England and Wales High Court (Technology and Construction Court) Decisions

IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
TECHNOLOGY AND CONSTRUCTION COURT

		Royal Courts of Justice Strand, London, WC2A 2LL
		19 September 2008

The Hon Mr Justice Ramsey :

JUDGMENT No2

Introduction

1. By a judgment dated 11 January 2008 ("the January Judgment") I made various findings on liability in relation to a fire which occurred on 27 June 2004 during the course of the construction of a domestic waste recycling facility at Bursom in Leicester. The fire started in a ball mill which had been supplied and installed by Outokumpu Wenmec AB ("OT").
2. The recycling facility at Bursom formed part of the obligations of Biffa Leicester Limited ("Biffa Leicester") under a PFI contract with Leicester City Council ("LCC") for the collection, recycling and disposal of Leicester's domestic waste ("the PFI Contract"). Organic material which is produced by the recycling plant at Bursom is then transported a few miles to a plant at Wanlip where it is used to produce methane which then generates electricity. As this electricity is produced from a renewable resource financial benefits accrue in the form of statutory incentives.
3. Biffa Leicester entered into a back-to-back contract 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. The work was then further subcontracted to Maschinenfabrik Ernst Hese GMBH ("MEH") who, in turn, sub-contracted the work to Hese Umwelt GMBH ("HU") who entered into a contract with OT to design, supply and install the Ball Mill at Bursom.
4. In the January Judgment I held, amongst other things, that OT was liable to Biffa Leicester and Biffa Waste (together referred to as "Biffa") in tort for the fire which caused a delay to the operation of the plant of 217 days or some seven months from 28 June 2004 to 31 January 2005. Although I also made findings of liability and quantum against MEH and ordered interim payments to be made by MEH to Biffa, MEH became insolvent and has since January 2008 taken no part in the proceedings.
5. Following the January Judgment I gave directions for a quantum hearing, including directions for the exchange of evidence. As pleaded at that stage the quantum of Biffa' claim was some £2 million. However, following meetings between quantum experts for Biffa and OT, they were able to agree figures and narrow the differences on quantum issues. As a result, in the third joint statement prepared by the quantum experts on 23 May 2008, Biffa's claim was valued by Biffa's expert at some £334,757.
6. There were further agreements and by the end of evidence at the quantum hearing the following issues remained:

(1) The value of Biffa's claim for lost electricity sales. OT contended that the loss was £102,025. Biffa claimed £176,223. The difference depended on two issues: the conversion factor from gas to electricity and whether Biffa should have produced some gas from compost available during the seven month delay period.

(2) The value of Biffa's loss of income from sale of recycled materials. OT contended that the loss was £114,486; Biffa claimed £149,038.

(3) The value of savings made at Bursom and at Wanlip during the seven month delay. OT contended that savings of £490,605 had been made at Bursom and £522,715 at Wanlip. Biffa's figures were respectively £420,354 and £504,173. The difference related to internal hire costs, agency labour costs, sub-contracting costs and rent.

(4) The value of uninsured losses, being an MEH invoice for £26,429 and project management costs for Mr Nattrass of £6,956.

7. In addition, the parties have agreed figures for Landfill Tax repayment loss of £342,295; onward haulage costs of £138,317; landfill gate costs of £169,230 and SRM settlement costs of £37,500.
8. In this judgment I now consider what sums Biffa are entitled to recover from OT as a result of the fire and the consequent period of delay in respect of the various disputed items.

Evidence

9. Biffa submitted the second, third and fourth witness statements of Ray Nattrass and the first and second witness statements from Simon Crook. As set out in the January Judgment Mr Nattrass was employed by Biffa Waste as project manager for the project to provide the plants at Bursom and Wanlip. Mr Crook is now General Manager of Biffa Leicester and as Operations Manager since April 2003 was familiar with the project since that date. Both Mr Nattrass and Mr Crook gave evidence which, I am satisfied, honestly reflected what they knew or recalled about the claims being made.
10. I have already referred to the assistance which has been given by the quantum experts in agreeing figures and narrowing issues. Biffa instructed Mr Damian Glynn of Teceris and OT instructed Mr James Stanbury of RGL. Both gave evidence and for the issues which remained much depended either upon factual evidence or were matters for submissions. I am satisfied that the matters on which the experts disagreed represented areas where their opinions honestly differed, often because of uncertainties as to the facts.
11. I therefore turn now to the issues which remain as to quantum.

