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England and Wales High Court (Technology and Construction Court) Decisions
You are here: BAILII >> Databases >> England and Wales High Court (Technology and Construction Court) Decisions >> Mueller Europe Ltd v Central Roofing (South Wales) Ltd [2013] EWHC 237 (TCC) (22 February 2013)
URL: http://www.bailii.org/ew/cases/EWHC/TCC/2013/237.html
Cite as: [2013] EWHC 237 (TCC), 147 Con LR 32
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QUEEN'S BENCH DIVISION
TECHNOLOGY AND CONSTRUCTION COURT
Strand, London, WC2A 2LL |
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B e f o r e :
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| Mueller Europe Limited |
Claimant |
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| - and - |
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| Central Roofing (South Wales) Limited |
Defendant |
____________________
Graham Eklund QC and Richard Liddell (instructed by Lyons Davidson Solicitors) for the Defendant
Hearing dates: 15, 16, 17, 21, 22, 23, 24, 28, 31 January 2013
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Crown Copyright ©
- The Claimant ("Mueller") operates a large factory premises in Bilston, West Midlands, where it makes copper tubes. In the early hours of Sunday 9 November 2008 a disastrous fire broke out in the factory. By the time it was brought under control, part of the factory roof had collapsed and extensive damage had been caused to the fabric of the factory and its contents. At the time of the fire the Defendant ("Central") was part way through a major contract to refurbish the roof of the factory. In order to carry out its work on the roof while enabling Mueller to continue production below, Central had rigged a suspended "birdcage" scaffold just below the roof. The scaffold was boarded out and sheeted with combustible materials. The fire occurred because one or both of a pair of gas-powered radiant heaters operated and set light to the combustible materials in the scaffold. The heaters were part of the system for heating the factory and were suspended from the roof structure. The birdcage scaffold enclosed the heaters so that they were only a short distance above the upper surface of the scaffold's floor. Once enclosed by the combustible materials of the completed birdcage scaffold, the heaters were an obvious fire hazard, which should have been appreciated by anyone who turned their mind to the question.
- By this action, Mueller claims that the contract between the parties means that Central is solely responsible for the fire and is liable to it for a sum in excess of £20,000,000. For its part, Central submits that the contract imposes sole responsibility for the fire upon Mueller. It also submits that, if it might otherwise have been liable to Mueller, its liability is avoided by the operation of the doctrine of estoppel by convention or by the doctrine of waiver. It also advances a plea of contributory negligence; and it submits that the quantum of the claim advanced by Mueller is excessive. These, in briefest outline, are the issues, which were litigated during the trial of the action and are the subject of this judgment.
- This judgment concludes that:
- Both Mueller and Central are substantial and reputable concerns. In a promotional video, which was shown in opening, Mueller emphasises the high standards and technical competence of its operations. It had experienced and suitably qualified in-house mechanical and electrical engineers and technicians who carried out mechanical and electrical maintenance of the factory and its plant. They answered to Mueller's Engineering Manager, Mr Jones, who was ultimately responsible for the whole of the factory, its plant and equipment. He was very experienced and had worked his way up over the years, becoming Engineering Manager in 1998. It is a mark of the extent of his responsibilities that in his evidence he said that the administration of the roof refurbishment contract only amounted to about 5% of what he had to do. While the percentage was not exact, I accept that the contract formed only a small part of his responsibilities while it was being carried out.
- Central's promotional material emphasised its substantial size and experience, its accreditation by all relevant specialist bodies, its impressive client list and its commitment to operating to the highest standards of health and safety management. On the Mueller contract, its site manager was Mr Henwood, who had by then been involved in the roofing industry for over 40 years. He answered to Mr Thomas, a director of Central, who had particular responsibility for the health and safety aspects of projects undertaken by the company and who was responsible for the satisfactory delivery of the Mueller project.
- In May or June 2007, Mueller sent pre-construction information to Central[1]. It did not specifically mention the gas heaters as a hazard. It identified Mr Jones as Mueller's point of contact. It said[2] that the Principal Contractor was to compile a Construction Phase Health and Safety Plan for the construction phase of the works which was to be sufficiently developed before the project could commence. The Principal Contractor was to develop the plan as part of his duties, in particular taking reasonable steps to achieve compliance with both the rules and recommendations of the plan and all legislation relevant to health and safety matters. The contractor's Health and Safety Plan was to remain an active document throughout the project.
- Central sent Mueller a number of quotations[3] before the final one. When attempting to obtain the business Mr Tony Davies, the Managing Director of Central, gave a presentation to Mueller in the course of which he stressed Central's strong commitment to health and safety and that Central operated the highest levels of health and safety management. By that he meant that everyone involved in safety management (the contract manager and above) and the site supervisor had formal qualifications, so that Central was as good as or better than its competitors. Mr Davies' speaking notes[4] show that his presentation concentrated heavily upon Central's experience in roofing, and the steps that would be taken to reduce risk throughout the construction period. He said that Central's directors and management had signed up to ongoing training in site safety which included hazard identification, risk management and risk control; and he said that Central would produce a construction phase health and safety plan together with task specific methods of work, which would incorporate guidelines set out by the HSE and which would be passed on to all personnel verbally and in writing. Mr Davies (correctly) accepted that the purpose of method statements was to ensure that Central's work could be carried out safely; and that it was important that all of Central's staff should sign and understand its method statement; and that Mueller should have come away from his presentation with an understanding that Central could be relied upon to run the job safely.
- The final quotation was sent on 4 September 2007 and was in the sum of £2,075,000, which was significantly more than the earlier quotes. There had by then been a number of discussions between the parties and the increase in price was, as explained by Mr Davies, because it had been decided to use birdcage scaffolds in order to enable Mueller to continue production below Central's area of work. Although the type of scaffold had been decided and there had been brief discussions about how the works would be carried out, the precise method of working that Central would adopt had not yet been discussed in detail or worked out by Central. Specifically, Mr Davies confirmed in evidence that Central did not set out until after the contract had been entered into precisely what the birdcage would look like or where it would be positioned in relation to the existing factory structures and services; and before the contract was entered into he did not discuss with Mueller the need to turn off the heaters. After the contract had been entered into he left further discussions about how the work was to be conducted to Mr Thomas and Mr Henwood.
- The final quotation was sent to Mr Brian Parsons, Mueller's Manufacturing Director, who then conducted the negotiations which led to the signing of the contract. On 20 September 2007 he sent a draft contract to Mr Davies. The draft contract was based on a template provided by Mueller's American parent, which Mr Parsons had amended. Central replied on 2 October 2007 and raised a number of queries by a letter from Mr Davies' co-director, Mr Jeffreys. As originally drafted, Clause 8.9 of the draft contract was headed "Damaged or Destroyed Property" and imposed two obligations on the Contractor. First, it placed responsibility upon the Contractor at its own expense to repair, restore or replace any of Mueller's property which the Contractor or its sub-contractors may damage, destroy or remove in the course of the Work. Second, it placed responsibility upon the Contractor at its own cost and expense promptly to repair any damage to property of third parties resulting from the performance of the Work. Mr Jeffreys wrote in relation to Clause 8.9:
- There were further discussions between Mr Parsons and Mr Davies between 2 October and when the contract was concluded, as a result of which Mr Parsons agreed to incorporate a number of amendments to the draft contract. One of those amendments was to Clause 8.9. The amendment was clearly based upon the proposal set out in Central's letter of 2 October 2007 but, as set out below, the wording adopted by the parties in the contract differed from that initially proposed by Mr Jeffreys. There is no evidence about precisely how the altered wording came to be agreed for inclusion in Clause 8.9.
- Mr Parsons signed the contract on behalf of Mueller on 9 October 2007 and then sent it to Central. Mr Jeffreys signed it and a contract in writing thereupon came into being on the terms of the document. Mr Jones saw the terms of the contract and accepted that he must have gone through the contract to identify what it was that Mueller was going to have to do for the purposes of the re-roofing project[5]. He had no recollection of discussing it with Mr Parsons and did not accept that it was probable he had done so. Having regard to Mr Jones' background (which was technical rather than legal), his general approach, (which I accept was to rely upon Central to get on with the job) and his subsequent conduct in administering the contract, I consider it probable that he did not read the contract in any great detail and did not discuss the obligations arising under the contract with Mr Parsons or anyone else. There is, however, no doubt that he shared Mr Parsons' view that Mueller did not want anyone other than Mueller's employees touching Mueller's plant and equipment[6]; and, even without sight of the contract, he would have expected it to give Mueller the right to require unsafe work or practices to be rectified and steps taken to ensure that they were not repeated[7].
- Under the contract, Mueller was described as the Company; Central was described as Contractor. The terms of the contract that are most relevant to the present dispute are as follows:
- In accordance with the Preliminary Construction Information, Central produced a Health and Safety Plan. It was dated 2 November 2007 but was not in its final form by then. Before it reached its final form there was an important meeting at the factory on 7 November 2007. Among the attendees were Mr Parsons and Mr Jones for Mueller and Mr Thomas and Mr Henwood for Central[8]. The initial trigger for the meeting appears to have been a wish on Central's part to discuss the results of an asbestos survey with a Mr Ward[9], but it is clear that the meeting ranged much wider, as shown by Mr Thomas' contemporaneous notes[10]. There is a dispute about what was said at the meeting. Mr Parsons did not have a very clear recollection of the meeting. His recollection was that it was to be a first gathering where Central would take Mueller through what the process was. He had a recollection of a specific discussion concerning arrangements for the isolation of the workshop crane prior to the scaffolding being moved from one area to another. He did not remember any discussion in connection with isolation of the gas fuelled heaters or high bay lights[11], though he remembered Mr Thomas saying that Central would identify where they needed the electrics to be de-energised as the works progressed[12]. Mr Jones remembered discussing fencing round the work area, monthly safety and consultation meetings and hot work permits. He had no recollection of heaters and lights being discussed in the meeting; and he accepted that if Mr Thomas said that they had been and there was a note of it being discussed, he would not be in a position to dispute it. Neither Mr Parsons nor Mr Jones was shown such a note in the course of their cross-examination.
- By the time that Mr Thomas came to give evidence, his notes of the meeting had surfaced. The first half page consisted of notes made in advance of the meeting. The rest of the note consisted of sections divided by lines drawn across the page. Each section covered a topic, with annotations to the right hand side to indicate who was to take action in the light of the discussion. Mr Thomas said that, with one exception, the notes were notes that he drew up as the discussions were carrying on. The exception came within the section that is directly relevant to the present dispute. In the middle of the second page, immediately before a section which records "Method of Permit System" (with the words "Many meetings. Confirm work areas" crossed out) and an action marked for Mr Thomas, is a section which states as follows:
- To the right of this entry the notes record "GT Meth[o]d Statement". What is apparent on the original of the notes is that the words "Inc lights + heat shut down" and "Gas heating stopped" have been squeezed into that section of the document. Mr Thomas agreed that he had entered those words later, saying that it was later within the meeting rather than weeks later. He said that this section of his notes meant that the handover and shutdown of lights and heat were things that he was to look into and develop further and deal with in a method statement which he would have to prepare[13]. The note was an action point for him rather than Mr Jones. Although he rejected the suggestion that there was no actual discussion with Mr Jones on the question of the gas heaters and how they would be addressed, he accepted that he could not remember precisely what was discussed and that all he had to go on now was his notes[14]. While maintaining that the actual (i.e. physical) isolation was going to be in Mueller's hands, he accepted that what Mueller would have been expecting after the meeting was a document which told them when they needed to isolate their plant[15].
- Mr Henwood's notes of the meeting did not refer to isolation of plant or machinery and he gave no additional evidence about the meeting on 7 November.
- On 9 November 2007, two days after the meeting, Mr Thomas wrote to Mr Jones setting out and referring to points which had been discussed. Item 10 of the letter said:
- On 20 November 2007 Mr Thomas sent the revised Health & Safety Plan to Mr Jones. He did not either then or later ask Mr Jones formally to approve that plan although he did invite Mr Jones to contact him if he had any queries or required further information[17]. The plan was in large measure based upon generic documents already held by Mr Thomas, which he had tailored to the Mueller contract as necessary. It now included the "Area Handover and Permit System" method statement which Mr Thomas had been actioned to produce after the meeting of 7 November 2007 and to which he had been referring at item 10 of his letter of 9 November 2007. The method statement was, as expressly confirmed by Mr Thomas, an integral part of Central's Health & Safety plan and was therefore an integral part of the document that had been envisaged by Mueller's pre-construction information in May/June 2007, as well as being the document that was to set out Central's sequence of working and when Mueller was to isolate its plant.
- The main text of the area handover method statement bears setting out in full:
- Before turning to other relevant parts of the health & safety plan, it is convenient to record findings of fact about what was said at the meeting on 7 November 2007. I find that there was a specific discussion about the need to isolate cranes, as recalled by Mr Parsons, and about fencing and the intention to have frequent meetings, as recalled by Mr Jones: all of these are mentioned in Mr Thomas' meeting notes, which supports their respective recollections. I am not satisfied that there was any substantive conversation about heaters or lights or the need to shut them down. Had there been such a conversation, either Mr Jones or Mr Parsons would have recalled it. The late addition of the words "Inc lights + heat shut down Gas heating stopped" in Mr Thomas' notes indicates that he had them in mind when making that part of the note, which I accept he did later during the meeting rather than weeks later; but he had no independent recollection of any substantive conversation about shutting down the heat and light, and the late entry in the notes is consistent with the heat and light being an afterthought which emerged after the discussion about isolation of plant, and the note being a memory prompt to himself without the heat and light being discussed in any detail (or at all) with Mr Jones and Mr Parsons. The notes make clear, and Mr Thomas' evidence confirms, that the question of isolating plant, including the cranes, was something that he was to consider and develop by the production of his method statement, as he did at some stage before 20 November 2007. It therefore appears from the notes and the need to develop the method statement that shutting down the heaters had not been considered in any detail at the time of or during the meeting and was to be considered and developed by Mr Thomas later. On this evidence I am not satisfied that the heaters and lights were mentioned as part of the substantive discussions involving Mr Parsons and Mr Jones. Even if they were mentioned at all, I find on the basis of the witness evidence and Mr Thomas' notes, that there was nothing more than a fleeting reference to them and that any reference was in the context that Mr Thomas was to go away and draw up a permit and work sequence for handover that would tell Mueller when they needed to isolate their plant. This is consistent with Mr Parsons' recollection that Mr Thomas said that Central would identify where they needed the electrics to be de-energised as the works progressed, although it is not possible to be sure whether that remark was made in relation to the cranes or more generally.
- Central's Health & Safety Plan stated that its purpose was to "highlight the main health and safety issues in connection with the roof refurbishment at the Mueller Europe project and to explain [Central's] proposals for effective health and safety management." It was to be developed by Central during the project to ensure compliance to all Health and Safety Legislation, and it was to be "the specific responsibility of the Site Manager to ensure the day-to-day implementation and development of [the plan] in connection with the project"[19]. Central was to follow HSE guidance on successful Health and Safety Management and was to instigate five steps to that end, including "good planning and setting of high health and safety standards" and "measuring performance by regular monitoring"[20]. Mr Davies was to have overall responsibility for safety; Mr Thomas was to be responsible for safety, design and co-ordination of the project; and Mr Henwood as site manager was to be responsible for making all direct labour and sub-contractors aware of any hazards and dangers on site and for liaising with all sub contractors and Mueller's representative (Mr Jones) to ensure work proceeded in a planned and safe manner[21]. Permits to work were to be obtained for crane and electrical isolation[22]. Information was to be given to all operatives on induction training courses[23] and by the provision of risk assessments[24] and method statements (including the method statement for permits and handovers)[25]. Scaffolds were to be inspected by a competent person prior to allowing persons to work[26]. All members of management were to be required to demonstrate their commitment to health and safety and to lead by example; and where accidents or incidents occurred, investigations were to be carried out and information communicated to all workers on how similar accidents or incidents could be avoided[27]. Risk assessments were to be carried out and fire was identified as a hazard that required to be addressed by a risk assessment[28]. Consultation was to take place with the CDM Coordinator and client for the project where it was necessary to alter or change designs or site rules[29] (which, according to Mr Thomas, would include any significant change to the method statement[30]).
- Mr Thomas correctly accepted in evidence that the purpose of the plan was to identify the risks arising from Central's work and to ensure that those risks were addressed or eliminated. To like effect, Mr Davies correctly accepted that the purpose of a method statement was to make sure that Central's work could be carried out safely; that it should be passed on to all Central personnel verbally and in writing; and that it was important that everybody involved in the project for Central should sign and understand it. If the method statement was followed it would ensure that work did not start until Central had a written permit confirming that the gas had been isolated. The self-evident intention was that Mueller would not issue such a permit without ensuring that the isolation had taken place. In this way Mr Thomas considered that he had devised a failsafe system that was a safe system of work[31]. Taking the evidence of Mr Davies and Mr Thomas with the terms of the method statement it is clear beyond argument to the contrary that the purpose of, and Mr Thomas' intention in drawing up, the method statement was to devise a failsafe system of working which would ensure that the heaters were off by placing on Central the responsibility for obtaining from Mueller a permit to work which would in turn ensure that Mueller had physically isolated them.
