owed a non-delegable duty.
- I therefore consider that the decision in Angus v. Dalton which is binding on me is inconsistent with the propositions in MTM and I therefore respectfully gain no assistance from MTM.
- Thirdly, it is submitted that, in the context of current health and safety practices and risk assessments, welding on a building site is not an ultra-hazardous activity. I consider that OT's argument is the same or similar to that rejected by Slesser LJ in Honeywill. As he said at 200, even extra-hazardous or dangerous operations if carefully and skilfully performed, will not lead to harm. He added: "But the rule of liability for independent contractors' acts attaches to these operations, because they are inherently dangerous, and hence are done at the principal employer's peril."
- The carrying out of the Welding and Grinding Works with the consequent sparks and hot metal in a location where there is combustible material is, in my judgment, an inherently dangerous operation.
- Finally, OT submits that there cannot be strict liability on OT where the Claimants had run the risk of damage from the dangerous thing or where the works were carried out for the benefit of the Claimants. In such circumstances, it must be shown that OT were negligent. The cases relied upon by OT relate to strict liability under the principle in Rylands v. Fletcher. The strict liability under that principle is subject to exceptions which include cases where there is consent to the dangerous thing being brought onto the premises or where the dangerous thing is brought onto the premises for the benefit of the claimant. In such cases liability to the claimant for the escape must be based on negligence. I do not consider that such principles have any relevance to the question of whether a duty in relation to extra-hazardous activities is non-delegable so that a party is liable for the acts of an independent contractor.
- In this case, the work being carried out by Pickfords was extra-hazardous. The Welding and Grinding Works were being carried out within the Ball Mill which had been operating and where there was inevitably combustible waste. The sparks and welding operations were inherently dangerous in such circumstances. I consider that OT's duties in tort in relation to such operations were non-delegable and that OT is therefore liable for the acts of Pickfords even if (contrary to the finding above) Pickfords would otherwise be independent contractors.
- As I have held that OT owed a duty of care to Biffa Leicester, Biffa Waste and MEH, it follows that those duties were non-delegable. On the basis of my finding that Pickfords were negligent in carrying out the Welding and Grinding Works, OT is similarly liable to Biffa Leicester, Biffa Waste and MEH for the negligence of Pickfords because the duty was non-delegable.
- In relation to MEH, having found that the Welding and Grinding Works were non-delegable then, I consider that MEH could not delegate its duties of care to HU so as to avoid liability. In such circumstances, given my findings of negligence by HU, it follows that the non-delegable duties were performed negligently and that MEH is also liable to Biffa Leicester and Biffa Waste for the negligence of HU in carrying out the Welding and Grinding Works.
The period of delay
- The question of the period of delay is relevant to the assessment of damages. In terms of claims by Biffa against MEH the precise period is now of less importance given my finding on the application of liquidated damages between Biffa Waste and MEH and the limit of liability in the Direct Agreement between Biffa Leicester and MEH.
- The fire occurred on 27 June 2004 and from that date onwards there was delay whilst the necessary work was carried out to reinstate the Plant. There is an issue between the parties as to the date to which the delay should be measured. Biffa contends that the relevant date is 7 March 2005, whilst MEH and OT contend that the relevant date is 31 January 2005.
Progress of the Ball Mill at 27 June 2004
- The Ball Mill first commenced operation in March 2004, running for 3 hours on 7 March and then running on a number of days from 26 March onwards. Shortly after this, on 2 April 2004, a Certificate of Practical Completion was issued by Biffa Waste to MEH in respect of the Plant and also Wanlip.
- During commissioning it was noted that the throughput capacity of the Ball Mill was lower than expected. Mr Groeble of HU contacted Mr Nygren of OT and a meeting was held at Gelsenkirchen on 27 April 2004 to discuss modifications to the Ball Mill to improve throughput. It was decided at that meeting to change the "lifter bars" on the grate so that they were flush with the surrounding grate.
- On 26 May 2004, HU announced that performance testing would start on 2 June 2004. By 15 June 2004, HU anticipated that contractual performance trials at Bursom would commence on 29 June 2004 as set out in item 7 of the minutes of the meeting on that date.