Loss of Electricity sales

12. Biffa claims that during the period of seven months when the Plant was not producing organic material, the plant at Wanlip could not produce electricity from methane and therefore Biffa lost a sum equivalent to the electricity sales which would have been made during that period. Biffa now claims £176,223 under this head of claim, based on Mr Glynn's calculation; OT accepts a figure of £102,025 based on Mr Stanbury's calculations.
13. Although at the hearing the matter proceeded on the basis that such loss was recoverable and the only debate was as to the quantum of such loss, subsequent to that hearing OT submitted a short further written submission in which it raised two points. The first was a reference to Spartan Steel v. Martin & Co [1973] QB 27 which it said supported a proposition that Biffa could not claim damages in tort "based on lost sale contracts yet to be made at an unknown date in the future because such contracts and alleged losses are not immediately consequential on the physical damage of the tort". Although not expressly stated to be a reference to this head of loss, this is the only claim which it seems could amount to "lost sale contracts".
14. In response to that submission, Biffa submitted that it was unclear why Spartan Steel was relevant; Biffa should have been alerted to the argument which would have needed evidence and that any questions of remoteness and duty which might be raised by OT based on Spartan Steel would require more extensive reference to authorities. As I have indicated, I have taken this submission to refer to this head of claim. On that basis, I do not see that Spartan Steel supports OT's closing submissions as OT states in these further submissions. Rather, it opens up a new and uncertain argument after the close of the hearing and one which I do not consider I should entertain for the reasons given by Biffa.
15. Two issues explain the difference between the figures put forward by the two experts. The first issue is the correct conversion rate which should be used to convert the lost gas production into lost electricity for the purpose of calculating the lost electricity sales. The second issue, which was conceded by OT in closing, concerned whether Biffa should have used some of the organic material produced by the Bursom plant in the period July 2004 to January 2005 so as to make gas to produce some electricity during that period.
16. In addition, in its closing submissions, OT introduced a new issue concerning the period for electricity production. Whilst I have found that there was a period of 7 weeks and 2 days delay caused by the fire, OT submits that the court should assume that, but for the fire, Wanlip would have been able to produce electricity for a maximum of 5 months. It submits that this is because one month would have been taken up with commissioning, testing and building up sufficient stocks of compost and one month would then have been needed to allow the "seeding" of the gas plant to produce sufficient gas to commence electricity generation.
17. Biffa objected to this new contention, made only in closing submissions, on the basis that Biffa had no proper opportunity to deal with it. I consider that Biffa was justified in that objection. However, in addition, I do not accept that the contention by OT has any merit. The period of delay was a period from June 2004 when the plant was being commissioned until January 2005 when the plant had been reinstated to the same state as it was in June 2004. If the fire had not occurred then the overall plant would have required a further period after June 2004 for commissioning, testing, building up stocks of compost and seeding of the gas plant to produce sufficient gas to commence electricity generation. Equally, after January 2005 the plant required a similar period for those operations before it could commence electricity generation. It follows that the seven month delay period does not include that period for commissioning through to electricity operation. In such circumstances, it would be wrong to deduct the period of 2 months, as proposed by OT. Rather, the correct period for assessing lost electricity sales is that of 7 months 2 days which I have found to be the delay period caused by the fire.
18. I turn now to consider the remaining disputed issue of the gas to electricity conversion rate and also, for completeness, refer to the issue now conceded by OT.