- Despite the fact that he was the Mueller contact responsible for the administration of the roofing contract and despite knowing that Mr Thomas was going to produce a handover permit and work sequence which was to be written in to the revised Health & Safety document and which would tell Mueller when they needed to isolate their plant, Mr Jones did not read the Health and Safety Plan before the fire. He knew that the method of work statements would be the way in which Central would say how they were going to do the work; and he accepted that they would be sent to him for his approval and that, if there was anything that Mueller had to do, he would be able to look at the statements and see whether or not it was acceptable to him and Mueller[32]. What in fact happened was that, when he received it he passed it to his colleague Mr Ken Hall, who was responsible for health and safety issues at Mueller[33]. Mr Hall returned the file to Mr Jones and said that "everything was fine". It was also sent to Mueller's CDM Co-ordinator, RG Wilbrey Ltd, who wrote to Mr Jones on 16 January 2008 stating that they considered it to be "satisfactory". Because he did not read the Health and Safety Plan, Mr Jones did not read the area handover method statement and was unaware of its terms until after the fire. Mr Parsons did read the Health and Safety Plan, including the method statement – but he was not to be involved in the day to day administration of the contract.
- I discuss the contractual significance of the provision of the method statement later in this judgment. Subject to that, I find as a fact that Central did not make any specific request to Mueller before the works started that the heaters should be isolated during the works.
- Measuring and surveying of the roof started on or shortly after 1 November 2007[34] with the erection of the external scaffolds that were required to give access to the works via the walkways on the roof commencing on or shortly after 13 November[35]. Internal works started on or shortly after 17 December 2007[36]. It is clear from all of the evidence that there were good relations between Mueller and Central during the contract and, in particular, that Mr Jones developed a good working relationship with both Mr Thomas and Mr Henwood. It is also clear that, although there were some occasions when things did not go entirely smoothly and other occasions when criticism could be made of individuals' conduct[37] in the course of the works, both parties considered that the contract was going well. The good relations between the contracting parties continued after the fire: Central secured the contract to get the factory operational again and met Mueller's target date of 6 December 2008, which prompted Mr Parsons to thank Central for their "magnificent support", commenting that Central was "amongst the most well organised and professional companies it has been my pleasure to work with." I have no doubt that Mr Parsons' comments were sincere.
- During the contract, Mueller and Central had regular meetings. Initially there were monthly progress meetings that were attended by Messrs Thomas and Henwood for Central and by Mr Jones and another representative of Mueller. Those meetings did not continue after April 2008. There is a dispute, which it is not necessary to resolve, about why these meetings ceased. What is clear is that the meetings could have been re-convened by either party had it been thought necessary.
- As it was, there were two other sets of regular meetings which provided the opportunity for all matters relating to the contract works to be discussed. In the period to July 2008 there were daily meetings which provided a forum for any problems to be raised and the progress of the contract works to be discussed. After a gap in August, those meetings continued from September 2008, but on a weekly basis.
- In addition, there were regular pre-scaffold move meetings. These would typically be attended by Mr Henwood and Mr Hardy (Central's working foreman on the contract) and by Mr Jones and, sometimes, by Mr Hartland (one of Mueller's shift supervisors). A few days before any move of a scaffold, a meeting would be held where Mr Jones would discuss with Mr Henwood and Mr Hardy the date on which the move was to take place and the steps that needed to be taken in preparation for and in connection with the move. The area of the factory that would be affected would be identified to Mr Jones by bay numbers and grid numbers which corresponded to column numbers. Mr Jones accepted that this meant that he would know precisely the area where the scaffold would be erected.
- In an important passage of cross-examination[38] Mr Jones accepted that the identification of the area where the scaffold would be erected gave Mueller the opportunity to remove stock or to protect any vulnerable plant or equipment that might have to be worked around. He also accepted (correctly) that a person who went down to the shop floor knowing the area where the scaffold would be erected would have no difficulty in identifying where the lights and heaters were in relation to the columns and whether they were in the area that was being scaffolded. The cross-examination did not establish whether Mr Jones was speaking generally or whether he had in fact gone onto the shop floor during the meetings. However, Mr Jones is a hands-on man who spent time on the shop floor. He accepted in re-examination that he had been on the shop floor when the scaffolds were being erected and had seen them being erected[39], and it seems likely that questions would have arisen (e.g. about the need to move stock or protect machinery) which would have required Mr Jones and Mr Henwood to look at the area in question during the pre-scaffold move meetings. In addition, the evidence of Mr Hartland was that the five or six pre-scaffold move meetings that he attended took place on the shop floor. On this evidence I find that Mr Jones' pre-scaffold move discussions with Mr Henwood will generally have involved going onto the shop floor to the relevant area; and that he would have seen scaffolds being erected on a number of occasions.
- Once the pre-scaffold move meeting had identified the area to be affected by Central's work, Mueller's technical staff would routinely isolate the cranes that ran the length of the bays of the factory by inserting mechanical stops and splitting the electrical supply rails, thereby isolating the electricity supply so that the cranes could not infringe Central's working area. In addition, the electrical supply to the downshop leads would be cut and the supply locked off with a padlock. This isolation would be requested by Mr Jones. If it was to be carried out at the weekend the request would be written on a weekend worksheet, otherwise it would be written on the whiteboard that was routinely used for identifying work to be done. Once done, it would be recorded in Mueller's maintenance log[40], although the evidence does not establish that every instance of isolation and reinstatement was faithfully recorded.
- When the area had been cleared and the cranes had been isolated, Central's work could proceed. Before it did, Estil Ltd (who were electrical contractors engaged by Mueller) replaced trunking and sockets at high level working from a cherry-picker. They would not touch the heaters or the existing lighting. The birdcage would then be erected by Central's scaffolding sub-contractors, Scaffolding Erection Services Ltd ("SES"), which would typically take about 7 days on each occasion. Central's Asbestos Subcontractors, Central Environmental Services ("CES"), would then sheet up the birdcage and work from inside the birdcage to remove asbestos panels which were taken away via an airlock that gave access to and from the external walkways on the roof. Once that was done and CES had cleansed the area of asbestos residues, Central would remove and replace the roofing panels, again working from inside the birdcage and removing materials via the external walkways. On completion of that work, the birdcage would be handed back to SES, who would dismantle it and move it to the next position. In this way, the scaffold "crept" along the bays of the factory. After the roofing works were complete, Estil would follow on, section by section, fitting new lights and wiring.
- It is plain that, while SES were erecting the birdcage on each move and before it was sheeted out, there would have been a number of days when the lights and heaters would have been in full view for anyone who looked up from the shop floor. It would have been obvious that the heaters were or would be in close proximity to the scaffold.
- Mr Jones, Mr Henwood, Mr Hartland and Mr Hardy gave evidence about what was discussed in the pre-scaffold move meetings. In the end, there was little or no dispute between them. The evidence of Mr Jones and Mr Henwood, which I accept, was that there was no specific discussion of the need to isolate heaters and that Mr Henwood made no request for them to be isolated at the meetings. Mr Henwood clearly recognised that the heaters needed to be isolated; but he simply assumed that Mr Jones would be of the same view, as it was his factory, and that the heaters would be isolated. Mr Hartland's evidence confirms other evidence which is to the effect that, while the cranes were the subject of discussion, the lights and heaters were not.
- I also find, on the basis of the evidence of Mr Henwood, Mr Hardy and Mr Jones, that, when requesting permits to work from Mr Jones, Mr Henwood did not request permits confirming the isolation of the lights or the heaters and there was no discussion of them. By the end of the trial it was entirely clear what had happened. On Central's side, Mr Henwood assumed that Mr Jones would have the heaters in mind as an obvious hazard and would therefore cause them to be isolated. However, Mr Jones never turned his mind to the heaters and was relying upon Central to identify to him what needed to be isolated as part of what he saw as their responsibility for carrying out the work safely.
- It is, with hindsight, almost incomprehensible that Mr Jones, who is a valued and experienced employee in a position of significant responsibility for a major enterprise such as Mueller, could have failed to appreciate the danger posed by the heaters; but, having observed him closely in the witness box and having reviewed all of the evidence as it emerged and again since the close of the trial, I am certain that is what happened. The reason it is surprising is that the danger was obvious and he had every opportunity to spot it before and during each scaffold move. There was a clear sense as he gave his evidence that he was burdened by the realisation that he should have recognised the danger and by the appreciation that, had he done so, the fire would not have happened. That evident burden contributes to my finding that he was not aware of the risk before the fire. I accept that he is generally diligent and responsible in the discharge of his duties. Had he appreciated the risk, I am confident that he would have taken steps to obviate it by ensuring that the heaters were not just switched off but isolated. To my mind the fact that he did not read the contract thoroughly and did not read the Health and Safety Plan at all before the fire is all consistent with his evidence (which I accept as a matter of fact) that he was relying upon Central to carry out their work safely and to alert him to any steps that he needed to take. He was a busy man, for whom the roofing contract took up a small part of his time, even though it was obviously important for his employers; and he thought he was dealing with competent contractors under the direction of Mr Henwood, who he respected.
- Mr Henwood's assumption that the heaters were being turned off was equally surprising for a man of his experience and position of responsibility, even had there been no incidents of heaters being found on. He was aware that the heaters were a potential source of danger. He also was aware of the terms of the method statement and would have realised the importance of the system that Mr Thomas had devised for ensuring that the heaters were isolated. Yet he neither operated that system nor discussed the heaters with Mr Jones. This was, as was confirmed in evidence, a serious lapse on his part. Once again, I consider that it is at least partially explained (though not justified) by the fact that he got on well with Mr Jones and the contract seemed to be going well. Whatever the explanation, it happened; and it was not picked up by Mr Thomas in his supervisory role with responsibility for the safe conduct of the contract.
- The method statement required that Central "obtain [written] confirmation by permit for isolation of electrics, heating and crane shutdown." Mr Jones had a template on his computer, which was divided into various sections. The first section specified the date, job location and nature of work covered by the permit. The second section was entitled "Identification of Hazards" and included tick boxes for a number of specified hazards including fire and a further box for "other" hazards. The next box was entitled "Isolations". The first subsection was for electrical isolation and there were two further subsections for "other" isolations. Under each subsection were boxes identifying the scope of isolation, by whom it was performed and by whom it had been checked, with boxes to the right identifying the lock that had been applied to the isolation and who held it. Further sections in the permit were to identify protective equipment, other precautions, personnel covered by the permit, and the issuer, issuing date and period of validity. There were then sections indicating when and by whom the permit was accepted (on behalf of the contractor carrying out the work), when the work was completed, and the date on which the permit was cancelled on completion of the work.
- When a permit was required, Mr Henwood (or, occasionally, Mr Hardy) would go to Mr Jones and request one. If the permit system had been operated as required by the method statement, fire would routinely have been identified as a hazard, and isolation of the cranes, heaters and electrical systems would each routinely have been confirmed. Because (a) Mr Jones had not read the method statement, (b) there was no discussion of heaters or lights, and (c) Mr Henwood and Mr Hardy[41] did not ask him to issue permits which confirmed the isolation of the electrics heating and crane shut down, Mr Jones issued permits to work to Central which did not comply with what had been set out in the method statement by confirming that the heating and electrics (for the lights) were shut down. No permit identified fire as a hazard attributable to the heaters and no permit referred to isolation of the heating or lighting. Two early permits which were issued to or signed as being accepted by Central[42] (the last of which was issued on 4 February 2008) referred to isolation of the cranes. This happened because the cranes were "on the radar" and the need to isolate them was discussed at the meetings even if no express request was formulated by Mr Henwood. After the early two, no permit issued to Central even referred to isolation of the cranes[43] although, as a result of discussions at the pre-scaffold move meetings, the cranes were in fact routinely isolated. This further lapse meant that, after the early permits, the failsafe system provided for by Mr Thomas' was entirely neglected by both parties.
- Instead of issuing permits each time a scaffold was to be moved, the parties settled on a routine of permits being issued at about monthly intervals, which were issued in broad terms to cover the work being carried on under the contract and which contained no reference to the need for any isolations[44]. Instead of Mr Thomas' system as set out in the method statement, the isolation of the cranes was dealt with by Mr Henwood requesting that isolation should happen at a particular position, as he did in relation to moving a scaffold from bay 3 to bay one at a meeting on 6 November 2008. After that meeting Mr Jones gave the necessary instruction to Mueller's maintenance fitters, which was recorded on the whiteboard by Mr Smith who wrote "please put crane stops up in 1 bay as follows tonight. … Isolate long travel (positioned where Eddie requested). Best of luck. Thanks. Trev." When the instruction had been carried out, the whiteboard was marked "done" and the key used to lock off the electricity supply was stuck to it with sticky tape. I find that this was typical of the way in which the cranes came to be isolated.
- Central relied upon an answer by Mr Jones that "there was no decision by Mr Henwood to put [isolation of the cranes] on the permit." However, that answer needs to be seen in a broader context. Mr Jones was the person who sat at the computer; and he adapted the template in the light of his discussions with Mr Henwood and the issues that Mr Henwood raised. Mr Jones then printed and issued the permits. But Mr Henwood knew the format of the document and what Mr Jones was doing, and that if he raised the need for isolations Mr Jones would include them on the permit; and it was his decision to accept the permit in the form printed off by Mr Jones.[45] So, while Mr Jones' answer has some validity, the process by which the permits came to be issued as they did was more complex than the single answer suggests and Mr Henwood had the power to exercise and did exercise decisive influence over their terms. The evidence of Mr Smith about the occasions when he issued permits was to similar effect: the person requesting the permit would sit or stand by him as he drew up the permit, and would provide information about the name of the contractors, the area of work and the nature of the work, including whether any isolations were required. I do not accept Mr Smith's evidence that he would always ask what isolations were required; but I do accept the gist of his evidence that there would be a conversation during which the contractor would provide information which would determine what went on the permit.
- The sheeted birdcage that caught fire had been erected in Bay 2 over about the previous nine days. The scaffold had been erected by Wednesday 5 November 2008. CES were engaged in sheeting it out on 6 and 7 November 2007. Central left site at about 1.30 pm on 7 November 2007 and were not present again before the fire. SES were on site on 8 November 2007 but were working in Bay 1. The fire was discovered at or just before 4 a.m. in the morning of 9 November 2007.
- The heaters were powerful (32 or 35kw) gas-fired radiant heaters that were suspended from the roof about 6 metres above shop floor level. The factory was divided into zones, each of which contained a number of pairs of heaters. At the time of the fire, Central's scaffold was suspended so that it spanned part of bays one, two and three of the factory, which took in parts of zones eleven and eight of the heating system. Within bay two the scaffold enclosed two of the zone eleven pairs of heaters, which have been called 1(a), 1(b), 2(a), 2(b). Other zone eleven heaters were outside the birdcage scaffold. The underside of the heaters within the scaffold was approximately 0.5 metres above the surface of the scaffolding deck. The manufacturer's data sheet specified a minimum clearance distance of 2.63 metres between the underside of the heaters and combustible material.
- The agreed evidence of the forensic experts instructed by the parties is that the fire started in the immediate vicinity of heaters 1(a) and 1(b). On the basis of their evidence the inevitable conclusion is that the fire was caused by radiant heat from one or both heaters 1(a) and 1(b).
- There were controls governing the Zone 11 heaters both at factory floor and at roof level. At ground floor level there was an electrical control box attached to a stanchion between Bays 1 and 2. At one stage a thermostatic control system had been attached to the left hand side of the control box; but this had been overridden before March 2007. After that, control of the Zone 11 heaters at ground floor level was provided by two switches within the control box, numbered 1 and 2. Switch 1 controlled the supply of electricity to five pairs of heaters in bay one; switch 2 controlled the supply of electricity to five pairs of heaters in bay 2, including heaters 1(a), 1(b), 2(a) and 2(b). The electrical supply was protected by fuses or a circuit breaker at ground level. Conventionally, protection either by a fuse or circuit breaker would have been positioned on the supply side of the switches in the control box. It would therefore have been possible to isolate the electricity supply to all of the zone eleven heaters (but not to individual heaters or groups of heaters within zone eleven) by removing the fuse (or by flicking a switch on the MCB if that was protecting the circuit).
- At roof level the electricity supply to the heater was provided by a flying mains lead which passed from a fused spur to the heater. At the fused spur end the flying lead was hard wired into the spur which had an on/off switch. At the heater end the flying lead was attached to the heater by a plug which could be removed. It follows that the supply of electricity to the heater could be prevented at roof level either by switching off the switch at the spur or by disconnecting the plug on the heater or both. Also at roof level there was a local supply valve in the gas pipework leading to each heater. The supply of gas to each heater could be isolated by turning the local supply valve to the closed position. No other valve which would have enabled the isolation of the gas supply to either all or some of the Zone eleven heaters has been identified in the evidence.