- By the beginning of June 2004, issues had arisen as to the durability of the modifications carried out to the Ball Mill which led to the meeting in Gelsenkirchen on 21 June 2004. The remedial work carried out on 26 and 27 June 2004 then led to the fire.
Progress of the reinstatement works
- After the fire, work began on reinstating the plant. One of the main components which had to be supplied was a replacement liner to the Ball Mill. It became apparent that a new liner would take some time to obtain and install. As the other reinstatement work was likely to be completed within a few months, it was decided that a temporary liner should be installed to permit the Plant to be put back in operation as soon as possible.
- In the event, the Ball Mill was back in operation with the temporary liner on about 15 October 2004 and production figures were recorded for the week commencing 26 October 2004.
- Work was then carried out to test and optimise the production. This work was aimed at improving upon the performance of the plant.
- Installation of the new permanent liner commenced in January 2005. By 31 January 2005 the Ball Mill was back in operation with the new liner. There then followed a period of commissioning of the Plant. Biffa submits that this commissioning took 5 weeks, until 7 March 2005.
Performance of the Plant
- Both MEH and OT rely on a comparison of Plant performance before and after the fire to establish the period of delay. MEH provided with its written closing submissions a modified version of an illustrative exhibit which extracted performance figures and which took account of the evidence given by Mr Davis. That indicates that the plant performance between 8 and 24 June 2004 showed that some 25.5% organics and 27.6% of inert elements were produced against the target figures of 36.5% and 24.4%.
- Following the re-commencement of production on 31 January 2005, the weekly average figures show that organics were between 27.8% and 32.3% and the inert element was between 18.9% and 23.4%.
- Given that the plant was seeking the maximise organics which could be recycled and minimise the inert element which had to be disposed of in landfill, the increased organics and reduced inert element show that the plant performance was better from 31 January 2005 than it was in the weeks before the fire.
The relevant period of delay
- In assessing the relevant period of delay, I need to bear in mind that the issue relates to the period for which Biffa can claim damages for the loss caused by the fire. The classic statement of Lord Blackburn in Livingstone v. Raywards Coal (1880) 5 App Cas 25 at 39 requires Biffa to be put in the same position it would have been in had the contract not been broken or the tort not committed.
- In the period leading up to the fire the performance of the Plant was falling short of the target figures and concern was being expressed at the lack of throughput. Whilst the view was expressed that performance testing might have commenced at the end of June 2004, I consider that further delay would have been likely before the Plant could be satisfactorily tested.
- When I compare the Plant at 27 June 2004 with the Plant at 31 January 2005, it is evident that the Plant on 31 January 2005 was in a better position than it was on 27 June 2004. However, without the new permanent liner it would not have been in the same position as it was on 27 June 2004. This points to 31 January 2005 being the relevant date.
- Whilst a period of commissioning after 31 January 2005 was necessary, it is likely that a period would still have been required after 27 June 2004 and I consider that it would be wrong to allow the further period of commissioning after 31 January 2005. In effect the period of commissioning in February 2005 showed that the Plant was in a better position on 31 January 2005 than it was on 27 June 2004 but, in doing so, I consider that it established the relevant date as 31 January 2005.
- I therefore conclude that the relevant period of delay to establish damages is the period of 217 days from 28 June 2004 to 31 January 2005. Loss within that period of delay was, in my judgment, caused by the fire. How that loss is to be calculated is not a matter for consideration at this stage. Evidently, so far as MEH is concerned, the period of delay must take account of my findings on the provisions of Clause 47.1 of the Design and Build Deed and Clause 2.2 of the Direct Agreement.
- I therefore find, in summary, as follows:
(1) That MEH is liable to Biffa Leicester and Biffa Waste for damages for both breach of contract and negligence for the 217 day delay consequential on the fire.
(2) That MEH's liability to Biffa Leicester and Biffa Waste both in contract and in tort is limited by the provisions of Clause 47.1 of the Design and Build Deed and Clause 2.2 of the Direct Agreement to the sums payable by way of liquidated damages.