Gas to electricity conversion rate

19. To consider this issue it is necessary to explain the way in which gas is produced by the combined plants at Bursom and Wanlip. The process involves a number of stages. First, the plant at Bursom produces organic material as one of the end products of the recycling facility. That organic material is then taken by road to Wanlip where a complex process takes place to produce organic material from the raw input, so that it is suitable for bacterial decomposition to produce the methane gas. The organic material is placed in tanks where anaerobic decomposition takes place to produce methane gas. That methane gas is then stored and controlled in a storage system. The gas is used to fire two combined heat and power units (CHP1 & CHP2) which generate electricity. If the flow of gas cannot be used by the available CHP unit or units then it is passed to a flare stack. Evidently, any gas which is flared does not produce electricity.
20. In order for the plant at Wanlip to produce the optimum amount of electricity a number of processes have to work satisfactorily. First, the plant at Bursom has to produce organic material which is suitable for the Wanlip process plant. Secondly, the Wanlip process plant has to treat the incoming organic material so as to produce material which is suitable for the bacteria to produce the maximum methane gas. Thirdly, the methane gas storage and controlling system has to be working correctly. Fourthly the CHP units have to have sufficient availability so that the gas produced can all be used to generate electricity. This essentially means that none of the gas is flared and that the flare is only used to burn excess methane in cases of emergency.
21. The experts agree that in the seven month period of delay, the volume of gas which would have been available to generate electricity from the Wanlip plant was 48,500 cubic metres.
22. Under the PFI contract between Biffa and Leicester City Council, the Plant had to achieve a number of guaranteed parameters which were to be established during a four-week performance test. One of those parameters at the plant at Wanlip related to power generation and was a guarantee that greater than 2.2 Kwh of electricity would be produced from a cubic metre of the gas. The performance test at Bursom, for which there are also guaranteed parameters, was carried out in April/May 2007 and the performance tests at Wanlip were carried out in May/June 2007. In relation to the power generation guaranteed parameter, a report was produced by the independent certifier, Waterman Building Services ("the Waterman Report"). That report, dated September 2007, at page 7 sets out the cumulative power generation after 54 days of performance trials. It states that the power generation was "407,827 Kwh with flare stack in operation for 143hours".
23. In the Waterman Report, in order to calculate the power generation per cubic metre of gas it was first necessary to find the overall volume of gas produced during that period and then deduct from that figure the gas which had been flared. The available data shows that the overall volume of gas produced during that same period was 294,005 cubic metres. The volume of gas which was flared is then calculated from the time during which gas was flared (143 hours) and a rate of 800 cubic metres per hour which represents the volume of gas flared per hour. The gas flared was therefore 114,400 cubic metres. When the volume flared is deducted from the overall volume, this gives the net gas production used to produce electricity of 179,605 cubic metres. When the overall power generation of 407,827 Kwh is then divided by the net gas production of 179,605 cubic metres, a figure for power generation per cubic metre of 2.27 Kwh/ m³ is derived. That is the figure which is given at page 7 of the Waterman Report and it is that figure which Mr Glynn has used in his calculations to convert the 48,500 cubic metres of gas into electricity.
24. Mr Stanbury, on the other hand, has approached the relevant conversion rate by considering data which has been produced by Biffa for the period from 2 April 2006 to 24 March 2008. That data is set out in Schedule 3 to his June 2008 report. It sets out the gas and electricity production and the flare run time for each of the weeks during that period, with some exceptions. Mr Stanbury has reviewed that data and selected the data for the last three weeks, that is the weeks commencing 10, 17, 24 March 2008 and calculated the conversion rate of gas to electricity during that period. He selected those weeks because in those weeks he observed that the engine run time was at its highest level, being between 129 and 156 hours per week. Even so, during the relevant weeks there was a period of flare time. Mr Stanbury produced two figures representing the conversion of electricity from gas: one which included the gas which had been flared so reducing the Kwh/m³ and the other, like the figure used by Mr Glynn, deducting the gas which had been flared so as to produce a higher net production figure of Kwh/m³.
25. For the three weeks in March 2008 Mr Stanbury produced figures of 1.301 to 1.708 as the conversion factors when including gas flared, with an average of 1.535. He then based his calculations on that figure of 1.535. The other figure produced by Mr Stanbury, deducting the gas flared, gave a conversion factor of 1.884 to 2.310 with an average of 2.127.It can be seen that Mr Stanbury's figure of 2.127 is equivalent and close to the figure of 2.27 in the Waterman Report which was used by Mr Glynn.
26. The issue between the two experts is therefore whether, in establishing a conversion rate of electricity from gas in Kwh/m³, an allowance should be made for flared gas. Mr Stanbury makes that deduction because he says in assessing damages for lost electricity production the Court should look at the actual production data from the Plant and that this demonstrates that generally in the period up to March 2008 a substantial amount of gas was flared. On that basis he says that in assessing lost electricity sales, it is the figure based on the net gas, after making allowances for the gas flared, which should be taken into account.
27. Mr Glynn approached the question differently. He points out that the PFI contract provides for a 25 year period of operation and that I have found that there was a seven month period from 28 June 2004 to 31 January 2005 when the Ball Mill was out of operation because of the fire. He says that on the assumption that the performance of the combined Bursom and Wanlip plant from 31 January 2005 to date reflects what would have happened from 28 June 2004 for an equivalent period, the proper assessment is to assess a seven month period of steady-state operation which has been lost within that 25 year period. He says that, in his opinion, this more properly represents the loss of electricity caused by the seven month delay as a result of the fire.
28. I consider that the approach adopted by Mr Glynn to the assessment of damages is, in principle, correct. However that does not answer the question as to whether or not during the seven month period there will be a level of flared gas which should be deducted from the calculations. To answer that question, there has to be further investigation of why gas was flared during the performance trial in May/June 2007 and, equally, why gas was flared during the three weeks in March 2008.
29. As I have stated and as would be expected, the purpose of the Wanlip plant is to convert the gas produced from the organic material to electricity and not to flare it. I am satisfied from the evidence of Mr Nattrass and Mr Crook and from the documentation that there have been at least two major reasons why gas has been flared during the relevant periods. First as set out on page 11 of the Waterman Report there have been ongoing problems with one of the units, CHP 1, because of difficulty in obtaining spares. It is stated in that report that CHP 1 had not run for many weeks. This means that if the other unit, CHP 2, fails then all the surplus gas would have to be flared off. Also it is stated that as the gas plant production increased there would then be an opportunity to run both CHP units rather than flare off the gas in excess of that needed for one unit. On the evidence it seems that during the relevant period with which I am concerned only one CHP unit has generally been running, at most. As a result, gas has been flared for the reasons set out in the Waterman report.
30. A second reason why gas has been flared is that there have been problems with the gas storage system. Inside the gas tank there is a bag or bladder which is used to store the gas. It is supposed to expand and contract depending on the volume of gas in the tank. However, this bag has ruptured on a number of occasions and this has meant that the gas produced cannot properly be stored and supplied to the CHP units. This has also meant that gas has had to be flared. Thirdly there are also, I understand, a number of other problems which have occurred and led to gas being flared rather than being used to produce electricity.
31. Whilst, as Mr Stanbury observes, there have been substantial periods of gas flare to date, the data also shows that there have been weeks during which no gas has been flared. I consider that in analysing the lost production of electricity the Court should not give undue weight to the fact that gas has generally been flared up to date but should look beyond the current period to a period lost within the 25 years of operation when the Plant is operating, as anticipated, with both CHP units working and with a gas storage system which does not have the current defects. On that basis I consider that the proper assessment of the electricity production which has been lost by the period of delay should assume that gas will not be flared. This is also consistent both with the purpose of the plant and with the general principle that gas is only flared in emergency situations.
32. So far as the actual conversion rate is concerned there are a number of possibilities. In his Second Witness Statement Mr. Crook referred to a conversation which he had with Chris Parry concerning the achievable conversion rate. That was subsequently set out in a document by Graham Wilkins, Biffa's gas to energy technical manager. His figure was 2.3963 Kwh/m³. Whilst the plant may achieve that rate I do not consider that this conversion rate is appropriate given the current evidence of what has been achieved. There is then the guaranteed figure of 2.2; the figure of 2.27 achieved on average during the performance test and the figure of 2.127 averaged during the three weeks in March 2008. In my judgment, a figure of 2.27 Kwh/m³ properly represents the conversion factor to be used to assess lost electricity. I consider that it represents an achievable long term conversion rate. It follows that on this issue Mr. Glynn's figure is to be preferred. The difference between the experts on this issue was £57,026.