- Within each heater there was an electronic control circuit which governed the flow of gas into the heater and the creation of a spark to light the gas. Provided that a supply of gas was available to the heater, when the electricity supply to that heater was switched on, it would open the gas control valve on the heater and activate the spark ignition. The heater would then continue to operate for as long as a supply of gas and electricity was present.
- It follows that there were three steps that could be taken to prevent the operation of individual heaters within zone eleven, each of which required to be carried out at roof level, and all three of which could be carried out either singly or in combination. First, the switch on the fused spur could be switched off; second, the plug attaching the flying mains lead to the heater could be detached from the heater; and third, the local gas supply valve could be turned to the closed position.
- Following the fire the switch in the control box on the stanchion at factory floor level which governed heaters 1(a) and 1(b) was found to be switched on. At roof level the local supply valve for heater 1(a) was found to be open. The position of the local supply valve for heater 1(b) is unknown because of the extent of the fire damage. Also at roof level, the fused spurs for both heaters 1(a) and 1(b) were found to be switched on and both fuses were "blown" which indicates that the flying leads were not detached from the heaters when the fire broke out. There is no evidence to suggest that any of these switches or valves were moved after the outbreak of fire and I find that they were not. What this means is that the heaters were not isolated at roof level or by the removal of fuses or operation of a circuit breaker at ground level. Thus the flicking of the switch in the control box at ground level was all that was determining whether or not the heaters operated. Since there is no evidence to suggest and no reason to suppose that there had been a temporary malfunction which prevented the operation of the heaters at any stage, the inevitable inference is that someone must have turned the switch at ground level to the on position which caused the heaters to operate.
- There is no forensic evidence identifying how long the fire had been burning before it was detected. Even without such evidence, the potency of the heaters once ignited and the ferocity of the fire when discovered, make it overwhelmingly probable that the fire did not start and the heaters were not on until some time during the night of 8/9 November. I therefore find that the heaters started to operate after Central and its subcontractors had left site for the weekend. It follows that the ground level switch was in the off position when they left.
- The happening of the fire raises the question: who switched on the switch and when did they do so? But it raises broader factual questions, namely:
- On the evening of 8/9 November, two Mueller employees, Mr Mehigan and Mr Bahia, were on duty and carrying out mechanical maintenance in the factory. They were checking the tracking on a belt in bay 3 and checking for an oil leak on the tagger in Bay 2. The tagger was on the shop floor about 15-20 metres from the area of the birdcage which caught fire. They finished this work by about 9 pm. While they were carrying out their work, there were lights on in Bay 4 but not in Bays 1, 2 and 3. This gave them enough light to walk around the factory, but they used a torch when working on the oil leak. Mr Bahia said that he knew the heating could be turned on at the stanchion but that he did not know how that could be done. He said that he did not remember the heating being on that night and neither he nor Mr Mehigan turned it on. Although he accepted that Mr Jenkins, a Mueller electrical engineer, had been working that night, he did not know where; and he did not remember anyone else working near them in Bay 2. Mr Mehigan's evidence was to much the same effect save that he said that he did not know where to go to turn the heating on as it was not his job to turn heaters on; and he said that he did not know where to go to turn the factory lights on. He also said that it was not necessary to isolate the tagger in order to carry out their work on it. The evidence of Mr Mehigan and Mr Bahia is confirmed by CCTV which shows two members of staff working by torch light in the area of a machine in Bay 2 at about 8.22 pm. The CCTV also shows that they went to the pillars between Bays 1 and 2 but it is not clear what they did in that area.
- On this evidence, I find that the switch which activated the heaters was switched on by a Mueller employee at a time when Central and its subcontractors were not on site. There is direct evidence that Mr Bahia and Mr Mehigan went to the area where the switch was situated at a time which, if they had switched on the switch, would be consistent with the time of outbreak and discovery of the fire. On their evidence, they had no need of additional lighting and did not at any stage intend to switch on the heaters. However, there is no evidence of anyone else working in the vicinity of the switch or approaching it. The weight of the objective evidence therefore suggests that it was Mr Mehigan or Mr Bahia who turned the switch on, but the objective evidence is opposed by their evidence that they did not. It is not necessary to make a specific finding that it was Mr Mehigan or Mr Bahia who turned the switch on, since the identity of the Mueller employee who turned on the switch makes no difference to liability or quantum, and I do not do so. What may matter is the fact that it was a Mueller employee who turned the switch on, and not Central or its sub-contractors.
- Turning to the broader factual questions, considerable evidence was adduced and detailed submissions were made. Mueller submitted that its employees did not routinely isolate heaters; but that heaters must have been isolated during the works and that this must have been done by Central or its subcontractors. Central's opening submission was that Mueller was isolating the heaters although it was not issuing permits confirming that it was doing so[46], and that throughout the performance of the Contract the heaters were either isolated or turned off prior to the works commencing[47] and that this was being done by Mueller[48]. That remains Central's submission[49].
- The main features of the evidence that is relevant to the question of isolation of heaters may be summarised as follows:
- By the end of the evidence it was common ground that there had been at least one occasion when a heater was found to be turned on when enclosed by a scaffold. Mr Henwood had told Mr Hotchkiss (the forensic investigator appointed by Mueller's insurers) soon after the fire of an occasion when a heater was found on in Bay 1. The position he identified to Mr Hotchkiss was the same as had been identified by Mr Smith who said that he had been asked to isolate a heater which was found to be on with in the scaffold as the birdcage was being erected about 4-6 weeks before the fire. Mr Smith said, and I accept, that he isolated the heater by closing the local gas supply valve and pulling out the flying lead to the heater.
- On 26 November 2008 Mr Hotchkiss recorded Mr Henwood as telling him:
- Mr Low was a supervisor for CES. He gave evidence in his witness statement of an occasion "some weeks" before the fire when he found the heaters on. His evidence was that he had informed Mr Hardy who had arranged for the heater to be turned off within about 5 minutes. By then the hardboard underneath the heaters was very hot and vapours could be seen coming from the heaters. He had given a similar account to Mr Hotchkiss shortly after the fire save that there was inconsistency about whether the incident had occurred in what CES described as Phase 5b or 6b of their work[53]. In addition, he gave evidence that he had been told by others that they had on one occasion found decking boards buckled after a heater was left on. Mr Low's evidence was challenged in cross-examination, and Mr Hardy was adamant that Mr Low had not come to him about heaters being on. While Mr Hardy may be right about that (not least because it is consistent with his evidence that he did not know of the occasions described by Mr Henwood) I am confident that Mr Low was not making up the occasion that he described to Mr Hotchkiss, Mr Bennett and in his witness statement. The more difficult question is whether he was in fact referring to the same incident as the incident agreed upon by Mr Henwood and Mr Smith. The timing ("some weeks" before the fire) is consistent with the description by Mr Henwood (4-6 weeks before the fire). Mr Low was inconsistent about which phase of work was being carried out, but phases 5b and 6b were both in Bay 2 – Mr Henwood and Mr Smith's incident was identified by each of them as being in Bay 1, but adjacent to where CES's phase 6b works took place. On balance, given the proximity of time and place, although I am satisfied and find that Mr Low is correct in remembering an incident generally as he describes, I am not satisfied that it is different from the incident which, it is common ground, occurred about 4-6 weeks before the fire in Bay 1.
- Mr Goring was a foreman for SES. He gave unchallenged evidence that on one occasion whilst dismantling scaffolding in Bay 1 he found that the hardboard sheet was stuck to the plastic sheet and battens in the area beneath one of the heaters. He could not remember which move in Bay 1 he was on at the time and did not say that he had alerted either Central or Mueller: he merely said that he had shouted to a colleague to go and tell whoever was around on the shop floor not to turn the heaters on. While I accept his evidence, it is not clear whether what he found was the aftermath of one of the incidents I have discussed above or a separate and additional incident. I am not satisfied that it probably constitutes an additional incident of heaters being left on.
- So, I find that there were three occasions when heaters were found to be on within the birdcages. Two were early in the contract; the third was 4-6 weeks before the fire. On the last occasion Mr Smith isolated the heaters at roof level. I am not able to identify who switched off or isolated the heaters on the previous two occasions, but it would have been Mueller employees after a request from Central to Mr Smith. Mr Henwood was aware of all three occasions. Mr Jones was not informed and was not aware of them.
- In addition to the notes to which I have already referred, Mr Hotchkiss took notes which are relevant to the question whether, and if so by whom, the heaters were isolated:
- Mr Hotchkiss said in evidence that Mr Henwood had not confirmed before the fire that the heaters and lights were off: he had said to Mr Jones after the fire that the heaters and lights had been off before it. But there is another note two pages further on which is consistent with what Mr Hotchkiss had noted here.
- Also in the same note, Mr Hotchkiss recorded "Crane, heater and lights isolations responsibility of Mueller." There has never been any doubt that Mr Parsons and Mr Jones took the view that the physical act of isolating plant should be carried out by Mueller. It is not clear from the note that Mr Jones was saying anything more than that.
- There is also a note of a conversation with Mr Urosevic which states "No request to disconnect lights or heaters before scaffolding moved – just crane stops". This is to be contrasted with Mr Urosevic's witness statement and oral evidence in which he said that before a scaffold move he received verbal requests on two or three occasions from either Mr Henwood or Mr Hardy to isolate lighting in the areas where the scaffold was to be erected.
- In my judgment it is entirely clear that the heaters were not being routinely isolated by Mueller or by anyone else as the works progressed. This is for a number of reasons. First, Central did not request isolation as a matter of routine either in the pre-scaffold move meetings, or when obtaining permits or at any other stage in the works. Second, Mr Jones, who would have been the person who would have instigated routine isolation of the heaters, did not have them in mind. Third, the heaters seem to have been almost completely "off the radar", in stark contrast to the cranes which were the subject of regular and routine discussion and isolation. Fourth, on the three occasions when heaters were found on, the incident was not treated with the seriousness it deserved either by Central (who failed to institute a thorough investigation or to involve the company's higher management) or by Mueller (who failed to report the incidents up the line to Mr Jones). There may have been individual occasions in addition to when heaters were found on when, on a purely ad hoc basis, someone from Central asked someone from Mueller to isolate or switch off a heater; but the evidence on this point is unsatisfactory and, if they occurred, such occasions were relatively rare and were effectively kept at shop floor level. Fifth, it appears that Mr Henwood knew that the gas was off to banks of heaters between about May and October. That may have lulled him into a false sense of security which contributed to the fact that no steps were taken to isolate heaters for the purposes of the works when the gas was switched back on in about October. Sixth, I accept the evidence of the Mueller employees to the effect that they were not routinely asked to isolate heaters. Seventh, the fact that some flying leads were found to be unplugged does not demonstrate a consistent practice of isolating heaters. Apart from the fact that the evidence does not show that the leads were consistently unplugged, the evidence does not support a finding that they were unplugged by Mueller as part of the carrying out of the works. By the time that Estil followed on, the leads could have been unplugged by any number of people who had by then come into close proximity with them (including Estil themselves), which is what I find probably happened. Eighth, if Mueller had been routinely isolating the heaters, there would be at least some mention of it in the maintenance log, even though I would not accept that every instance would necessarily have been recorded. Ninth, I do not consider that Mr Hotchkiss' note of 12 November 2008 compels a different conclusion. The sentence where Mr Jones is recorded to have referred to the heaters is placed on a new line and preceded by a dash – the method used by Mr Hotchkiss to indicate a new topic. I am not persuaded by the terms of the note that Mr Jones ever said that Mueller routinely isolated heaters. If a heater had been isolated by closing the local gas valve, normal factory demarcation would have meant that it would be done by a mechanical fitter. I am not satisfied that the sentence in question reflects anything more than that.
- The first six reasons that I have just set out explain why the heaters were not isolated on 8/9 November 2008. If the method statement had been followed, they would have been isolated. I accept the evidence of Mr Henwood and Mr Jones that, if Mr Henwood had asked for a permit which confirmed isolation of the heaters, Mr Jones would not merely have issued a piece of paper but would have checked to ensure that the heaters were isolated before confirming the position on the permit.
- Central challenges this last finding, relying upon the fact that Mueller did not take steps to reform its permit to work system in spite of an incident in May 2008 when a roofing contractor worked "above live crane rails, not isolated and not fitted with stops." However, that incident did not relate to the Central contract and involved another contractor, Marsh Roofing. Little detail is available about the incident. In particular, nothing substantial is known about how the permit to work system was being operated (or not) on the Marsh Roofing contract and what steps (if any) were being taken on that contract to ensure that cranes were isolated. What is known is that the incident involved working above live crane rails, which was not a problem on the Central contract because the cranes were being routinely isolated. That being so, it is not surprising that the incident did not cause changes to be made in the administration of the Central contract, and the fact that Mueller did not change its permit system is of limited assistance. It does not necessitate the rejection of the combined evidence of Mr Henwood and Mr Jones on this point. Mr Henwood knew Mr Jones well and, having had the opportunity to assess Mr Jones as he gave his evidence, I am satisfied that Mr Henwood's judgment was correct.
- Since the heaters were not routinely isolated for the purposes of the works and the ad hoc unplugging of flying leads would not have been consistent, they must generally have been turned off by some other method, at least outside the period from May to October 2008 when the gas to heaters was cut for reasons of economy: otherwise the heaters would have been found burning when enclosed in the scaffold on many more than three occasions. There is no reason to suppose that turning off at stanchion level was an approach that was uniquely adopted at the time of the fire, and no obvious alternative has been offered. After the fire the control box on the stanchion was found to be open, though it had a lockable cover. There was evidence that the lock was simple and easily turned by a variety of implements. There is no direct evidence of the heaters being turned off at the stanchion on previous occasions, but I find that to be the most probable method that was used. In addition, I find that turning off the heaters at stanchion level was usually but not always done by Mueller employees on an ad hoc basis when they were asked to do so. There are a number of reasons for these findings. First, if there had been in any sense a formal system for turning off the heaters at the stanchions, Mr Henwood and Mr Hardy would have known about it and it is quite likely that Mr Jones would have too: they did not. Second, the ease of access to the switches on the stanchion and the lack of security, which is reflected in the fact that the cover was open after the fire, suggests that security was not strict and that it both could be and was circumvented. Third, the evidence of Mr Goring that, when he found the hardboard sheet stuck to the plastic sheet and battens, he shouted to a colleague to go and tell whoever was around on the shop floor not to turn the heaters on suggests a degree of informality which is not surprising in a working factory. Fourth, in general the contractors would leave the operation of Mueller's plant and equipment to Mueller, but I cannot exclude the possibility that, on some occasions, contractors may have taken the easy option and turned a switch on a stanchion themselves.
- The evidence in relation to the isolation of lights can be taken more shortly. Mueller sometimes isolated banks of lights. This is confirmed by the experts' finding that a number of fuses in the control unit for the Bay 2 lighting had been removed so as to isolate the lights that were enclosed in the scaffold. It is also confirmed by the evidence of Mr Urosevic, though he qualified his evidence to say that he was asked by Central to do so by Mr Henwood and Mr Hardy either two or three times. I would accept his evidence that the way the isolation was done was for Mr Henwood or Mr Hardy to stand by him and identify to him the specific area of lights that they required to be isolated: he would then remove the appropriate fuses. Even so, there were occasions when lights were found on, as confirmed by the account given by Mr Low to Mr Bennett on 11 November 2008[59]. On all of the available evidence I would find that the isolation of lights was not routine (in the sense of being carried out regularly for each scaffold move); instead it was carried out by Mueller on those occasions when Mr Urosevic or others were requested to do so by Central. In the result, the lights were sometimes isolated, and sometimes were not.
- The general principles of contractual interpretation are well known. Only a brief recapitulation is required here by reference to high authority. The interpretation of contracts is the ascertainment of the meaning which the contract would convey to a reasonable person having all the background knowledge which would reasonably have been available to the parties in the situation in which they were at the time of the contract[60]. The Court's enquiry will start and usually finish, by asking what is the ordinary meaning of the words used[61]. Individual words or phrases in a contract should be interpreted in the context of the contract as a whole. The background knowledge and surrounding circumstances which it is legitimate to take into account include anything which would have been reasonably available to the parties which would have affected the way in which the language of the contract would have been understood by the a reasonable man; but the law excludes from the admissible background the previous negotiations of the parties and their declarations of subjective intent[62]. Similarly, evidence about what the parties understood a contract to mean or their obligations under a contract is generally inadmissible for the purposes of interpreting a contract, as is post-contract conduct - though post-contract conduct may be relevant to the question whether a term has been incorporated in the contract or not[63]. In a commercial contract, it is right that the court should know the commercial purpose of the contract and this in turn presupposes knowledge of the genesis of the transaction, the background, the context, and the market in which the parties are operating[64].