(3) That OT is liable to Biffa Leicester, Biffa Waste and MEH for damages for negligence for the 217 day delay consequential on the fire.
- I have set out my detailed findings on the Issues at Appendix 2 to this judgment and give liberty to apply in respect of the drafting of those declarations.
- As requested by MEH in its written closing submissions, I also grant the following relief in respect of Pickfords and HU:
(1) That judgment be entered against Pickfords with damages to be assessed.
(2) That HU is liable to indemnify MEH in the terms pleaded by MEH and that HU is liable to pay MEH damages to be assessed.
- I reserve all questions of contribution to further argument.
Appendix 1: The Issues
A COMMON LAW DUTIES OF CARE & RELATED ISSUES
A.1 Did MEH owe Biffa Leicester and/or Biffa Waste a duty of care at common law not to cause loss consequential upon physical damage to the Ball Mill in the carrying out of the Grinding and Welding Works?
(a) Was it reasonably foreseeable that:
(i) The Grinding and Welding Works, if carried out carelessly, might cause physical damage to the Ball Mill?
(ii) If so, Biffa Leicester and/or Biffa Waste would suffer loss consequential upon such physical damage?
(i) Biffa Leicester;
(ii) Biffa Waste,
enjoy any proprietary or possessory interest in relation to the Ball Mill at the time of the fire?
(c) Clause 21.5 of the Design and Build Deed did not require Biffa Waste to insure against loss suffered by Biffa Waste and/or Biffa Leicester consequential upon physical damage to the Ball Mill.
(d) Does clause 2.2 of the "Direct Agreement" and/or the contractual framework which existed between Biffa Leicester, MEH and Biffa Waste dated 2 May 2003 preclude the existence of any duty at common law on MEH's part to Biffa Leicester not to cause loss consequential upon physical damage to the Ball Mill in the carrying out of the Grinding and Welding Works?
(e) Were the Grinding and Welding Works "ultra-hazardous"?
(f) If the answer to (e) is "yes", was MEH entitled at common law to delegate responsibility for the Grinding and Welding Works to HU and/or OT and/or Pickford Vanguard?
A.2 In all of the circumstances (including the contractual structure) did OT owe Biffa Leicester and/or Biffa Waste and/or MEH a duty of care at common law not to cause loss consequential upon physical damage to the Ball Mill in the carrying out of the Grinding and Welding Works?
(a) Was it reasonably foreseeable that:
(i) The Grinding and Welding Works, if carried out carelessly, might cause physical damage to the Ball Mill?
(ii) If so, Biffa Leicester and/or Biffa Waste would suffer loss consequential upon such physical damage?
(i) Biffa Leicester;
(ii) Biffa Waste,
enjoy any proprietary or possessory interest in relation to the Ball Mill at the time of the fire?
(c) Did clause 21.5 of the Design and Build Deed require Biffa Waste to insure against loss suffered by Biffa Waste and/or Biffa Leicester consequential upon physical damage to the Ball Mill?
(d) Was Pickford Vanguard OT's independent contractor for the purpose of carrying out the Grinding and Welding Works?
(e) Were the Grinding and Welding Works "ultra-hazardous"?
(f) If the answer to both (d) and (e) is "yes", is OT liable for any torts of Pickford Vanguard when they carried out the Grinding and Welding Works?
B THE EXECUTION OF THE GRINDING AND WELDING WORKS
B.1 Prior to the execution of the Grinding and Welding Works:
(a) Was any or any adequate inspection of the Ball Mill carried out?
(b) Was the Ball Mill cleared of all combustible waste?
B.2 Was the work area inside the Ball Mill wetted down adequately or at all prior to or after the carrying out of welding inside the Ball Mill?
B.3 Was a fire watch maintained continually during and after the carrying out of welding inside the Ball Mill?
B.4 Was the Ball Mill left unattended after the carrying out of welding inside the Ball Mill?
C.1 In the light of the answers to issues B1-4, was MEH in breach of contract to Biffa Waste and/or Biffa Leicester in respect of the execution of the Grinding and Welding Works?