Electricity Production July 2004 to January 2005

33. In his figure for loss of electricity Mr Stanbury made a deduction of £17,172 because he noted that during the seven month delay organic material was produced from the Ball Mill. On this basis he considered that such material could have been used to generate gas to produce electricity and that an allowance should be made for that against the figure claimed for lost electricity. In essence this deduction depends on whether or not Biffa failed to act reasonably in failing to mitigate its loss by using that organic material to generate electricity. I do not consider that OT can make out such a case and indeed in oral closing submissions OT rightly, in my judgment, abandoned their contention to the contrary.

Summary

34. Accordingly I find that because of the delay of seven months caused by the fire Biffa have suffered a loss of £176,223, as calculated by Mr Glynn, in terms of lost electricity sales.

Loss of recycled metal

35. During the recycling process at Bursom metals are extracted from the waste by magnetic and electro-static separators. These ferrous and non-ferrous metals are then sold by Biffa. During the period of delay caused by the fire the ability of Biffa to recycle metal and obtain income through this means was reduced. Biffa, relying on the evidence of Mr Glynn, say that there has been a loss of recycled metal of £149,038. On the other hand OT, relying on the evidence of Mr Stanbury, says that the figure should only be £114,486.
36. The difference between the parties of £34,552 arises because during the relevant period records show that metal was recovered but, as set out below, there is no satisfactory evidence of what then happened to it. Mr Stanbury has applied rates which are agreed by Mr Glynn to the amount of metal actually produced, which again is agreed by Mr Glynn. On this basis the value of such metals amounts to £53,244. The experts are agreed that, on the basis of two invoices, there is evidence that metal to the value of £19,107 was actually sold during this period. After taking account of a rounding difference of £415, the balance is therefore £34,137 which forms the subject of the dispute.
37. In the quantum documents there is a schedule which shows sales of recyclable metal from April 2004 to March 2005 (incorrectly stated as March 2004). That schedule includes the two invoices referred to above. Mr Stanbury has also identified other potential metal sales within that schedule which he highlighted on a copy provided to the Court and which total £34,340. It is evident that when this sum is added to the two invoices totalling £19,107 the overall sum can be reconciled approximately to the figure of possible sales during the relevant period of £53,244.
38. There has been no satisfactory explanation of what otherwise would have happened to the metals which were obtained from the recycling process during the period of delay. Various possible ways in which metal may have been disposed of without Biffa obtaining payment were suggested in evidence, generally on the basis of speculation as to what might have happened to the metals if they were not sold. For instance Mr Crook said that some metal might have been supplied to metal traders to see whether it could be used; some might have been taken to landfill or some might just have been lost in the aftermath of the fire.
39. I am not persuaded that there is any satisfactory explanation for how the metals which were produced by the recycling process were disposed of without any benefit to Biffa. The available documentation in respect of the sales of recycled metals and receipt of payment does not allow any particular metals to be traced through the system. In the circumstances, I consider it much more likely that at some stage value was obtained for the recycled material. This is the case in relation to the two invoices which are accepted by Mr Glynn and I consider that the other invoices or sums paid are likely to cover some or all of the recycled materials produced by the Plant, even if this is not clear from the documents.
40. As a result, I am not satisfied that that Biffa did not receive income for the recycled metals which were produced during the period or that any loss of income was caused by the fire. In those circumstances I find that the value of loss of recycled material is the figure put forward by Mr Stanbury in the sum of £114,486.