- Where a clause of a contract has no very natural meaning, it is important for the court to consider the implications of each interpretation; and the court when construing any document should always have an eye to the consequences of a particular construction, even if they only serve as a check on an obvious meaning or a restraint upon adoption of a conceivable but unbusinesslike meaning[65]. While the court should not strive to find ambiguity where none really exists, in cases of real ambiguity and uncertainty as to meaning, the contra-proferentem doctrine may come into play. The two established categories of parties who will be regarded as "proferens" are (a) those who rely upon a clause to exclude or to limit the liability alleged against them, and (b) those who were responsible for introducing during the negotiating process the particular parts of the clause on which they rely[66].
- The first question is to determine what were the contract documents. The term "Contract Documents" was a defined term and included the document which Mr Parsons and Mr Jeffreys signed. In its opening submissions Mueller submitted that Central's Health and Safety Plan and the method statement were contract documents on the basis that they fell within the definition of "addenda or standards"; but by the time of closing submissions – correctly, in my view – it withdrew that submission. The correct analysis is that the Health and Safety Plan (including the method statement) was contemplated by the contract but was not itself a contract document. As is now common ground, the plan and the method statement were not within the definition of "Contract Documents". However, Clause 2.1(a) of the contract required Central to "begin the Work in accordance with the terms of the schedule of pre-construction document dated May 2007." That was a reference to the pre-construction information, which included the provision that Central should compile and develop the Health and Safety Plan for the construction phase of the works both before and after commencement of the Works. The express terms of Clause 2.1(a) therefore imposed a direct contractual obligation upon Central to produce and develop its Health and Safety Plan; but they did not have the effect of making the Health and Safety Plan itself a contract document in the sense of being a document that gave rise to primary contractual obligations, breach of which by one party could give rise to a claim for damages by the other.[67]
- In cross-examination Mr Jones accepted that the method statements would "set out the way in which [Central] were going to say that they were going to do the work" and that they would be sent to him "for [his] approval".[68] The exercise to which he referred was not one that would make the method statement, if "approved", a contract document; nor would it have the effect of making the steps identified in the method statement primary contractual obligations. Instead, the exercise was an example of sensible cooperation between contracting parties in the light of the terms of the contract that required Central to carry out the works in Mueller's working factory; it also reflected the fact that Central were not able to tell Mueller at the 7 November meeting precisely how they were going to sequence or carry out the works, so that it was necessary for Central to go away and develop the permit and work sequence that would tell Mueller when they needed to isolate their plant. Central could not simply impose a permit and working sequence on Mueller in such circumstances: hence the need for "approval".
- At all times when interpreting the contract, those terms imposing obligations on either party have to be considered in the context of the contract as a whole and in the light of the obligations imposed on the other. In my judgment, for the reasons given below, once the parties' obligations are viewed in this way a clear demarcation of responsibility emerges:
- Central's obligation to begin and proceed diligently to complete the Work[69] was amplified by its other obligations which included that Central:
- The contract also made clear that, although Mueller had the right or power to intervene in certain ways, Central would not be relieved of any of its obligations under the contract even if Mueller exercised its right or power. This is apparent from:
- The allocation of responsibility is also indicated by Clauses 6.1 and 8.5 which stated that:
- Central's obligations must be read in the light of Mueller's obligations under Clause 8.9, and vice versa. Mueller contends that the last sentence of Clause 8.9 should be read as if it said: "It is the responsibility of Mueller Europe Ltd to protect and electrically/mechanically isolate all plant as required/requested by Central during the contract works." Central submits that it should be read as if it said: "It is the responsibility of Mueller Europe Ltd to protect and electrically/mechanically isolate all plant as required as being necessary during the contract works." The essential difference between the parties' positions is that Mueller asserts that its obligation physically to isolate its plant did not arise unless it was triggered by an express request from Central while Central asserts that responsibility for determining whether and when isolations were necessary rested upon Mueller. Put another way, Central submits that clause 8.9 placed an obligation upon Mueller that was absolute in the sense that its existence was not determined or affected by whether or not Mueller knew or ought to have known of the need to carry out the isolation.
- In its oral closing submissions Central advanced a detailed semantic argument in support of its interpretation of Clause 8.9. First, it identified three places in the contract[71] where the word "request" was used. Then it analysed the occasions when "as required" was used, dividing them into two categories, namely (a) those where the clause identified the source of the requirement[72] and (b) those where it did not[73]. On the basis of this categorisation, it submitted that the word "required" means "requested" in those cases where the party or authority making the request is identified. In those cases where no party making the request is identified, Central submits that "as required" means "as necessary" and imposes an absolute obligation which is not dependent upon any request or upon the state of the obligee's knowledge.
- There are a number of points that may be made about this argument. First, it accepts that the word "require" may mean "request" if the context shows that it should. Second, the attempt to create the two categories is unsatisfactory. Clause 8.7 does not state that there will be a requirement by a Governmental Authority: what it states is that Central is to cause inspection or approval to be performed by a Governmental Authority if that is required – whatever the source of the requirement. More significantly for present purposes, although Clause 12 identifies that it is Central who will "require" its employees to act as specified, it is unrealistic to substitute the word "request" since that does not have the necessary element of compulsion. Third, the fact that the person doing the "requiring" is identified in some clauses but not in others does not necessitate or suggest that, in the latter clauses, no-one did so: it is equally consistent with the identity of the person doing the requiring being left open. Fourth, I do not consider that this contract should be approached in such a sedulously detailed and analytical way. It is a contract agreed between two commercial parties who, as reasonable men having the knowledge that was reasonably available to them at the time of contracting, would certainly not have engaged in such an exercise to determine what was meant by everyday words, which were not defined in the contract, on each occasion that they were used. This is particularly so when it is remembered that Clause 8.9 did not form part of one coherent and pre-existing document but was inserted as a consequence of the process of negotiation that I have described. I would therefore reject the analysis on the basis that it is not an appropriate approach to an objective determination of what reasonable men in the position of the contracting parties would have understood by the contract. I would also reject it because it shows that there was an inherent flexibility in the use of the word "required", so that Clause 8.9 should be interpreted by reference to all of the normal canons of contractual construction and not semantically straight-jacketed in the manner that Central seeks to achieve.
- In my judgment, neither party's submissions on the meaning of Clause 8.9 can be accepted in full, but its meaning becomes clear when the normal principles of construction are applied.
- Taken alone, the words "as required during the contract" do not expressly determine whether they mean and should have the same effect as "as necessitated by the state of the work being carried out" or "as required upon request by Central". It is therefore necessary to look at them in the wider context of the contract as a whole. Once that is done, it appears that Central had and retained throughout the responsibility for carrying out the works safely. Integral to that responsibility was the express responsibility for identifying hazards and taking all precautions within their power for the prevention of fires. That this was a continuing obligation is established by Clause 8.18(b) which required Central continuously to inspect the work to be performed and the site and allocated sole responsibility to Central for the discovery and correction of conditions giving risk to the risk of loss or damage or accidents. Central's overarching responsibility was also confirmed by the provisions which made clear that, although Mueller had rights of inspection and intervention, they were not obliged to exercise those rights and, even if they did, the exercise of the rights would not relieve Central of its responsibilities under the contract. It was contractually agreed that Mueller was relying upon Central as the experts to carry out the works and that Central acknowledged that it was being paid sufficient to take into account all hazards. If those obligations are to co-exist with Clause 8.9 (and vice versa) it is necessary either to cut down the apparent scope of Central's obligations drastically, by imposing on Mueller the obligation to identify and guard against the risk of fire or other damage to persons or property caused by heaters in close proximity to the scaffold without being isolated, where otherwise the obligation appears to be expressly and solely imposed on Central; or it is necessary to give Clause 8.9 a relatively restricted meaning. To my mind the context of the contract as a whole argues strongly for the latter solution: adopting Central's interpretation of Clause 8.9 does considerable violence to the language of Central's express obligations, whereas adopting a more restricted meaning recognises the allocation of responsibility for the safe carrying out of the works to Central while adopting an interpretation which does either no or minimal damage to the language of Clause 8.9.
- The relevant commercial context for and purpose of the contract can readily be identified from the terms of the contract. It is essentially common ground between the parties, and was confirmed by the evidence of a number of witnesses. Mueller wanted the Work to be carried out by experts upon whom they could rely in a way that did not interrupt the operation of the factory more than was absolutely necessary. However, Mueller did not want to hand over to Central (and Central did not wish to have) physical control of Mueller's plant and equipment. This aspect of the commercial purpose of the contract was reflected in Clause 8.9. Although the full scope and effect of Clause 8.9 is in dispute, it is common ground that it meant (at least) that the physical act of isolating or protecting Mueller's plant and machinery was to be undertaken by Mueller and not by Central. However, neither the contract nor any extrinsic evidence indicates that the commercial purpose of the contract would be served by placing upon Mueller the additional responsibility for identifying when and where in the course of Central's works, isolation of Mueller's plant and machinery might be necessary. Mr Davies gave evidence which was entirely consistent with a more limited allocation of responsibility to Mueller when discussing how he would normally expect to proceed: Central would identify possible hazards (involving the client's plant) and would decide whether they could work round them or not, but might well have to discuss with the client first in order to make that decision. Then a separate decision would have to be taken, if Central could not work around the problem, about who was going to take the necessary precautions and what was going to be done[74]. If it involved Mueller's plant in the roofspace, Central would take a decision jointly with Mueller about whether it needed to be turned off. If it did, Central would not want to turn it off as that was not their area of expertise[75]. This sensible evidence does not determine that the contractual purpose is limited as set out above, but is consistent with what I have set out above as essentially common ground.
- Lest it be said that the meaning of Clause 8.9 is still unclear, it is useful to test the proposed interpretations of clause 8.9 and its correlation with the rest of the contract by looking at the consequences of the alternative interpretations. If one simply looks at the heaters, it may be said that there is nothing unreasonable about imposing an obligation to identify the hazard upon Mueller, because it was readily identifiable by Mueller in general and by Mr Jones in particular. It is, however, informative to look at a more difficult case, such as cabling within trunking attached to stanchions in the roofspace. It was Central who had control of the birdcage and how it would carry out its works - that was not affected by the possibility of Mueller requesting access to inspect what was being done: see clause 6.1 of the contract. Mueller would not know and could not reasonably be expected to work out for themselves whether Central, the experts, could work around such trunking and cabling or not. Central could do so. Yet to adopt Central's interpretation of Clause 8.9 would impose on Mueller the responsibility for doing the very thing that they could not do on their own, namely working out whether isolation was necessary or not. This seems unreasonable in the absence of compelling language; and the language is, in my judgment, far from compelling.
- I therefore reject Central's interpretation of Clause 8.9 by reference to the context provided by the rest of the contract and the commercial purpose of the contract; and I draw support for my conclusion on Central's interpretation from the fact that, in my judgment, the consequence of adopting it would be unbusinesslike. However, it does not follow that Mueller's interpretation is the only alternative. Starting with the words of Clause 8.9 themselves, some weight should, in my judgment, be given to the fact that the contract did not say "as required by Central during the works"; and, despite the measure of flexibility of meaning which Central's semantic exercise has demonstrated, regard should also be had to the fact that the word "required" may suggest some greater element of objectivity than would be suggested by the word "requested". Second, there seems to me to be no sensible reason for adopting an interpretation which would allow Mueller to ignore the need to isolate the heaters simply on the grounds that Central had not issued a formal or express request to isolate individual or groups of heaters even if it were the case that Mueller knew or clearly should have appreciated the need to isolate them on the basis of information already in their possession. Third, it seems to be implicit in Mueller's submission (i.e. that its obligation to isolate pursuant to Clause 8.9 would be triggered by a request from Central) that Mueller would (or should) accept that the obligation is also triggered by the provision by Central of information which draws to Mueller's attention the need to isolate the heaters, even though that information falls short of being an express request. Fourth, looking at the consequences of Mueller's proposed interpretation suggests that it is too extreme and, for that reason, unbusinesslike. While Mueller was entitled to rely upon Central to carry out its work as experts and in accordance with the contractual responsibilities that it had undertaken, the fact that the contract was being carried out in a working factory and that Central was not to touch Mueller's plant and equipment necessitated a degree of cooperation on a day to day basis, as happened[76]. An interpretation of Clause 8.9 which would allow Mueller to ignore a need to isolate plant of which they had clear notice, even though falling short of a specific request, seems profoundly unbusinesslike. This can be cross-checked by reference to the way in which the parties dealt with the cranes. As I have already found, Central did not generally obtain confirmation by permits that the cranes were isolated and did not always issue express requests for isolation: but the course of dealing and the fact that the cranes were "on the radar" meant that Mueller routinely isolated them – and the fact that they did was not dependent upon the making of an express request. Fifth, while Mueller relies upon the existence of Central's obligations to identify hazards (clause 8.5) and to take all precautions within its power necessary for the prevention of fires (clause 8.18(a)), it does not follow that Mueller could or did only come under an obligation to isolate if Central complied with its contractual obligations and identified the hazard to Mueller by a request for isolation. The importance for the safety of people and property of avoiding fires was such that an interpretation which imposes co-existing obligations on both parties may reasonably be contemplated.
- I would therefore interpret Clause 8.9 as imposing the obligation upon Mueller physically to isolate its plant and equipment as required by information of which Mueller was or should have been aware during the course of the contract. However, in case my interpretation is wrong, when considering the issue of breach I will consider what would be the result if Mueller's interpretation were to be correct.
- When normal principles of construction are applied, I do not consider that Clause 8.9 is ambiguous. The doctrine of contra proferentem is therefore not applicable. However, if it was, it would tend to the same conclusion as I have reached because Central should be regarded as the proferens. It would not be right to regard either party as proferens in relation to the process by which the last sentence of Clause 8.9 came to be included in the contract because (a) although Mueller had originally offered the template contract, Clause 8.9 was a bespoke alteration that was the result of an initial proposal by Central; and (b) although it was Central that first proposed additional words, there was then a process of negotiation as a result of which words were incorporated which were different from those originally proffered by Central. There is no evidence to identify which party was responsible for the final formulation; all that is known is that negotiations between two parties of equal contractual standing led to agreement of the words to be introduced. However, it is now Central which seeks to rely upon the terms of Clause 8.9 to exclude or limit the liability alleged against it by asserting that the effect of the term is that the failure to isolate the heaters gives rise to a breach of Mueller's obligations, and not Central's, under the contract. If applicable, therefore, I would hold that the contra proferentem doctrine tended to support my rejection of Central's interpretation on this second basis.
- Mueller submits that there were implied terms of the contract that Central would comply with its own health and safety plan and method statement.
- The principles applicable to the implication of contractual terms are well known and do not require to be set out extensively here. For present purposes, I adopt the summary test set out in the opinion of Lord Simon of Glaisdale in BP Refinery (Westernport) Pty Ltd v Shire of Hastings (1977) 180 CLR 266 PC at 282-283:
- In my judgment, although it can be said that it would be reasonable and equitable to imply terms as suggested by Mueller, it cannot be said that the terms are necessary to give business efficacy to the contract. The purpose of the health and safety plan was to identify the risks arising from Central's work and to ensure those risks were addressed or eliminated, while the purpose of the method statement was to make sure that Central's work could be carried out safely[77]. They therefore set out the steps that Central proposed to take to ensure that it complied with its express obligations under the contract. Central has not argued that the relevant provisions of the health and safety plan and the method statement were not precautions that were within Central's power necessary for the prevention of fires; or[78] that conducting the works in compliance with the health and safety plan and method statement would not have avoided the risk of damage to the work that was to be performed; or that adopting Mr Thomas' failsafe approach as set out in the method statement was not a necessary precaution against fire; or that requiring compliance with the method statement was not an integral part of how Central intended to ensure the discovery and correction of any conditions giving rise to the risk of loss or damage; nor, in my judgment, could it sensibly have done so in the face of the self-evident and evidenced purpose of the health and safety plan and method statement and Central's failure to implement any alternative safe system of carrying out the works. That being so, express terms of the contract provide a satisfactory working framework for the carrying out of the works while the health and safety plan and method statement provide a check against which Central's performance can properly be measured. I therefore reject the submission that there were implied terms of the contract that Central would comply with its method statement and health and safety plan; but I accept that the terms of the health and safety plan and method statement are important documents when considering whether or not Central complied with its obligations under the express terms of the contract.
- Less controversially, and in line with an admission made by Central in its defence, Mueller alleges that there was an implied term that Central would exercise reasonable care and skill in performing the contract; and it alleges a co-extensive duty of care arising in tort. Without formal amendment of its pleadings, Central admitted the existence of the implied term and the co-extensive duty in its opening submissions, at [33].