C.2 In the light of the answers to issues A1 and B1-4, was MEH in breach of any duty at common law to Biffa Waste and/or Biffa Leicester in respect of the execution of the Grinding and Welding Works?
C.3 In the light of the answers to issues A2 and B1-4, was OT in breach of any duty at common law to Biffa Waste and/or Biffa Leicester in respect of the execution of the Grinding and Welding Works?
D.1 Subject to issues C1-2, did any breach of contractual or common law duty on the part of MEH cause the fire and/or its subsequent spread?
D.2 Subject to issue C3, did any breach of common law duty on the part of OT cause the fire and/or its subsequent spread?
E THE EFFECT OF PROVISIONS AS TO LDs WITHIN THE DESIGN & BUILD DEED
E.1 If and to the extent that any losses sustained by Biffa Leicester and/or Biffa Waste as a consequence of the physical damage to the Ball Mill caused by the fire were losses which were either consequential upon a delay in the completion of the Works or incurred in order to mitigate the effect of any delay in the completion of the Works:
(a) Is any liability on the part of MEH to pay damages to Biffa Waste for breach of contract (howsoever arising) limited by clause 47.1 of the Design and Build Deed to a liability to pay liquidated damages calculated in accordance with Schedule 12 thereto?
(b) Is any liability on the part of MEH to pay damages to Biffa Waste for breach of any duty at common law limited by clause 47.1 of the Design and Build Deed to a liability to pay liquidated damages calculated in accordance with Schedule 12 thereto?
(c) Is any liability on the part of MEH to pay damages to Biffa Leicester for breach of contract:
(i) excluded; or
by reason of clause 2.2 of the "Direct Agreement" between Biffa Leicester, MEH and Biffa Waste dated 2 May 2003?
(d) Is any liability on the part of MEH to pay damages to Biffa Leicester for breach of any duty at common law:
(i) excluded; or
by reason of clause 2.2 of the "Direct Agreement" between Biffa Leicester, MEH and Biffa Waste dated 2 May 2003?
E.2 If the answer to issue E1(a) is "yes", then is MEH liable to pay Biffa Waste LDs of £291,540.50 and €769,280.50?
E.3 Is the outcome of issue E2 affected by the outcome of issue A1(c) and, if so, how?
F.1 By what, if any, period did the fire delay the commissioning of the Ball Mill and that part of the waste treatment plant at Bursom?
G.1 Subject to both MEH and OT being held liable for the damages claimed by the Claimants, is MEH entitled, as a matter of principle, to bring a claim for contribution from OT in respect of such liability?
Appendix 2: Findings on the Issues
A COMMON LAW DUTIES OF CARE & RELATED ISSUES
A.1 MEH owed Biffa Leicester and Biffa Waste a duty of care at common law not to cause loss consequential upon physical damage to the Ball Mill in the carrying out of the Grinding and Welding Works:
(a) It was reasonably foreseeable that the Grinding and Welding Works, if carried out carelessly, might cause physical damage to the Ball Mill and that Biffa Leicester and Biffa Waste would suffer loss consequential upon such physical damage.
(b) Biffa Leicester and Biffa Waste enjoyed a proprietary or possessory interest in relation to the Ball Mill at the time of the fire.
(c) Clause 21.5 of the Design and Build Deed did not require Biffa Waste to insure against loss suffered by Biffa Waste and/or Biffa Leicester consequential upon physical damage to the Ball Mill. (by agreement).
(d) Clause 2.2 of the Direct Agreement and the contractual framework which existed between Biffa Leicester, MEH and Biffa Waste dated 2 May 2003 does not preclude the existence of a duty at common law on MEH's part to Biffa Leicester not to cause loss consequential upon physical damage to the Ball Mill in the carrying out of the Grinding and Welding Works.
(e) The Grinding and Welding Works was "ultra-hazardous"
(f) MEH could not at common law delegate its responsibility for the Grinding and Welding Works to HU or OT or Pickford Vanguard.