Savings at Bursom and Wanlip

41. Because of the fire and the seven month delay caused by it, it is evident that Biffa made some savings in the operating costs of the Plant which would otherwise have been incurred had the plants at Bursom and Wanlip been operating normally.
42. There is an issue between the parties as to what sums have been saved in terms of operating and other costs.
43. The approach which has been taken by both Mr Glynn and Mr Stanbury is to look at the management accounts for the period from July 2004 to January 2005 and to compare the operating costs within those management accounts with the same operating costs shown in the seven month period from June to December 2007 when the plant was in full operation. In principle, that should allow costs to be identified which are shown in June to December 2007 but which are absent in July 2004 to January 2005. These costs might then, on investigation, be savings made because the Plant was not operating normally. This has led both experts to arrive at figures which they put forward as being savings. Mr Glynn identifies savings of £420,354 (allowing for a further saving of £20,363) at Bursom and £504,173 at Wanlip. Mr Stanbury calculates savings of £490,605 at Bursom and of £522,715 at Wanlip. To the extent that there is agreement between the parties based on the opinions of their respective experts the Court does not need to investigate the position.
44. The difficulty comes where the Court does need to investigate the position. This is because the experts have, to a large degree, worked merely on the global figures which have been identified, sometimes under different headings, within the management accounts in 2004/5 and in 2007. Where there is disagreement between the parties as to a difference between a global sum in the two sets of management accounts then the proper approach would be to compare the full breakdown of each of the two global figures to look for the explanation for the difference. That would be a large task. For instance, Mr Glynn thought that it might take one to two weeks to analyse the figures and then a further period whilst a full explanation was obtained from the Biffa personnel involved at the time to understand how and why the difference arose. That exercise has not been done and the evidence produced to the Court, in the absence of any agreement between the parties, makes it difficult for the Court to determine the dispute.
45. Rather I am left in the position where there is a difference between the global sums spent for certain costs in the period July 2004 to January 2005 and the figure incurred in the period June 2007 to December 2007 which the experts have agreed should be a comparative period. The mere fact that there is a difference in the costs in those two periods does not, in my judgment, lead to a presumption that that difference evidenced savings for which credit should be given by Biffa. There has been a great deal of disclosure in this case. The original quantum bundle supporting Biffa's claim extended to some 22 files. In the Order for Directions given for this quantum trial on 25 January 2008 the direction provided that OT was to submit any request for additional disclosure to Biffa on the 28 January 2008 and Biffa was to provide that documentation by the 22 February 2008. This is what happened as can be seen from a further six files of further disclosure which have also been provided. The expert evidence and the meetings between the experts have obviously identified further issues, some shortly before the quantum hearing and there has to be a limit on further investigation and disclosure particularly in the light of the fact that the quantum is now considerably reduced.
46. With that explanation of the general difficulty, I now turn to the relevant headings.

Internal Hire

47. Biffa historically hired plant and equipment from companies within the Severn Trent Group as Biffa was originally part of that group. It seems that plant is still hired in this way and, albeit inaccurately, is still described as being "internal hire". The issue between the experts on this item depends on whether during the period of non-operation of the Plant Biffa were able to save on plant hire costs at Bursom.
48. The amount in dispute between the parties was originally £74,015 but by the time of the hearing Mr Glynn had obtained further evidence which allowed this dispute to be narrowed. After discussions with Simon Crook and Ricky Andrew (the Biffa Plant Manager), Mr Glynn has identified two items of equipment, a JCB forklift and a Finning CAT telehandler (CAT 330) which would have been needed at the Plant if it were working and therefore represent a saving. The combined monthly lease cost of these two items of plant is £2,909 which for the seven month period represents a sum of £20,363. The difference between the parties has therefore narrowed by £20,363 from £74,015 to £53,652.
49. In addition as a result of further discussions with Ricky Andrew, Mr Glynn has identified hire costs for a CAT 950 shovel loader and a CAT 924 shovel loader which were leased from the outset. The CAT 950 was used to move waste onto vehicles for transport to landfill, rather than feeding the ball mill and therefore did not represent a cost savings. Equally the CAT 924 was retained to deal with paper and plastic waste at Bursom and does not represent a saving. In his evidence-in-chief, Mr Glynn provided figures for these two pieces of plant of: CAT 950 at £2,730 per month for seven months of £19,110; CAT 924 at £2,491 per month for seven months of £17,442. This gives a total of £36,552.
50. Mr Glynn also referred to some development work for Cemex cement kilns which Biffa was undertaking which might account for some of the additional costs. However that development work was apparently only carried out until April 2007 and thus it is not clear that this would have appeared in the management accounts for the period June to December 2007.
51. Having reviewed the position which has ultimately been reached on internal hire costs, I am not persuaded that the difference of £53,652 between the operating costs in the two periods properly represents savings in costs in the period of seven months following the fire. There is some explanation which possibly explains the difference and Mr Glynn has made a further allowance of £20,363. On the evidence before me I am not satisfied that there is any further saving to be taken into account in relation to internal hire costs.

Agency Labour

52. Similar considerations apply to agency labour. A comparison between the operating costs in the two periods shows that there was additional agency labour spent at Bursom in the later period which was not spent in the earlier period. There could be a number of reasons why this agency labour was expended. I do not consider that it leads to a presumption that there was a saving. I have seen the possible explanation put forward by Mr Glynn that a banksman had to be employed at a later stage because of a fatality at another plant and that this might explain the difference. To that extent there is a possible explanation.
53. Again, given the process which has been followed by the parties and the way in which the experts have approached the question of savings in this case, I am not satisfied that agency labour of £12,853 can properly be attributed to be a saving.