- Mueller alleges that Central acted in breach of contract in the following respects:
- In my judgment each of these allegations of breach is made out. Requesting isolation of the heaters was a precaution which it was in Central's power to take. When the method statement was drawn up it was contemplated that obtaining written confirmation by permits in accordance with the method statement would take the place of a request that Mueller isolate the heaters – the request for the permit would lead to the same end result. However, by the time of the fire, not only were requests not being made, but also written confirmation by permit was not being requested or obtained; and not only was there no reason for Central to suppose that the heaters were routinely being isolated, it knew that they were not because of the previous incidents of their being found on. That knowledge, in circumstances where Central persisted in not obtaining confirmatory permits, meant that requesting isolation was the obvious precaution that was necessary for the prevention of fires.
- For similar reasons, carrying on the works without ensuring that the heaters were off amounted to a failure to conduct all operations in a manner to avoid damage. The method statement set out one way of conducting operations in a manner to avoid damage, but it was not followed and no alternative strategy or process was put in place. The obligation to take all reasonable and necessary precautions against risk of damage is expressed as a separate and additional obligation and it was breached by the failure to follow the method statement or any alternative strategy or process.
- The obligation continuously to inspect the work pursuant to clause 8.18(b) was with a view to identifying any conditions giving rise to risk of loss or damage and any potential accident-producing behaviours or conditions. In the event, Mr Henwood assumed that the heaters were off, which explains why there is no evidence to suggest that any inspection of the work to be carried out on the site was undertaken with a view to ensuring that the risk of loss or damage from the heaters was eliminated.
- Although only limited submissions were made on the point, the evidence establishes that Central did not prepare reports of previous incidents where heaters were found to be on in the birdcages. Central did not carry out any internal investigation and, by extension, did not provide any reports to Mueller. The effect of this failure was two-fold. Internally, it meant that Mr Thomas was not aware of the incidents so that he remained unaware of the failure to implement the system he had devised; and he took no steps to ensure it was implemented, which I am confident that he would have done if he had known it had lapsed[79]. Externally, it meant that he did not bring the incidents up with Mueller either in writing or at a meeting as he should and would otherwise have done[80]. From Mueller's perspective it meant that the incidents were not drawn to the attention of Mr Jones. Just as I have accepted that, if asked for a permit confirming isolation, Mr Jones would have checked the position before issuing the permit, so I am in no doubt that if the fact of heaters being found on had been brought to his attention, he would have reacted so as to ensure that it could not happen again – particularly if the incident had been reported to him in writing. In practice what would have happened is that Mr Thomas, Mr Henwood and Mr Jones would have become fully alert to the fact that the method statement was not being implemented, and would have taken the necessary steps to ensure that it was.
- Mueller also alleges that failure to comply with the method statement and the health and safety plan was, without more, a breach of contract. This is on the basis of the alleged implied terms requiring compliance with those documents, which I have rejected above. If the implied terms had been upheld, so would the pleaded allegations of breach.
- In addition, Mueller alleges that the failures to comply with the method statement and health and safety plan constituted a failure by Central to ensure that the Works were carried out in accordance with the contract documents, or to ensure that the Works met the highest professional or trade standards (both contrary to clause 8.1); and that the failure to comply with the method statement constituted a failure to ensure that the Works were carried out in accordance with generally accepted practices of safety and/or site safety standards or work rules, contrary to clause 8.12.
- The first of these allegations fails because the method statement and health and safety plan were not contract documents. In my judgment the second also fails. The first point to note is that, while Mueller's statement of case refers to "the Works", the contract term used in Clause 8.1 is the defined term "the Work". Second, when the obligation under clause 8.1 (to ensure that the Work met the highest professional or trade standards) is seen in context, and taking into account the contract definition of "the Work", it appears to be referring to the end product and not to the continuing process of carrying out the works from time to time. Accordingly, errors and defaults in the course of carrying out the works do not constitute breaches of clause 8.1.
- The third allegation requires further examination. Mr Thomas accepted that the method statement was a "site rule"[81], but his evidence is not determinative of what is a question of contractual interpretation. Clause 8.12 requires Central to adhere to "site safety standards or work rules", neither of which comfortably or obviously includes the method statement. Although it was intended by Mr Thomas that it should be complied with, it was not framed either as a set of rules or in a form that would generally be regarded as site safety standards. Section 3 of the Health and Safety Plan was expressly concerned with "setting standards" and identified what would generally be recognised as standards with which compliance would be required: the method statement is not there identified as such, though there is a reference to Permits to Work including permits in respect of "Crane and Electrical Isolation". Section 13 set out the site rules that were to be followed and did not refer to the method statement. I would therefore hold that the method statement was not a site rule or site safety standard within the meaning of clause 8.12.
- The allegation that failure to comply with the method statement constituted a failure to adhere to all generally accepted practices of safety adds nothing to the allegation that is constitutes a failure to exercise reasonable care. That allegation is made out, for reasons discussed later in the section dealing with contributory negligence.
- I find that Mueller acted in breach of its obligations under clause 8.9, adopting the interpretation of the clause identified above. At all material times from the onset of the contract works, Mueller had in its possession and should have been aware of the information which showed that isolation of the heaters was required as the contract progressed. The starting point is the meeting of 7 November 2007 when it was agreed that Mr Thomas would go away and draw up a permit and work sequence for handover that would tell Mueller when they needed to isolate their plant. This was confirmed by the letter of 9 November when Mr Thomas reiterated to Mr Jones that the handover and permit to work sequence would be written into the Health and Safety documents. Mr Thomas did what had been agreed and his method statement informed Mueller that they needed to isolate the heaters before handing over any given area for scaffolding. Mueller, in the person of Mr Parsons, knew this because he read the document. Mr Jones, no doubt because he was busy, merely passed the document to Mr Hall; and in due course it went to Wilbery. Mr Jones' failure to read the health and safety plan or the method statement was a critical error by the person who was charged with the administration of the contract on behalf of Mueller. It meant that, although he was aware on 7 November and again on receipt of the letter of 9 November that the method statement would tell him (as the responsible Mueller employee) when to isolate the heaters, he failed to act on the information which had been sent to him and which he had in his possession. Although the method statement spoke in terms of Central obtaining written confirmation that the heaters were off, Mr Jones (if he had read the method statement) must have understood that as meaning that Mueller had to isolate the heaters before issuing the permit to work that would enable Central to start their work in the relevant area.
- It is no answer to say that, because he did not read the document, Mr Jones should be treated as if he had not received it, any more than it would have been an answer if Mr Henwood had issued a specific and express request and Mr Jones had chosen to ignore it. Nor is it any answer to point to the fact that, by the time of the fire, Central knew that Mueller was not acting on the information contained in the method statement. The latter point is relevant to the separate question whether Central took all precautions in its power; but it does not alter the fact that Mueller had in its possession the information which should have alerted it to the need to isolate the heaters.
- Central relied upon the "visual reminders" that were available to Mr Jones as he walked about the factory. If it were necessary to consider the "visual reminders" on their own I might hesitate before accepting that they constituted sufficient information to trigger Mueller's obligation to isolate pursuant to clause 8.9 as I have interpreted it. I would on balance have held that it was sufficient because of the evidence from Mr Parsons, Mr Urosevic and others which supports the finding that the heaters were an obvious danger. However, it is not necessary to consider the "visual reminders" on their own since they are properly to be regarded as additional information available to Mueller over and above the information already provided by the method statement. Seen in that context, they reinforce the finding that I have made on the basis of the provision of the method statement alone that Mueller had sufficient information to have alerted it to the need to isolate the heaters.
- If Mueller's submissions on the interpretation of clause 8.9 were to be upheld, it would still be necessary to determine what would amount to a "request" by Central for the heaters to be isolated for the purposes of that interpretation. The fact that making a formal and express request was a step that Central could (or even should) have taken in order to comply with its (Central's) obligations under the contract would not, of itself, demonstrate that only such a request could trigger Mueller's obligation, because of the possibility of co-existing obligations going to the prevention of fires. What seems more significant is that the parties were content that Central should use the method statement to identify when plant was required to be isolated. That being so, I would hold that the provision of the method statement should be treated as a "request" to Mueller to isolate its plant in accordance with its terms for the purposes of Mueller's interpretation of clause 8.9. Once again, the fact that Mueller was not isolating the heaters does not cast doubt on whether a sufficient "request" was made for the purposes of clause 8.9 by the provision of the method statement. It is, however, relevant to the separate question whether Central had taken all precautions in its power given that it knew that, despite issuing the method statement, (a) it was not operating the failsafe system devised by Mr Thomas and (b) the unsafe and unsatisfactory system that it was pursuing was as a matter of fact leading to the heaters not being consistently isolated.[82]
- In its closing submissions, Central developed an argument that Mueller was not providing Central and its subcontractors with "appropriate [and] current valid Permit[s] to Work" as required by clause 8.17(a) and that "Mr Jones was not operating a true permit to work system." While it is correct that the parties did not operate the permits to work system as envisaged by the method statement, it remained the fact that Central and its subcontractors were not entitled to go on site without a permit to do so. The submission that Mueller was not providing "current valid" permits to work is therefore wrong. While it may be said that permits to work which did not specify the isolation of the cranes, heaters and electrics were not "appropriate", it does not appear that this adds anything of legal significance over and above Central's case on estoppel by convention and waiver to which I refer below.
- The allocation of responsibility under the contract meant that Central had responsibility for carrying out its works safely but Mueller had responsibility for physically isolating its plant and machinery when it was or should have been aware that isolation was needed. Both parties were in breach of their contractual obligations. Central was in breach in carrying on working without ensuring that the heaters were off and in failing to report the incidents of heaters burning in birdcages of which it knew. Mueller was in breach in failing to isolate the heaters despite having the method statement and visual reminders which gave it the information necessary to enable it to identify when isolation was needed.
- Central alleges that, in not requiring it to comply with the method statement or in permitting it to undertake the work without obtaining confirmation in writing that the electrics, heating and crane had been isolated, Mueller waived any rights it had to assert that Central acted in breach of contract in relation to the method statement or in undertaking the works without having obtained confirmation in writing of isolation of the heaters. Mueller, in addition to denying that the requirements for waiver are made out, relies upon clause 17.9 as a bar to any finding of waiver.
- Both parties rely upon the speech of Lord Goff in The Kanchenjunga [1990] 1 Lloyd's LR 391 at 397 col. 2 - 398 col. 2, but each party highlights particular aspects of the principles there set out. Central emphasises that waiver may arise whenever one party becomes entitled to exercise a right and has to decide whether or not to do so, and that the doctrine may apply to non-contractual performance falling short of repudiatory breach of contract. Mueller, emphasises the need for communication of the election by clear and unequivocal terms, whether by words or action. It is common ground that the question of waiver only arises where a party "acts in a manner which is consistent only with it having chosen one or other of two alternative and inconsistent courses of action open to it": see The Kanchenjunga at 398 col. 1.
- On the facts as found above, Mueller should be taken as knowing the terms of the method statement even though Mr Jones had not read them. They had been read by Mr Parsons, Mr Hall and Wilbery and should have been read by Mr Jones. Also, Mueller did not insist on Central complying with the terms of the method statement by obtaining permits to work which confirmed that the heaters were off. However, from this point Central's submissions break down for a number of reasons. First, for reasons given above, compliance with the method statement was not itself a contractual obligation. Hence Central's failure to obtain the confirmatory permits and undertaking work in the absence of such permits was not of itself a breach of contract by Central. Second, even if the failure to obtain a confirmatory permit (or carrying out the work in the absence of such a permit) was of itself a breach of contract by Central, Mueller's failure to insist upon contractual performance cannot be characterised as the election of one of two alternative and inconsistent courses of action that were open to it. The alternative courses of action that appear to be put forward by Central are (a) requiring contractual performance and (b) not requiring contractual performance. However, Mueller's conduct is equally consistent with being prepared to rely upon its remedy in damages in the event that Central's failure caused loss or damage. Third, Mueller did not communicate any election in clear and unequivocal terms. Although both Mr Jones and Mr Henwood separately proceeded without appreciating the need for confirmatory permits, what in fact happened is that both sides took their eye off the requirement for Central to obtain them. They did so without any discussion or communication because neither Mr Jones nor Mr Henwood applied their minds to the question - Mr Henwood didn't ask for confirmatory permits because he assumed (without justification) that the heaters were off; and Mr Jones did not apply his mind to the heaters or the need for confirmatory permits for the reasons discussed previously. Nor can any communication be derived from Mueller's conduct, since it was consistent either with simple forbearance or with its relying upon Central to carry out its works safely.
- There is, however, a more fundamental objection. Central does not allege, and could not reasonably allege, that Mueller's failure to insist upon Central obtaining confirmation permits or its issuing of permits that were not in conformity with the method statement amounted to an unequivocal representation that Mueller did not rely upon Central to comply with its other contractual obligations, breach of which has been established under Issue 1 above. That being so, Central's argument about waiver is irrelevant since it cannot act as a bar to a claim in respect of the breaches of contract which matter in this case.
- I therefore reject Central's submissions of waiver. Since it is not necessary to do so, I do not express any views on the meaning or effect of clause 17.9.
- Central alleges "that there was a shared assumption and understanding between the parties that the scaffolding works could commence and be undertaken, i.e. the scaffolding could be erected and the birdcage formed, without [Central] obtaining a permit from [Mueller] confirming in writing isolation of the electrics, heating and crane shut down."
- No separate consideration of authority is required. This allegation is rejected for essentially the same reasons as those given for rejecting the allegation of waiver. It is factually wrong to suggest that there was "a shared assumption and understanding" since the parties failed to engage in any way that gave rise to a sharing of either assumptions or understanding. To the contrary, the assumptions that mattered were that Mr Henwood assumed that Mr Jones would be isolating the heaters, while Mr Jones assumed that if Mr Henwood required him to isolate any plant, he would raise it with him.
- Central submits that any damages that would otherwise be recoverable should be reduced pursuant to section 1 of the Law Reform (Contributory Negligence) Act 1945. It submits that apportionment is available because the contractual obligations it has breached are not strict or absolute in the sense outlined by Forsikringsaktieselskapet Vesta v Butcher [1986] 2 All ER 488 (Hobhouse J), [1989] AC 852 (CA) and subsequent authorities.
- On the present state of the authorities it is well established that a party in breach of a contractual provision which does not depend on a failure to exercise reasonable care cannot reduce that liability by an apportionment to take account of the negligence of the other party: see Barclays Bank Plc v Fairclough Building Ltd [1995] QB 214, 228G-229A, 230F, Hi-Lite Electrical Ltd v Wolseley UK Limited [2011] EWHC 2153 (TCC) at [234].
- Four of the contractual provisions which Central breached do not depend on a failure to exercise reasonable care and are to be regarded as strict or absolute for the purposes of apportionment for contributory negligence. They are (a) the obligation to take all precautions within Central's power (clause 8.18(a)), (b) the obligation continuously to inspect the work (clause 8.18(b)), (c) the obligation to prepare and maintain reports (clause 8.18(b)), and (d) failing to conduct all operations in a manner to avoid damage (clause 8.18(b)). Of these four, only the last requires further discussion.
- Central submits that the first sentence of clause 8.18(b)[83] only imposed an obligation that Central display reasonable care and skill in carrying out its obligations. This submission treats the sentence as one and indivisible and giving rise to only one obligation. In fact, the sentence creates two separate obligations: (a) "[Central] will conduct all operations under the Contract Documents in a manner to avoid … risk of loss, theft or damage by vandalism, sabotage or otherwise, to all or any part of the Work" and (b) "[Central] … will within its scope of Work promptly take all reasonable and necessary precautions against risk of loss, theft or damage by vandalism, sabotage or otherwise, to all or any part of the Work." On Central's interpretation, obligation (a) would add nothing to obligation (b). If, however, each obligation is given its natural meaning there is an identifiable distinction between them, the distinction being between Central's (planned) conduct of the operations (obligation (a)), and the need for Central to respond promptly to any risk of damage, whenever and however arising within its scope of Work (obligation (b)). While obligation (b) is limited to promptly taking reasonable precautions, obligation (a) is dealing with a different situation and is not so limited.
- If Mueller's allegations that Central failed to comply with a contractual or co-extensive tortious duty of care stood alone, then questions of contributory negligence would arise. In that event, Central failed to act with reasonable care and skill in carrying out the works, but its liability should be reduced on account of Mueller's contributory negligence. Each party was seriously at fault. Central, the experts who were responsible for placing the birdcages in close
- Viewed overall, if this were a claim where apportionment for contributory negligence were appropriate, I would have reduced Central's liability by 40%. This reduction is to reflect the seriousness of Mueller's failings while recognising that (a) the primary responsibility for carrying out the works safely and sole responsibility for identifying hazards rested throughout with Central, and (b) Central continued to take no steps to carry out the works safely when they knew that Mueller was not routinely isolating and the failure to isolate had already caused "near misses".