A.2 OT owed Biffa Leicester and Biffa Waste and MEH a duty of care at common law not to cause loss consequential upon physical damage to the Ball Mill in the carrying out of the Grinding and Welding Works:
(a) It was reasonably foreseeable that the Grinding and Welding Works, if carried out carelessly, might cause physical damage to the Ball Mill and that Biffa Leicester and Biffa Waste would suffer loss consequential upon such physical damage.
(b) Biffa Leicester, Biffa Waste and MEH enjoyed a proprietary or possessory interest in relation to the Ball Mill at the time of the fire.
(c) Clause 21.5 of the Design and Build Deed did not require Biffa Waste to insure against loss suffered by Biffa Waste and/or Biffa Leicester consequential upon physical damage to the Ball Mill. (by agreement)
(d) Pickfords was not OT's independent contractor for the purpose of carrying out the Grinding and Welding Works.
(e) The Grinding and Welding Works were "ultra-hazardous".
(f) OT is liable for any torts of Pickfords when they carried out the Grinding and Welding Works.
B THE EXECUTION OF THE GRINDING AND WELDING WORKS
B.1 Prior to the execution of the Grinding and Welding Works there was not any adequate inspection of the Ball Mill carried out and the Ball Mill was not cleared of all combustible waste.
B.2 The work area inside the Ball Mill was not adequately wetted down prior to or after the carrying out of welding inside the Ball Mill.
B.3 A fire watch was not maintained continually during and after the carrying out of welding inside the Ball Mill.
B.4 The Ball Mill was left unattended after the carrying out of welding inside the Ball Mill.
C.1 MEH was in breach of contract to Biffa Waste and Biffa Leicester in respect of the execution of the Grinding and Welding Works.
C.2 MEH was in breach of a duty at common law to Biffa Waste and Biffa Leicester in respect of the execution of the Grinding and Welding Works.
C.3 OT was in breach of a duty at common law to Biffa Waste and Biffa Leicester in respect of the execution of the Grinding and Welding Works.
D.1 The fire and its subsequent spread was caused by the breach of contractual and common law duties to Biffa Leicester and Biffa Waste on the part of MEH.
D.2 The fire and its subsequent spread was caused by the breach of common law duties to Biffa Leicester and Biffa Waste and MEH on the part of OT.
E THE EFFECT OF PROVISIONS AS TO LDs WITHIN THE DESIGN & BUILD DEED
E.1 If and to the extent that any losses sustained by Biffa Leicester and/or Biffa Waste as a consequence of the physical damage to the Ball Mill caused by the fire were losses which were either consequential upon a delay in the completion of the Works or incurred in order to mitigate the effect of any delay in the completion of the Works:
(a) Any liability on the part of MEH to pay damages to Biffa Waste for breach of contract (howsoever arising) is limited by clause 47.1 of the Design and Build Deed to a liability to pay liquidated damages calculated in accordance with Schedule 12 thereto.
(b) Any liability on the part of MEH to pay damages to Biffa Waste for breach of any duty at common law is limited by clause 47.1 of the Design and Build Deed to a liability to pay liquidated damages calculated in accordance with Schedule 12 thereto.
(c) Any liability on the part of MEH to pay damages to Biffa Leicester for breach of contract is irrecoverable to the extent that Biffa Waste recovers liquidated damages up to the limit under Clause 47.1 and Schedule 12 of the Design and Build Deed but otherwise is capped to that sum by reason of clause 2.2 of the Direct Agreement between Biffa Leicester, MEH and Biffa Waste dated 2 May 2003.
(d) Any liability on the part of MEH to pay damages to Biffa Leicester for breach of any duty at common law is irrecoverable to the extent that Biffa Waste recovers liquidated damages up to the limit under Clause 47.1 and Schedule 12 of the Design and Build Deed but otherwise is capped to that sum by reason of clause 2.2 of the Direct Agreement between Biffa Leicester, MEH and Biffa Waste dated 2 May 2003.
E.2 MEH is liable to pay Biffa Waste Liquidated Damages of £291,540.50 and €769,280.50.
E.3 Not pursued
F.1 The fire delayed the commissioning of the Ball Mill and that part of the waste treatment plant at Bursom by 217 days from 28 June 2004 to 31 January 2005.
G.1 Question of contribution are reserved to further argument.