Sub-Contracting

54. Similarly, the operating costs of Bursom and Wanlip in the relevant periods indicate that there are sub-contracting costs in the later period which are not shown in the period of seven months following the fire. There has been no satisfactory explanation of what is comprised within this head of claim which, I note, only arose out of expert discussions shortly before the quantum hearing. Again, whilst the evidence may not be satisfactory, I can only approach the matter on the evidence before me.
55. There is no presumption that this sub-contracting labour represents a saving. Given the process which the parties have followed I am left in a position where I am not satisfied that the sum of £3,746 at Bursom and £7,555 at Wanlip can properly be said to represent savings.

Rent

56. The management accounts for the seven month period following the fire do not show any rent being paid for Wanlip whilst, in the seven month period between June and December 2007, rent payments are shown. Again, the fact that an operating cost is shown in the management accounts at the later stage but not at an earlier stage does not lead to the conclusion that the rent was not paid or was rebated because of the fire. There is no documentary evidence to show that. Rather the evidence which consists of invoices and a statement for rent together standing order forms setting out instructions by Biffa to its Bank to pay the rent. Those instructions cover rent at Wanlip in the relevant period and the relevant sums are the sums as set out in the invoices for that period. I am not satisfied that there was any saving in terms of rent during the relevant period following the fire. It follows that no deduction is to be made for rent in the sum of £10,987.

Summary

57. I therefore find that the figures for savings put forward by Mr Glynn of £420,354 at Bursom and £504,173 at Wanlip are the appropriate figures for savings.

Additional uninsured costs

58. At the commencement of the trial there was an agreed sum of £124,225 due to Biffa for additional uninsured costs incurred by them. The sum was originally £117,315 but the parties then agreed that a sum of £6,910 should be added for additional premiums to cover the extension of the insurance policy for the period of delay caused by the fire. That left a dispute as to two items: an MEH invoice in Euros which, it is agreed, is equivalent to £26,429 and a claim for £6,956 for project management costs.

MEH invoice 009-88

59. This invoice from the first defendant, MEH, covers the costs of additional supervision by MEH during the period 25 October 2004 to 3 January 2005. The invoice is dated 6 September 2005 and the evidence shows that it was discussed at a meeting between Mr Nattrass and Mr Grosse-Erwig of MEH on 29 December 2005. In a fax sent by Mr Nattrass to Mr Grosse-Erwig on 25 January 2006, Mr Nattrass said this:

"This invoice is for supervision costs that were not covered by our insurers is now part of out uninsured loss claim which was submitted on 6 January 2006. Should this claim be successful then we will have no problem settling this invoice in full."

60. Subsequently when these proceedings were commenced Biffa claimed for additional costs of £329,914 which included that sum. In the counterclaim made by MEH and served on 19 June 2007, MEH counterclaimed for sums which included this invoice. In Biffa's amended defence to that counterclaim they pleaded that subject to their entitlement to set off the sums claimed by MEH in respect of that invoice, that invoice was admitted. Following the January Judgment in which MEH was held liable to pay damages to Biffa, orders were made against MEH, including an order for MEH to pay the first claimant sums by way of interim payment. In addition a costs order was made against MEH. However neither the claim for damages against MEH nor MEH's counterclaim have proceeded any further because MEH became insolvent and has taken no further part in these proceedings since January 2008. In such circumstances, where MEH has issued an invoice for work relating to the fire but MEH's counterclaim for that sum is not being proceeded with, can Biffa claim from OT the invoiced sum as additional uninsured costs?
61. It is clear that Biffa will not actually make payment to MEH for the sum which has been invoiced. Biffa has a substantial claim against MEH which remains unpaid because of MEH's insolvency. Directions were given for the determination of MEH's counterclaim against Biffa at the same time as the determination of the quantum of Biffa's claim. MEH has not taken any part in these proceedings and in due course I shall have to consider what order to make.
62. The memo of 25 January 2006 indicates that Mr Nattrass considered that the question of payment of the invoice depended on the success of the uninsured loss claim made by Biffa. He said "should this claim be successful then we will have no problem settling this invoice in full." In his evidence given in cross-examination Mr Nattrass said that the invoice would only be payable if it could be reclaimed from MEH. He confirmed that it had never been paid and he could see no obligation to pay and did not consider that that position would change any time soon. In re-examination he confirmed that the only position that he was aware of was that set out in the memo of 25 January 2006. He confirmed that he had not been involved in deciding what would happen to the invoice and he would not now be involved and consulted as to payment.
63. The position is that MEH carried out work in the period October 2004 to January 2005 in supervising the reinstatement of the plant following the fire. There is no doubt that had that work been carried out by an independent third party who had no liability for the costs arising from the fire, it would have been paid and have been a liability which Biffa, could, in principle, pass on as damages to a party liable for that fire.
64. So far as liability against MEH is concerned, the sum would be payable to MEH but, as shown on the pleadings Biffa would seek to set-off a claim for the same sum against that invoice. If MEH were solvent and Biffa had recovered the damages from MEH and had set-off the sum then Biffa would have received a sum equivalent to that invoice and there would be no sum that Biffa could claim from OT. In such circumstances OT's liability would depend on whether OT was obliged to pay any sum to MEH by way of contribution.
65. In circumstances where the prospect of Biffa recovering payment of any damages from MEH seems, on the evidence before me, to be remote and where Biffa clearly will not pay the sum to MEH, can Biffa claim that sum from OT?
66. Biffa submitted in its opening that it was entitled to recover the sum as damages and the fact that Biffa had not paid the sum was no bar to recovery. It submitted that even a moral obligation to discharge a liability is sufficient and referred me to Donnelly v. Joyce [1974] 1 QB 454. OT, in opening, submitted that this was a case where Biffa will not be required to and will not pay MEH and Biffa will therefore acquire a "windfall". In addition, OT questioned the liability of Biffa to pay MEH costs which arose as a result of MEH's actionable tort.
67. In oral argument Biffa also relied on Allen v. Walters [1935] 1 KB 200 and Total Liban SA v Vitol Energy SA [2001] 1 QB 643. Biffa submitted that two principles could be derived from the authorities relied upon. First, that the fact that the victim of a tort had not discharged a liability to a third party did not provide a defence to a tortfeasor. Secondly, although there may be no defence, the court may in certain cases have concerns as to a party recovering a "windfall" and the remedy in such cases may be different to an immediate or simple award of damages. Biffa submitted that these cases are confined to situations where the court has concerns as to the liability of that party to a third party or concerns as to the appropriate quantum. However, even in such cases Biffa submitted that the courts proceed with caution before departing from the general approach that damages are the appropriate remedy.
68. As stated above, subsequent to the hearing OT served a short further written submission which, in addition to referring to Spartan Steel, also drew my attention to the decision of the House of Lords in Hunt v. Severs [1994] 2 AC 350 and, in particular the speech of Lord Bridge at 358, 361 and 363. OT submitted that Biffa was not liable to pay MEH sums expended by MEH in mitigating the damage and that if Biffa made any payment then Biffa would immediately be entitled to the return of that sum so that no liability would arise. OT also submitted that Biffa's claim to set-off the sum invoiced by MEH in reduction of its claim was wrong as the damages are reduced because MEH carried out the work as compensation.
69. Biffa served written submissions in response and submitted that. whilst Lord Bridge in Hunt at 361 found the reasoning of Megaw LJ in Donnelly unconvincing, that did not assist OT because:

(1) Hunt did not affect the principle that it is no defence to establish that the victim's liability to a third party has not been discharged.

(2) Lord Bridge's concern with the reasoning of Megaw LJ was as to the question whether the source of the services to meet the needs of the victim was always irrelevant. Lord Bridge said at 361 that the source was relevant if the victim received free treatment.

(3) It is clear from Hunt at 361 to 362 that if services had been provided pursuant to an agreement rather than gratuitously then they would have been recoverable. Further the ratio in Hunt is that a claimant cannot recover from the tortfeasor for gratuitous services provided by the tortfeasor.

70. As a result, Biffa submits that Hunt has no application here as MEH did not provide a gratuitous service. In Hunt the tortfeasor stood to recover sums expended in making good the consequences of his tort. Here MEH has charged for work and Biffa has admitted that MEH was entitled to do so. This, Biffa submits, is not a case of making a payment which is then re-paid. This is a case where the value of Biffa's claims against MEH has been diminished by the value of the work MEH undertook to put right damage caused by OT. Biffa submits that if OT is right then a victim of a tort would be at risk if remedial work were carried out by a tortfeasor who then became insolvent.
71. Biffa submits that OT has not made any case that the admission by Biffa of MEH's case was a sham or that there was a failure to mitigate by making the admission. Further Biffa states that if MEH had played an active part in the proceedings, OT would have to accept that the invoice constitutes loss but would seek to apportion that loss to MEH.
72. The general position, as derived from the authorities cited to me is as follows:

(1) A liability by a victim of a tort is sufficient to make that sum recoverable as damages even if that liability to a third party has not been discharged: see Randall v Raper EB&E 84 as applied in Total Liban SA v Vitol Energy SA at 652 to 656

(2) Where a third party provides gratuitous services to a victim, the victim may recover a sum in respect of those services as a mechanism for re-imbursing that third party for those services. The mechanism is that the victim holds the damages on trust for the third party: see Hunt at 363

(3) Where a tortfeasor provides gratuitous services to a victim, the victim cannot recover a sum in respect of those services because an award of damages in tort is compensatory and the victim does not suffer a loss: see Hunt at 363.