- In general, a defendant will be held liable to a claimant where he is found to be in breach of contract and his breach is found to be an "effective" or "dominant" cause of the claimant's loss rather than merely an occasion for the claimant's loss: see Galoo Ltd v Bright Graham Murray [1994] 1 WLR 1360, 1374G-1375B per Glidewell LJ. The words "effective" and "dominant" are not capable of precise definition and it is not clear that "dominant" has a materially different meaning from "effective".
- Where concurrent causes exist, the question whether the cause for which the defendant is responsible is or remains an effective cause is a question of fact. I gratefully adopt the summary of principle provided by Gross LJ in Borealis AB v Geogas Trading SA [2011] 1 Lloyds LR 482 at [43-47]. What emerges from his summary, and the authorities to which he referred, is that the question to be asked throughout is whether the concurrent cause for which the Defendant is not responsible has the effect of "obliterating" the effect of the cause for which the Defendant is responsible; or, in other words, whether the other concurrent cause has the effect that the cause for which the Defendant is responsible can no longer be described as effective or dominant. This applies where the other concurrent cause is some act or omission of the Claimant just as it applies when the other concurrent cause is some act or omission of a third party.
- In Borealis Gross LJ drew attention to the potential gradations of fault-based description that could be applied to a claimant's conduct. So "it is difficult to conceive that anything less than unreasonable conduct on the part of the claimant would be capable of breaking the chain of causation. It is, however, also plain that mere unreasonable conduct on a claimant's part will not necessarily do so – for example where the defendant's breach remains an effective cause of the loss…"[84] Even where the Claimant's conduct may be described as reckless, it does not follow that the chain of causation is broken. In Lambert v Lewis [1982] AC 225, 252 (a passage cited by Gross LJ in Borealis) when considering the effect of a claimant's conduct Roskill LJ said:
- Gross LJ also cited an illuminating passage from the judgment of Hobhouse LJ in County Ltd v Girozentrale Securities [1996] 3 All ER 834 on the significance of the state of knowledge of a claimant when considering whether the Defendant's conduct is to be treated as the legal cause of the Claimant's loss:
- Gross LJ recognised that reckless behaviour may be seen as relevant to questions of legal causation and to rules governing mitigation of damage. Concentrating upon the former, it is also likely to be relevant to know whether the other concurrent cause may itself be the consequence of the Defendant's breach, or whether the obligation which the Defendant has breached had, as one of its objects, the prevention of the other concurrent cause. If the purpose of the Defendant's obligation was to guard against the very thing that has happened by virtue of the Claimant's conduct, it should only be in a rare and extreme case that the Claimant's conduct is held to break the chain of causation[85].
- Mueller points out, correctly, that Central did not at any stage plead that Mueller's conduct was a novus actus interveniens as such. However, Central did plead that "the operative and effective cause of the fire was not [Central's] failure to request [written permits] but [Mueller's] own failure to isolate the heaters (as it was obliged to do so under the contract) and/or its failure to comply with the Method Statement by preventing the works from commencing until it had isolated the heaters and provided a written permit confirming the same." The issue of causation is therefore fairly and fully joined.
- Mueller's failure to isolate the heaters was without doubt a concurrent cause of the fire. But a number of considerations indicate that Central's breaches were also an effective cause. The starting point is the nature of the obligations that Central breached: they reflect the allocation of responsibility under the contract with Central being responsible for the safe carrying out of its works. That remained its obligation despite Mueller being under a concurrent obligation to isolate its plant as required by clause 8.9. Thus, at the time of the fire the contractual purpose and Central's obligation was that it should carry out its works safely taking into account the current site conditions, which it had an obligation to inspect continuously. Those obligations existed and were to be discharged in the light of the knowledge that Mueller was not routinely isolating its heaters. It would be no answer (even if it were to be established as factually correct) to say that Central could not carry out its works safely without Mueller isolating the heaters: if that were the case, Central's correct course of action would be to identify the hazard and, if unable to work around the heaters, to require Mueller to isolate them before Central continued with its work. Similarly, the obligation to prepare reports of previous incidents would have the effect, if properly discharged, of causing steps to be taken (both by Central and by Mueller) to ensure that identified hazards were eliminated for the future.
- It is also material that the way in which Central intended to discharge its obligation to take necessary precautions was as set out in the method statement, one object of which was to ensure that Mueller complied with its obligation to isolate the heaters and, by extension, to ensure that they could not be inadvertently switched on. So it can be said that Mueller's failure to isolate the heaters and the inadvertent switching on which led to the fire were the very things that Central's precautions were designed to prevent. And Central cannot argue that they were entitled to rely upon Mueller having discharged its obligation to isolate the heaters, since it knew that they were not doing so routinely.
- Turning to Mueller's conduct, it was a breach of contract but (a) Mr Jones was not conscious of his own failure to ensure compliance with Mueller's obligations under clause 8.9 (though he should have been), and (b) although he knew the terms of the permits he was issuing he assumed that if there was a problem, he would be told[86]. He was not in that sense "reckless". And the immediate trigger for the fire, the switching of the switch at the stanchion, was inadvertent rather than reckless, and was the foreseeable (even predictable) consequence of the systemic failings on both sides that had preceded it.
- With these considerations in mind and on the facts as I have found them, I would hold that Central's breaches of contract were an effective or dominant cause of the fire.
- This judgment concludes that Mueller is entitled to recover £8,036,150 in respect of its Machinery and Equipment claim. It is therefore entitled to damages in the overall sum of £21,357,889: see [131-150].
- The fire caused extensive damage both to the building and to Mueller's plant and machinery. After concerted efforts, production of small diameter tubing was reinstated before the end of 2008, but Mueller's large diameter equipment had been damaged and was subject to extended lead times for replacement and refurbishment, as a result of which the disruption to the large diameter manufacturing was inevitably prolonged.
- By the end of trial the parties had agreed all heads of damage bar one, which was the claim in respect of Machinery and Equipment. The agreed heads of damage were as follows:
- Shortly stated, the dispute in relation to Machinery and Equipment is that:
- The factual evidence relating to quantum was provided by three witnesses called by Mueller (Mr Griffiths, Mr Parsons and Mr Marsh). Mr Griffiths' evidence was not challenged in cross-examination. Central did not call evidence on quantum.
- Mr Griffiths carried out enquiries which established that the cost of repairing and replacing the large diameter machinery that was damaged by the fire could be reduced by installing a "single line system" in place of the previous configuration. The cost after taking account of this reduction was £8,036,150. The proposed replacement was like-for-like in terms of capacity and output: although there were marginal differences because of changes in technology, the machines that went to make up that sum were as close as they could be to the damaged machines and the differences were not significant. The start up time period for the "single line system" was 12 months compared to the start up time of between 16-18 months for replacing the previous configuration. If all of the machinery had been ordered at the earliest possible moment (which, realistically, would have been in early 2009) it could have been ready for installation in the second half of 2010, after completion of the phase 2 reinstatement works to the factory.
- Amongst the damaged machinery were three draw benches. They were known as bench no. 14 (a 50 tonne machine), bench no. 16 (a 30 tonne machine), and bench no. 17 (also a 30 tonne machine). Bench no. 16 was repairable, benches nos. 14 and 17 were not. Before the fire, Mueller's Bilston factory had been responsible for the supply world wide of 100% of at least some of the Mueller Group's large diameter products. The fire and consequent stoppage of large diameter production at Bilston highlighted the strategic weakness of having all large diameter production in one place: because the group had no other available large diameter capacity, it was necessary to attempt to buy in large diameter stock from others for resale by Mueller in an attempt to maintain its markets as far as it could. As a result, a decision was taken at group level to split large diameter production between two locations so that if another catastrophe were to occur at one location, large diameter production could continue at the other. The effect of the deliberations and decision to split production has been that:
- At present Mueller does not have the same capacity for large diameter production as it had before the fire. According to Mr Parsons, its current capacity with one machine installed is approximately 5 tonnes per day: before the fire its capacity was approximately 12 tonnes per day. This lack of capacity impacts directly on flexibility. Before the fire, Bilston could meet demand by running either one or occasionally two shifts per day on a five day week. Now the one machine that has been installed is operating permanently on three shifts, five days per week. This has two major implications. The first is that to increase current production would entail weekend working which attracts significantly higher labour costs, now also including lifestyle payments, which render the product uneconomic. The second is that continuous use of the line leaves Mueller no time for routine maintenance during the week and vulnerable in the event of breakdown (as has happened in practice) since there is no backup.[87]
- The second machine to come on stream will be the machine in Fulton; but pre-fire capacity will not be reached until all three of the large diameter benches have been installed, in Bilston and Fulton.
- Before the fire, Mueller's capacity for large diameter products exceeded demand, partly because of the state of the market in general and partly because of aggressive price cutting by one of Mueller's main competitors. It was then selling approximately 50% of its production on the home market and 50% abroad. Against capacity in the region of 2000 tonnes working one or two shifts per five day week, Mueller's large diameter export sales were 811 tonnes in the ten months to the fire (equivalent to 933 tonnes on an annualised basis). In the full year 2012, its large diameter sales into those same markets were 67 tonnes. Mr Marsh, who was Mueller's managing director from 2006 to 2011 explained the steps that Mueller took to try to retain market share, primarily by outsourcing production. He was cross examined by reference to foreign market sales reports which did not refer to the fire but did refer to adverse market conditions; but he was adamant that the loss of production capacity had also caused and was continuing to cause loss of market share, both directly for large diameter and, as a knock-on effect, for small diameter product as well[88]. He was supported in this evidence by the evidence of Mr Parsons who said that Mueller's inability to offer a full suite of products severely limited its commercial ability to win business[89] and that, at present, Mueller is turning away business because it does not have the capacity to satisfy demand[90].
- Mr Parsons' assertion of a continuing loss of business was challenged by Central who pointed to the fact that Mueller's loss of profit claim in the action was limited to the losses alleged to have been suffered during the period to October 2009 (which coincides with the period of indemnity under Mueller's insurance) and that in the following year (to October 2010) there was only a claim for increased cost of working in the sum of £172,000, with no such losses being claimed thereafter. Mr Marsh said that this was because of a commercial decision taken by Mueller not to pursue the uninsured losses that they believed they had sustained.[91] He was not cross-examined on that part of his evidence.
- Having reviewed the evidence about continuing loss of market and profitability from October 2010, I accept the general thrust of the evidence of Mr Parsons and Mr Marsh and find that Mueller has probably suffered some unquantified loss of profits after October 2010 as a result of not being in a position to meet demand for large diameter products caused by the fire. If Mueller had elected to reinstate its full capacity at Bilston (or elsewhere) by the end of 2010, which would have been possible if the decision had been taken at the earliest realistically feasible time, then the continuing impact of the loss of capacity would have been diminished by now and would be likely to be limited to continuing losses in markets that were lost to competitors as a result of the fire. It is not possible to quantify what those continuing losses would have been.
- The starting point is that the general purpose of an award of damages is restitutio in integrum. In the case of damage to or destruction of a chattel the prima facie measure of recoverable damages is the cost of reasonable repair or replacement of the chattel assessed at the time of loss or damage, but in special cases a later date may be taken if it more accurately reflects and compensates for the loss that has been suffered. Furthermore, the cost of repair is only appropriate if in the circumstances it is reasonable for the claimant to effect the repair: if a damaged chattel can be replaced more cheaply than it can be repaired, the cost of replacement may be the proper measure of damage: see McGregor on Damages, 18th Edition, 32-04 – 32-05. More generally, where the cost of reinstatement is the appropriate basis for the assessment of damages, it must be both reasonable to reinstate and the amount awarded must be objectively fair as between the claimant and the defendant: see The Maersk Colombo [2001] 2 Lloyds LR 275 at [32] and [71]. The cost of repair or replacement remains the prima facie measure of recoverable damages even if the Claimant has not yet carried out the replacement or repair[92] or will not in fact carry out the replacement or repair[93]. This is because damage to or destruction of a chattel causes loss to its owner when it occurs, representing the diminution in value of the chattel.
- These principles are not in doubt and are not challenged by Central. By reference to Harbutt's "Plasticine" limited v Wayne Tank and Pump Co Limited [1970] 1 QB 447, Ruxley Electronics Ltd v Forsyth [1996] 1 AC 344 and The Maersk Colombo it emphasises the need for a claimant to act reasonably (so that unreasonable replacement of a machine will not sustain a claim for the replacement cost), and for the claimant to suffer a "true" or "established" loss (so that an award of damages does not provide a gratuitous benefit to the aggrieved party). These principles are also not in doubt.
- Having pointed to the fact that, as in The Maersk Colombo, the Court should take into account the effect of the damaged chattel on the Claimant's business if not replaced, Central accepts that Mueller in the present case is entitled to be compensated for the cost of purchasing equipment "which enables Mueller to produce large diameter copper tubing at pre-fire production levels and have the capacity and capability to earn profits from such machinery."[94] Its position is further clarified as follows:
- In a further formulation of its position, Central's closing submission was that "Mueller is entitled to the reasonable cost of its production facility being put back in its business to its pre-fire capacity to enable it to have the capacity of achieving the profits it was capable of achieving before the fire." On the basis that there has been either no or no significant loss of profits attributable to the lack of large diameter machinery, Central submits that "the absence of the machinery … has not caused Mueller any or any significant losses and it would be unreasonable now, as between it and Central for Central to be required to compensate Mueller for the cost of machinery which is not reasonably needed to enable Mueller to undertake the production of large diameter tubing in the UK and/or which may be required as a contingency in the event of a similar event happening again."
- On the facts found as set out above, Mueller has not yet restored its "pre-fire production capacity and capability"; nor has it yet reinstated "the capacity to produce its product (large diameter tubing) and achieve profits from that production, as it had before the fire." The evidence of Mr Marsh and Mr Parsons, which I accept, is that Mueller will not have the same capacity and capability until all of the machinery is reinstated. This is supported by the unchallenged evidence of Mr Griffiths that the capacity of the machinery that would cost £8,036,150 would be, as nearly as could be achieved, the same as that of the machinery that had been damaged in the fire.
- It is important to distinguish between profit, production, capacity and flexibility, although they are linked. Mueller's pre-fire profitability is not a reliable or determinative marker either for whether restitutio in integrum has been achieved or for whether it is reasonable to reinstate on a like-for-like basis. That is because market forces may cause potential demand to increase (as well as to decrease) in the short, medium or long term. So excess pre-fire capacity is important for two reasons. First, to enable Mueller to meet any increase in demand, whether driven by general market forces or by increased market share; and, second, to enable Mueller to plan its production flexibly and economically. Even if it were to be established that reduced capacity would have been sufficient to enable Mueller to meet its post-fire demand up to now, that would not be determinative. Apart from any other considerations, if it be assumed that Mueller had (permanent) excess capacity pre-fire, it would have been open to it to take steps to realise that excess capacity, either by selling machinery or (if feasible) by putting it to different use. The restoration of pre-fire capacity is therefore of substantial commercial value even if it was not all going to be used in the period after the fire. Turning to the second reason, the evidence of Mr Parsons explains why limited capacity is unacceptable because of the lack of flexibility it imposes upon Mueller in terms of shift working, maintenance and production costs.
- Given that (a) Mueller suffered an immediate loss at the time of the fire because of the damage to and destruction of its machinery and equipment, and (b) the cost of replacing that equipment and putting Mueller in the position it would have been in but for the fire is agreed, the prima facie starting point is that the recoverable damages should be that agreed figure of £8,036,150. That loss was the claimant's loss; and if Central had recognised its liability and compensated Mueller promptly, Mueller could have used the damages in any way it legitimately pleased. Accordingly the fact that the group has taken a decision that the facility will be partially replaced by building in the USA is immaterial. It is for Central to show that the prima facie measure of damage would lead to an unreasonable result or a gratuitous benefit and, in my judgment, Central has fallen well short of discharging that burden.
- I would therefore conclude that the appropriate measure of damages is one which represents reinstatement of Mueller's pre-fire capacity even in the absence of evidence that capacity constraints have meant that Mueller has been unable to meet demand. My acceptance of the evidence of Mr Marsh and Mr Parsons provides added support for that conclusion.
- On the quantum issue remaining in dispute, Mueller is entitled to recover the sum of £8,036,150. It is therefore entitled to damages in the overall sum of £21,357,889.
Mr Justice Stuart-Smith:
Introduction
PART 1 – LIABILITY
Summary of Conclusions on Liability
i) The heaters had not been routinely isolated during the course of the works. This was because Mr Henwood of Central assumed, without checking, that Mueller would be isolating them and because Mr Jones of Mueller had not read Central's method statement and assumed that Mr Henwood would inform him if anything needed to be done. If Mr Jones had been asked to provide permits to work confirming isolation of the heaters he would have checked that they were isolated before issuing the permits; and if he had been informed of occasions where heaters were found burning in close proximity to the scaffolds, he would have taken steps to prevent it happening again;
ii) There had been prior incidents of heaters operating in close proximity to the birdcage scaffolds. They were known to Mr Henwood and to Mr Smith of Mueller, but were not reported either internally within Central or to Mr Jones, who was the Mueller employee responsible for the administration of the contract: see [13-68];
iii) Central acted in breach of its contractual obligations to carry out the works safely and to report prior incidents. Mueller acted in breach of its contractual obligation to isolate the heaters: see [69-106];
iv) No waiver or estoppel by convention is established: see [107-113 ];
v) Contributory negligence is inapplicable: see [114-119];
vi) Central's breaches of contract were an effective or dominant cause of the fire and Central is liable to Mueller for the consequences of the fire: see [120-129].
The Factual Background
The Parties
The Contract
"8.9 - Damages Or Destroyed Property – we confirm it is the responsibility of Mueller to protect their plant/equipment and isolating of mechanical and electrical services as required during the contract works. We request this be inserted here."
"I. DEFINITIONS
In addition to terms, which are defined elsewhere in these Master Terms and Conditions; the following terms have the meanings given them below:…
Construction Project means the particular Work to be performed by Contractor pursuant to a supplement.
Contract Documents means with respect to each Construction Project, these Master Terms and Conditions, the Supplement applicable to Construction Project, and any and all, Exhibits, Schedules, amendments, approved plans, drawings, specifications, addenda, standards, and modifications for such Construction Project…
Work means the work to be performed and/or materials to be supplied by Contractor as required by the Contract Documents.
II. COMMENCEMENT AND COMPLETION; PROGRESS REPORTS; FINAL ACCEPTANCE
2.1 Commencement and Completion.
(a) Contractor will begin the Work in accordance with the terms of the schedule of pre-construction document dated May 2007 issued at the tender stage and proceed diligently to complete the Work within the Contract Term…
…
IV. COMPANY'S OBLIGATIONS
4.1 Price.
Company will pay Contractor, and Contractor agrees to accept as full payment for satisfactory completion of the Work, the Contract Sum. The contract sum is £2,075,000.00…
VI. QUALIFICATION AND INDEPENDENCE OF CONTRACTOR
6.1 In performing and carrying out the Work.
Contractor agrees, and will cause each Subcontractor to agree, that Contractor and its Subcontractors are independent contractors, and not agents or employees of Company, except for the limited purposes provided in Section 5.2. Company will have no direction or control as to the method of performance of the Work. Contractor has represented itself as an expert with respect to the performance and completion of the Work, and Company is relying upon the expertise of Contractor in performing, completing and accomplishing the results intended by the Work even though Company may inspect the Work or provide materials or services in connection with the Work including, without limitation, specifications, drawings, or plans…
…
VIII. CONTRACTOR'S OBLIGATIONS
8.1 Compliance with Standards.
Contractor expressly assumes responsibility for ensuring that the Work meets the highest professional or trade standards, and is in accordance with the Contract Documents…
…
8.3 Adequate Staffing.
Contractor will provide competent and experienced supervisors, craftsmen and workers to perform the Work. The number of persons employed by Contractor will be adequate for job progress satisfactory to Company. Contractor will employ a competent and experienced superintendant and other key personnel satisfactory to Company…
…
8.5. Familiarity with Work and Project Site.
Contractor will acquaint itself thoroughly with the Work and will make all Work a complete, safe and finished job of its kind. Contractor represents that it has inspected the Project Site, is familiar with it and is satisfied as to its condition including, without limitation, hazards to life and property. Based upon its inspection, Contractor agrees that (i) the Contract Sum is just and reasonable compensation for all of the Work, including all foreseen and foreseeable risks, hazards and difficulties in connection with the Work excluding environmental and subsurface conditions;…
…
8.7 Inspections.
Contractor will give, and will cause all Subcontractors to agree to give, Company and its inspectors free access to all materials and equipment related to the Work and to the Project Site and any other of its work places. No inspection performed or failed to be performed by Company will be waiver of any of the Contractor's obligations under the Contract Documents or be construed as an approval or acceptance of all or any part of the Work…
…
8.9 Damaged or Destroyed Property.
Contractor will, at its own expense, repair, restore or replace any real or personal property, including tools and equipment, belonging to Company, which Contractor, its employees, agents or Subcontractors may damage, destroy or remove while performing, or in order to perform, the Work. Contractor will, at its sole cost and expense, promptly repair any damage or disturbance to walls, utilities, sidewalks, curbs and the property of third parties (including any Governmental Authority) resulting from the performance of the Work. It is the responsibility of Mueller Europe Ltd to protect and electrically/mechanically isolate all plant as required during the contract works.
…
8.12 Compliance with Applicable Laws
Contractor represents and warrants that the work will be performed and completed in a manner and with materials which comply with all applicable United Kingdom and local laws, regulations, ordinances and codes including, but not limited to, all those relating to
labour, employment and safety. Contractor will adhere to all generally accepted practices of safety and workmanship and to site safety standards or work rules to avoid … damage to equipment, materials and property.
8.13 Compliance with
United Kingdom Health and Safety at Work Act 1974
(a) Contractor acknowledges that it, its agents or Subcontractors are or may be subject to the provisions of the Health and Safety at Work Act 1974 (the "Act") as they may be amended, depending upon where the Work is to be performed. Contractor agrees that it will abide by, and will cause each Subcontractor to agree to abide by, all applicable rules and regulations promulgated by the "Act", or any other United Kingdom or local governmental agency having authority over Safety and Health. To the extent that training of its employees or Subcontractors is required under any United Kingdom or local rules or regulations existing now or at any time during the term of the Supplement, Contractor further agrees that its employees or Subcontractors will receive such training as is required. Company reserves the right to specify and require Contractor to perform additional job safety and health and safety training and activities and require Contractor to certify its compliance in writing.
(b) Contractor agrees to assume the entire responsibility and liability for any violations of the Acts, the regulations promulgated under the Acts, or other statutes and regulations relating to Safety and health caused by it or its agents or Subcontractors and to pay and, upon demand of Company, defend any citation, penalties, or assessments assessed against Company by the United Kingdom Health and Safety Executive or any Governmental Authority having authority over safety and health as a result of alleged violations of the Acts, the regulations promulgated under the Acts or other statutes and regulations relating to safety and health caused by Contractor or its agents or Subcontractors…
…
8.17 Project Site Rules and Employee Relation.
(a) The Company will Issue each Contractors and Sub Contractors personnel with the appropriate "PERMITS TO WORK". No Personnel of the Contractor or Sub Contractor will be allowed on site unless they have been issued with a current valid Permit to Work. All Contractors and Sub Contractors Personnel must abide by the Companies Health and Safety Rules stated on the Permit to Work. Contractor will supply a copy of the Company's Project Site rules regarding the Work to its Subcontractors and the Subcontractors will comply with such rules.
(b) Contractor will plan and conduct its operations so that its employees, agents, and Subcontractors work in harmonious relationship with other groups of workers at the Project Site, and so that they do not delay, endanger or avoidably interfere with the operations of others. Company shall have the right to reject or remove from the Work any of the subcontractors, or its or their employees or agents (or require Contractor to do them same) which Company determines to be incompetent, undesirable, whose productivity is below acceptable levels, whose workmanship is substandard, or whose conduct creates a danger to themselves or others. Company will give Contractor notice of such rejections or removals, and the time of persons so rejected or removed will not thereafter be charged to Company.
8.18 Accident Prevention: Security.
(a) Contractor will, and will cause each Subcontractor to take all precautions within their power necessary for the prevention of accidents, fires, theft, vandalism, injury or damage at the Project Site. …
(b) Contractor will conduct all operations under the Contract Documents in a manner to avoid, and will within its scope of Work promptly take all reasonable and necessary precautions against risk of loss, theft or damage by vandalism, sabotage or otherwise, to all or any part of the Work. Contractor will continuously inspect the Work, materials, equipment and the Project Site and will be solely responsible for the discovery, determination and correction of any such conditions and any potential accident-producing behaviours and/or conditions. Contractor will be liable for all loss or damage of any kind to materials, equipment and facilities contemplated by the Contract Documents or to any property of Contractor or any Subcontractor or for injury to employees of Contractor or any Subcontractor, caused by Contractor or by Contractor's failure to comply with this paragraph. … Contractor will cooperate with Company on all safety and security matters and comply with all Company safety and security requirements. However, such compliance will not relieve Contractor of its responsibility for maintaining proper safety and security, nor will it be construed as limiting Contractor's obligation to undertake reasonable action as required to establish and maintain safe and secure conditions at the Project Site. Contractor will prepare and maintain accurate reports of incidents of injury, loss, theft, damage or vandalism and shall furnish these reports to company within 24 hours of any incident.
…
XVII. MISCELLANEOUS
17.6 Headings and Captions.
Headings and captions in the Contract Documents are inserted for convenience of reference only and shall not expand, limit, modify or affect the text of any Contract Documents.
…
17.9 Waivers
No waiver of any provision of, or a default under, the Contract Documents nor any failure to insist on strict performance under the Contract Documents, may affect the right of Company or Contractor, as the case may be, thereafter to enforce said provision or to exercise any right or remedy in the event of any other default, whether or not similar."
The Pre-construction Period: October – December 2007
"Cranes must be isolated
Either – permit system
+ permit for asbestos release
+ handover
Inc lights + heat shut down Gas heating stopped"
"A Handover permit and work sequence will be written in to the revised Health & Safety documents"
By reference to this letter, Mr Parsons accepted that at the end of the 7 November meeting, Central were to go away and come up with a permit and work sequence for handover[16].
"BEFORE WORKS CAN COMMENCE…
1. ERECT TAPES AND BARRIERS AT GROUND LEVEL FOR SCAFFOLDERS TO ERECT ROOF VALLEY WALKWAYS.
2. HANDOVER IN WRITING OF WALKWAYS, ACCESS TOWER, LOADING BAYS AND PERIMETER EDGE PROTECTION, BY S.E.S. WEEKLY INSPECTIONS BY CRSW
3. INENDIFY AND AGREE WORK AREA WITH DAVE JONES, MUELLER, OBTAIN WRITIN CONFIRMATION BY PERMIT FOR ISOLATION OF ELECTRICS, HEATING AND CRANE SHUTDOWN TO WORK AREA .ERECT HERRIS TYPE FENCE AND WARNING SIGNS TO SHOPFLOOR TO ALLOW INTERNAL SCAFFOLDS TO COMMENCE.
4. ON COMPLETION OF SCAFFOLD AND PVC[18] ISOLATION A WRITTEN HANDOVER WILL BE ISSUED AND A COPY GIVEN TO DAVE JONES MUELLER, ON AGREEMENT THE FENCE CAN BE DISMANTLED AND OPERATIVES CAN THE WORK BELOW THE SCAFFOLDS.
5. DISMANTLING OF SCAFFOLD WILL FOLLOW AS ITEM 3. PLEASE NOTE THAT THE CRANE GAS AND ELECTRICS MUST REMAIN OFF UNTILL ALL WORKS ARE COMPLETE AND CENTRAL ROOFING ARE CLEAR OF THE AREA. CRSW WILL ISSUUE A SECTIONAL HANDOVER DOCUMENT TO CONFIRM THIS.
Health & Safety Plan Ref: - 11.1
All works are to be carried out in accordance with the Health and Safety Plan and Mueller Europe site rules.
CONSULT AND COOPERATE AT ALL TIMES
If you are in any doubt about your Method Statement or any Safety Matters in your working area you must consult management immediately."
The Performance of the Contract – pre-November 2008
November 2008 – The Fire
i) Had the factory's heaters been isolated during the course of the works and, if so, who had been isolating them?ii) Why were the heaters not isolated on 8/9 November 2008?
iii) Had the lights in the birdcage scaffolds been isolated during the course of the works and, if so, who had been isolating them?
i) Approximately 70 heaters in total would have been enclosed in the scaffolds as work progressed along the length of the factory. However, much of that work was done between May and October 2008, during which time an unspecified number of heaters, amounting to quite a large proportion, would have been isolated for reasons of economy unrelated to the works. The number of heaters that would have been enclosed in the scaffolds when they had not been isolated for reasons of economy is not known but is significantly fewer than 70[50];ii) Neither Mr Henwood nor anyone else made a request for the heaters to be turned off in advance of scaffold moves, either in pre-scaffold move meetings or when requesting permits to work;
iii) Mr Jones had not read the method statement and was not requested by Central to turn off the heating in advance of scaffold moves;
iv) Mr Henwood had read the method statement and was, as he accepted, responsible for implementing it on site. But he did not do so and did not implement any other procedure for ensuring that the heaters were off, relying instead upon an mistaken assumption that Mr Jones would have done so;
v) Although there were ample "visual reminders" of the presence of the heaters in close proximity to the scaffold that were available when Mr Jones was on the shop floor, they did not alert him to the danger posed by the heaters and he did not recognise it until the fire had happened;
vi) The evidence from the Mueller witnesses was, without exception, that they were not asked (either by Mr Jones or by Central or its subcontractors) to isolate heaters in advance of scaffolds being erected and that they were unaware of it being done;
vii) By contrast, the cranes were clearly in people's minds and were discussed at pre-scaffold movement meetings, with Mr Henwood sometimes making express requests for crane isolation and, typically, identifying the precise limits beyond which the cranes should not run[51]. Mueller's mechanical and electrical fitters would then be instructed to isolate the cranes mechanically and electrically before the scaffold was moved, and that was done;
viii) There was evidence from Mueller's witnesses that, if Mueller maintenance staff had isolated heaters, that would have been recorded in the maintenance log in the same way as the records of isolating and reinstating the cranes. There are no such records in the maintenance log;
ix) Mr Powell, an electrician employed by Estil, gave unchallenged evidence that when Estil followed on after the re-roofing he saw a number of heaters with the flying leads unplugged[52]. He did not know who had unplugged them. He said that, if any were still plugged in, Estil would have unplugged them. He had no memory of whether or not the local gas supply valves were open or closed;
x) After the fire, one heater that was beyond the area that the scaffolding and re-roofing had reached was found with the flying wire unplugged;
xi) The evidence relating to the heaters in and near the scaffold which caught fire shows that they had not been isolated, as discussed above.
"heaters and lights off during summer – occasionally scaffolders or asbestos removers would bring to EH's attention. Would then contact Dave Jones or Trevor Smith to get them turned off.
2 or 3 times heaters found on by scaffolders or asbestos sheeters then contacted Mueller (D[avid] J[ones]) or T[revor] S[mith]) to get them turned off."
After referring to the occasion 4-6 weeks before the fire, Mr Hotchkiss recorded Mr Henwood as saying "other 2 occasions, Xmas last year at warehouse end." Although by the time he came to give evidence Mr Henwood said that he could not remember these other occasions, I find that Mr Hotchkiss' record of this interview is essentially correct and that in November 2008 Mr Henwood could remember two other incidents when heaters were reported to be found on. Mr Hotchkiss' note "… then contacted Mueller (D[avid] J[ones]) or T[revor] S[mith]) to get them turned off" bears two possible interpretations. The first is that Mr Henwood had reported at least one occasion to Mr Jones and at least one occasion to Mr Smith so that, taking the three incidents overall, his reports had been either to Mr Smith or Mr Jones. The alternative is that he did not remember who he had reported them to but thought it would have been either Mr Jones or Mr Smith. Although Mr Smith gave evidence that he recalled only one such occasion, I prefer the second explanation because my assessment of Mr Jones is that, if he had been informed that heaters had been found on he would have remembered it and acknowledged it when he gave evidence. And, of equal importance, he would have discussed it with Mr Henwood to ensure that it could not happen again, which did not happen. I therefore find that there were two occasions early in the contract when heaters were found on in the vicinity of the scaffolders' work; that they were reported to Mr Henwood, who reported them to Mr Smith; that Mr Smith either isolated the heaters himself or caused them to be isolated; and that Mr Jones was not told of the incidents.
i) On 10 November 2008 Mr Hotchkiss noted "heaters unplugged" and to some heaters being isolated and then reconnected[54], but the significance of these entries was not explored or explained. In what appear to be notes relating to Mr Jones or Mr Urosevic (Mueller's electrical engineer), entries stating that the heaters in Bays 1 and 2 had been disconnected are crossed out[55]; there is a note that "isolations [are] done by Mueller requested at meetings prior to moves"[56]; and there are notes indicating that Mr Hotchkiss was told by a number of Mueller employees that no isolation of lights or heating had been carried out in the most recent Bay 1 and 2 positions for the scaffold[57];ii) On 12 November 2008 there is a contentious note of a conversation with Mr Jones as follows:
"- no permits issued for isolations. Meetings held, with Eddy [Henwood]. – Eddy would request isolations Dave would ask maintenance fitters to do it. But no formal notification given that work had been done.Mech[anical] fitters isolated heaters."That is followed by:"Trevor Smith – mechanical manager.Eddy – would ask for heaters to be isolated if any found on. …."Mr Jones said that the reference to heaters in the last line of the note of the conversation with him was a misunderstanding and that the discussion concerned cranes, which would be isolated by mechanical fitters. Central submits that the context provided by the following note shows that there was no misunderstanding and that the note relates to heaters.iii) On 19 November 2008 Mr Hardy is recorded as saying that he hadn't known heaters to be on and had only known lights to be on on one occasion;
iv) On 21 November 2008 there is a note of a conversation with Mr Jones in the course of which he is recorded as saying:
"When scaffolding is erected Eddy [Henwood] will go to maintenance office to request isolation of any lights or heating. – Never actually asked DJ for this – not discussed during meetings prior to scaffolding move. Both before + after fire Eddy has said that heaters and lights were off in 2 bay."[58]
Liability Discussion
Issue 1: The Allocation of Responsibility Under the Contract
Principles of contractual interpretation
The Contract Documents
Interpretation of the Contract: Express Terms
i) Central had responsibility for the safe carrying out of the works at all times. This was not affected by any rights to inspect or intervene that the contract gave Mueller;ii) Mueller's responsibility for the physical isolation of its plant arose when it was triggered by the provision of sufficient information to enable it to recognise that isolation was required.
i) Assumed responsibility for ensuring that the work to be performed and/or materials to be supplied by Central met the highest professional trade standards: Clause 8.1;ii) Was to provide competent and experienced supervisors, craftsmen and workers to perform the work that had been undertaken, and had full responsibility for all materials and equipment so as to permit the most rapid and economical completion of the work: Clauses 8.3 and 8.4;
iii) Represented and warranted that the work to be performed would be performed and completed in a manner which complied with all applicable laws, regulations and codes, including but not limited to those relating to safety: Clause 8.12 (and see Clauses 8.13(a) and (b));
iv) Was to take (and was to cause all its sub-contractors to take) all precautions within their power necessary for the prevention of fires at the site: Clause 8.18(a);
v) Was to conduct all operations under the Contract Documents in a manner to avoid, and would promptly take all reasonable and necessary precautions against risk of loss or damage to all parts of the work to be performed: Clause 8.18(b);
vi) Was to continuously inspect the work to be performed and the site and was to be solely responsible for the discovery, determination and correction of any conditions giving rise to risk of loss or damage and any potential accident-producing behaviours and/or conditions: Clause 8.18(b).