73. It follows, in my judgment that where a tortfeasor provides services to a victim by way of mitigation, then the victim cannot recover a sum in respect of those services because an award of damages in tort is compensatory and the victim does not suffer a loss. The loss to the victim is avoided by the act of the tortfeasor. Whether the act of mitigation is voluntary or whether it consists of the fulfilment of a contractual duty to mitigate, such as a duty to make good defects or carry out remedial work, the same principle applies.
74. As Biffa states in its submissions, there are cases where, pending liability being established, a third party who might also be a tortfeasor, provides services to a victim. Those services might be provided on a number of bases. For example, they may be provided in mitigation of damages, with no question of payment arising. Alternatively, there might be an agreement that pending liability being established or insurance payments being made, the potential tortfeasor will be paid sums which will later be reimbursed or otherwise taken into account.
75. In the present case, there was a policy of insurance which covered the cost of reinstating the work, as set out in my previous judgment at paragraph 197. The claims which are made in these proceedings relate to sums which were not recovered under the policy. As Mr Nattrass said in his fax of 25 January 2006, the sum invoiced was for supervision costs that were not covered by insurers. They were however costs which were incurred by MEH in reinstating the work.
76. The discussion in late 2005 between Mr Nattrass and MEH indicated that up until that time Biffa was not accepting that it had any liability for the sum invoiced. The position was then that Biffa included the invoiced sum as part of its claim. It did not at that stage accept liability to MEH but stated that if the claim was successful, MEH would be paid the sum invoiced.
77. In these proceedings Biffa claimed the invoiced sum from MEH and OT. MEH brought a counterclaim for the invoiced sum and Biffa admitted the sum subject to being able to set off its claim for damages. MEH are now insolvent. Mr Nattrass gave clear evidence in cross-examination that Biffa will not pay that sum and the position would not change. Whilst, as he explained in re-examination, Mr Nattrass might no longer be involved in decisions as to payment to MEH, Biffa called no witness to say that the position had changed.
78. On that basis, it is evident that Biffa will not discharge the liability to MEH by making payment or incurring a loss for which they are entitled to be compensated. Indeed, in my judgment, Biffa will never pay MEH for two reasons. First, Biffa's liability to MEH has, as pleaded and would, in any event be discharged by Biffa setting off its own claim for damages for that sum against its liability to MEH for that sum. No payment will occur and any sum recovered by Biffa would not be needed to compensate it for any loss that it has suffered. Secondly, given the fact that MEH is now insolvent, the prospect of Biffa's liability for the invoice being dealt with at all is, in any event, remote.
79. Rather, if Biffa were to recover from OT the sum invoiced by MEH it is evident that Biffa would retain that sum and not pay that sum to MEH. It would, in a real sense, obtain a windfall instead of compensation for a loss that it has suffered.
80. In certain circumstances where a windfall might occur it is appropriate, as identified in Total Liban at 663 to 664, for the court to adjourn the decision on quantum or, for instance, to make a quantum award on condition that the money is paid to a third party or that it is held on trust for that purpose. The purpose of that type of order in this case would be to prevent Biffa from obtaining a windfall and to ensure that the liability of Biffa to MEH on which the award of quantum would be premised was properly discharged. For the reasons set out above, this is not a case where such an order is appropriate because on the facts it is evident that any sum paid by OT would give rise to a windfall rather than compensate Biffa for a loss in relation to any liability to MEH.
81. As a result, I find that Biffa has not established its claim to an award of compensatory damages from OT in respect of the sum of £26,429 invoiced by MEH.

Project Management costs

82. Biffa claims the costs of management time expended by Mr Nattrass following the fire. A sum of £4,400 has been agreed under this head for time spent prior to 31 January 2005. In addition, Mr Nattrass spent time after 31 January 2005 dealing with general management of the project and with specific design defects which arose within the plant after the end of January 2005.
83. When the fire occurred at the plant at the end of June 2004 the plant was undergoing remedial work to see whether it could be satisfactorily commissioned and meet the various performance tests. The welding work being carried out at the time of the fire was being carried out in the context of improvement to the plant to achieve satisfactory performance. The defects in the grates and the external bolts which happened after 31 January 2005 occurred after the fire and after the reinstatement of the Ball Mill.
84. I am not satisfied that the work carried out by Mr Nattrass supervising defects in the plant can be said to be work which was caused by the fire. First, the defects in the grates and the external bolts or similar defects are likely to have occurred after June 2004 and I do not consider that the liability for such defects can be attributed to liability for the fire. Secondly, Mr Nattrass spent time dealing with general management of the project and I am not satisfied that he would not, in any event, have had to spend such time at some stage in managing the project, even in the absence of the fire.

Summary

85. As a result, I find that Biffa is not entitled to any further sum for additional uninsured costs. Other than the sum of £124,225.

Overall Summary

86. Accordingly, for the reasons set out above I find that Biffa is entitled to the sum of £140,249 as damages from OT calculated on the following basis:

Loss of electricity sales:	£176,223
Loss of sales of recycled metals:	£114,486
Landfill Tax Repayment: agreed	£342,295
Savings at Bursom:	(£420,354)
Savings at Wanlip:	(£504,173)
Onward Haulage: agreed	£138,317
Landfill Gate Costs: agreed	£169,230
Additional uninsured costs:	£124,225
Total	£140,249

87. I now invite the parties to agree or make submissions as to the way in which the sum of £140,249 falls to be awarded to Biffa Leicester and Biffa Waste, together with all issues of interest and costs. I also invite submissions on any orders that I should make in relation to the claims against MEH or any other party.

Contribution

88. On the pleadings MEH seeks damages or a contribution from OT in relation to MEH's liability to Biffa. However, since MEH are no longer taking part in these proceedings I have no submissions in relation to this aspect. Further, there are evidently issues which would need to be dealt with concerning what loss MEH has suffered and whether, in relation to any contribution, MEH is liable for the same damage.
89. OT therefore submits that I should dismiss MEH's claim for contribution against OT. In the circumstances, as MEH have not sought to prove the pleaded case, I accept OT's submission and propose to dismiss MEH's claims against OT for damages or a contribution.