While it is arguable that Clause 8.1 imposed an obligation to achieve an end result rather than to achieve standards during the carrying out of the work, that argument is not applicable to the other obligations just listed. Singly and cumulatively, they applied throughout the course of Central's conduct of the works.
i) Clause 6.1, which provided that Mueller would have not direction or control as to the method of performance of the Work by Central;ii) Clause 8.7, which provided that no inspection performed or failed to be performed by Mueller would be a waiver of any of Central's obligations or be construed as an approval or acceptance of all or any part of the Work;
iii) Clause 8.13(a), which reserved to Mueller the right (but imposed no obligation upon Mueller) to specify and require Central to perform additional job safety and health training and activities;
iv) Clause 8.17(b), which reserved to Mueller the right (but imposed no obligation upon Mueller) to reject or remove (or to require Central to reject or remove) incompetent or dangerous subcontractors or their employees;
v) Clause 8.18(b) which required Central to cooperate with Mueller on all safety and security matters and to comply with all Mueller's safety and security requirements while stating expressly that such compliance would not relieve Central of its responsibly for maintaining proper safety and security and would not be construed as limiting Central's obligation to take reasonable action as required to establish and maintain safe and secure conditions at the site.
i) Central had represented itself as an expert with respect to the performance and completion of the Work;ii) Mueller was relying upon the expertise of Central in performing, completing and accomplishing the results intended by the Work, even though Mueller may inspect the Work;
iii) Central represented that it had inspected the site, was familiar with it and was satisfied as to its condition including hazards to life and property; and
iv) Mueller agreed that the Contract Sum was just and reasonable compensation for all of the Work, including all foreseen and foreseeable risks and hazards.
In the light of the events which happened, it is clear beyond argument that the heaters constituted a hazard to life and property; and the risk of fire caused by the heaters was a hazard that was not merely foreseeable but was foreseen by Central[70].
Interpretation of the Contract: Implied Terms
"(1) It must be reasonable and equitable; (2) it must be necessary to give business efficacy to the contract, so that no term will be implied if the contract is effective without it; (3) it must be so obvious that it "goes without saying"; (4) it must be capable of clear expression; (5) it must not contradict any express term of the contract."
Application of principles: breach of contract by Central
i) Failing to request the isolation of the heaters, which is alleged to be a failure to take all precautions within its power necessary for the prevention of fires, contrary to clause 8.18(a);ii) Failing to conduct all operations in a manner to avoid damage and failing to take all reasonable and necessary precautions against risk of damage, contrary to clause 8.18(b);
iii) Failing continuously to inspect the Work, contrary to clause 8.18(b);
iv) Failing to prepare and maintain reports of previous incidents where heaters were found to be on in the birdcages, contrary to Clause 18.8(b).
Application of principles: breach of contract by Mueller
Conclusions
Issue 2: Waiver
Applicable Principles
Discussion
Conclusions
Issue 3: Estoppel by Convention
Discussion and Conclusion
Issue 4: Contributory Negligence
Discussion of Principles
proximity to the heaters, were at fault in failing to operate either the system envisaged by the method statement or any other system for ensuring that the heaters posed no risk to life or property, even after it knew that the heaters were not being routinely isolated; and it was also at fault for failing to bring to Mueller's attention the fact that the heaters were not being isolated and posed a high risk of fire. Mr Henwood was at fault in failing to alert either Mr Thomas or Mr Jones to the incidents that had occurred or to the risk of further incidents, and in allowing the works to continue without taking any steps to guard against the risk of fire. Mr Thomas recognised (correctly) in his evidence that he was at fault in failing to carry out monitoring or supervision that would have identified the happening of the earlier incidents and the fact that his method statement was not being followed. On the other side of the contracting fence, Mueller's failure to appreciate that it was not routinely isolating the burners and that they posed a high risk of fire cannot possibly be justified. Primary responsibility must fall on the shoulders of Mr Jones, for his failure to read the method statement and his failure thereafter to appreciate the risk created by the proximity of the heaters to be scaffolds, which led to Mueller's continuing failures to isolate the heaters. Some responsibility must also lie with Mr Smith, who failed to alert Mr Jones when he knew of at least one "near miss" before the fire. The seriousness of the lapses is acknowledged by senior management on both sides who accepted that they would have justified the taking of disciplinary proceedings against the valued employees within their organisations who were directly responsible, though in the event none was taken.
Issue 5: Causation of Loss
The Applicable Principles
"In my judgment there does not have to be recklessness and nothing less than recklessness on the part of the buyer before a seller can disclaim liability for damage in respect of which the buyer claims an indemnity. It is, as Lawton L.J. said yesterday, always a question of degree at what point the damage claimed for ceases to flow naturally and directly from the breach." [Emphasis added]
"Where a Plaintiff does not know of a defendant's breach of contract and where he is entitled to rely upon the defendant having performed his contract, it will only be in the most exceptional circumstances that conduct of the Plaintiff suffices to break the causal relationship between the defendant's breach and the plaintiff's loss.
The plaintiffs' conduct was not voluntary in the sense of being undertaken with a knowledge of its significance. Conduct which is undertaken with a knowledge of its significance. Conduct which is undertaken without an appreciation of the existence of the earlier causal factor will normally only suffice to break the causal relationship if the conduct was reckless. It is the character of reckless conduct that it makes the actual state of knowledge of that party immaterial."
Discussion
PART 2 – QUANTUM
Summary of Conclusions on Quantum
Agreement and the Outstanding Issue on Quantum
___________________________________________________________________________
SCHEDULE OF AGREEMENT AND DISAGREMENT ON QUANTUM ISSUES
___________________________________________________________________________
| Description | AGREEMENT/ DISAGREEMENT (Exclusive of interest) |
| PROPERTY DAMAGE | |
| Buildings | |
| Total Phase 1 | 2,961,940 |
| Total Phase 2 | 6,168,723 |
| Machinery & Equipment | IN DISPUTE |
| Loss of finished goods | 228,000 |
| TIME ELEMENT | |
| Loss of gross profit | |
| UK loss of gross profit | 1,169,532 |
| Export loss of gross profit | 1,200,000 |
| Increased costs of working | |
| Additional Rebates | 1,000,000 |
| Purchase of Finished Goods | 1,401,181 |
| Mueller US Related Costs | 0 |
| Added Value on US Purchases | 0 |
| Freight and Duty Costs | 122,000 |
| Additional Customer Support | 60,000 |
| Loss of margin on export contracts | 386,000 |
| Total savings | (1,375,637) |
i) Mueller claims £8,036,150, which is the agreed cost of repair and replacement of the large diameter machinery and equipment damaged or destroyed in the fire on what Mueller contends is a like-for-like basis; whileii) Central contends that Mueller should recover £4,131,118, which is the agreed sum of money actually expended or in the process of being expended by Mueller (or its parent) in the UK and in the US in purchasing large diameter machinery.
The Factual Background – Quantum
i) One of the 30 tonne draw benches (no. 16) was reinstated at Bilston in June 2012 after being repaired and a replacement for the other (no. 17) will be installed at Bilston with completion in 2014;
ii) The 50 tonne draw bench no. 14 is going to be "replaced" by the installation of a 30 tonne draw bench at the group's plant in Fulton, USA, in the near future.
Discussion
The Relevant Principles
Application to the Facts of the Present Case
"Central contends that Mueller will have been restored to its pre-fire position when:
(i) Mueller was put in the position (by the repair or replacement of damaged machinery) that enable it to have the capacity to produce its product (large diameter tubing) and achieve profits from that production, as it had before the fire; and
(ii) Mueller has been compensated for any foreseeable loss of profit for its lack of capacity after the fire and before its pre-fire production capacity was restored; and
(iii) Mueller has been compensated for the cost of replacing or repairing the equipment required to restore the pre-fire production capacity and capability; and
(iv) Post-fire Mueller has equipment having a capital value which is at least equal to the pre-fire capital value of the machinery."
Conclusion
Note 3 Including F1/15, 67, 71 [Back] Note 5 In re-examination he suggested he may not have seen it until after the fire. That evidence is rejected. [Back] Note 8 Although Mr Parsons’ statement suggested that Mr Davies was there, that was not confirmed by other witnesses and the entries in Mr Henwood’s diary (L/196) and Mr Thomas’ notes (P/113A-C) do not record him being there. [Back] Note 12 See D24/[32]. The reference to “Gareth Jones” is an error. Although cross-examination established that he could not remember at which meeting Mr Thomas had said this, Central did not challenge his recollection of it being said. [Back] Note 13 T6/118.10-120.13 [Back] Note 14 T6/120.14-121.3 [Back] Note 16 T5/141.21-142.2 [Back] Note 18 Poly-vinyl-chloride sheeting was put up to as to enclose the asbestos removal works within the birdcage. [Back] Note 20 A/33. And see Section 3 “Setting Standards” – A/36 [Back] Note 22 A/37 – and see the method statement. [Back] Note 28 A/45 – but the risk assessment that was carried out was very general and did not identify the heaters as a potential hazard. Mr Thomas’ evidence was that this was covered instead by the method statement. [Back] Note 30 T6/152.15-153.25 [Back] Note 32 The contractual significance of the method statement is discussed later. What cannot be disputed is that Mr Jones knew the function of the method statements and that he would have the opportunity to object if he found anything in them unacceptable. [Back] Note 33 It appears that he was not a direct employee of Mueller, but this does not affect the nature of his responsibilities. [Back] Note 37 For example, an occasion when a scaffold was tampered with when it should not have been. [Back] Note 38 T2/130.6-137.14 [Back] Note 41 Mr Hardy was not aware that isolations could be entered on permits to work. [Back] Note 42 J10, 32. J32 was signed by Mr Henwood as accepter of the permit although the work was to be carried out by SCS personnel. [Back] Note 43 Other permits requiring or referring to isolation of the cranes were issued to Estil (J26, 44, 47) and Mueller’s own employees (J61, 64), the last of these being issued on 28 February 2008. [Back] Note 44 I reject the suggestion made by Mr Jones in his evidence that the fact of issuing monthly permits meant that isolations might not be needed during the currency of the permit. Most, if not all, monthly permits would have covered at least one move of a scaffold which required isolations that could (and should, if the method statement had been followed) have been provided for on a permit to work. [Back] Note 45 See Central’s closing submissions at [41], based on T3/85.8-9. See more generally, T3/84.9-85.9 and see also T3/89.4-10 and T7/37.25-40.1 [Back] Note 46 Central Opening at [28.5] [Back] Note 47 Central Opening at [29] [Back] Note 48 Central Opening at [29.6] [Back] Note 49 Central Closing at [52], [59] [Back] Note 50 See T4/35.13-36.13 and 66.23-67.22 [Back] Note 51 As happened at the meeting on 6 November 2008. Even if no specific requests for isolation was made in so many words by Mr Henwood on every occasion, it would be implicit in the discussion about the cranes which routinely occurred. [Back] Note 52 Mr Hotchkiss recorded him as saying on 12 November 2008 “heaters unplugged already”, without qualification. But on 18 December 2008 he recorded him as saying that he could not recall if all heaters were already unplugged or whether some were still plugged in. [Back] Note 53 In addition, he had given a similar account to the Fire Brigade’s Investigating Officer, Mr Bennett, on 11 November 2008, when he had said that the incident had been within Phase 6b: F2/379. [Back] Note 60 ICS Ltd v West Bromwich BS (HL) [1998] 1 WLR 896, 912H per Lord Hoffmann [Back] Note 61 Charter Re v Fagan [1997] AC 313, 348B-C per Lord Mustill [Back] Note 62 See ICS at 912H-913B, Chartbrook v Persimmon [2009] 1 AC 1101 at [38- 42] [Back] Note 63 GNER v Avon [2001] 2 Lloyds Rep 649 at [29] per Longmore LJ [Back] Note 64 Reardon Smith Line Ltd v Hansen-Tangen [1976] 1 WLR 989 at 995 per Lord Wilberforce [Back] Note 65 Gan Insruance Co Ltd v Tai Ping Insurance Co Ltd (No 2) [2001] 1 All ER (Comm) 299 at [16] [Back] Note 66 See BHP Petroleum Ltd v Briths Steel Plc [2000] 2 Lloyd’s Rep 277, 281 per Evans LJ [Back] Note 67 Mueller’s allegation that there was an implied term that Central would comply with the terms of the Health and Safety Plan and method statement gives rise to different and broader considerations, and is addressed at [87] below. [Back] Note 70 That is why Mr Thomas identified in the method statement a failsafe mechanism for them to be switched off: see T6/119.4-8, 126.9-13, 139.23-140.8, 142.25-143.17. Mr Henwood knew the heaters were an obvious fire risk: T7/28.3-14 [Back] Note 71 Clauses 3.1 “Upon receipt of a request from [Mueller] … [Central] shall furnish …”, 7.2(d) “Upon request, [Central] will provide …”, and 8.15(c). [Back] Note 72 Clauses 7.3(b) “Each subcontract must contain provisions that:… require that the subcontractor’s work be performed …”, 7.3(c) “Each subcontract must contain provisions that: … require submission to [Central] of applications for payment;”, 8.7 “If any of the Work is required to be inspected or approved by a Government authority, [Central] shall cause such inspection … to be performed.”, And “[Mueller] reserves he right to specify and require [Central] to perform additional job safety and health training … and require [Central] to certify its compliance in writing.”, 10.1 [Central] will procure and maintain … whatever other insurance [Mueller] may require …” [Back] Note 73 Clauses 8.9 “… as required during the contract works.”, 8.15(d) “… [Central] shall not be liable for or be required to incur any expense resulting from any environmental condition …”, 8.16 “If [Central] knows or should know that the Work required under the Contract Documents is at variance with ….”, 9.2 “if employment of separate counsel is required because of a conflict of interest…”, and 8.13(a) “To the extent that training of its employees … is required under any ... rules or regulations, Central further agrees that its employees … will receive such training as is required.” [Back] Note 76 The obligation to co-operate on safety matters was expressly imposed on the parties by Clause 8.18(b). [Back] Note 77 See [7], [20] and [21] above. [Back] Note 78 Subject to the argument that Mr Jones would have issued permits confirming that the heaters were off without ensuring that the permit was correct, which I have rejected as a matter of fact. [Back] Note 79 Not least because of his frank and patently genuine response that he was “horrified” when he found out after the fire that the system had not been operated properly: T6/166.24 [Back] Note 82 There is no inconsistency between (a) holding that the method statement was sufficient to trigger Mueller’s obligations as a “request” for the purposes of clause 8.9 and (b) holding that Central should have made further (and effective) requests in order to take all precautions in its power at a time when it knew or ought to have realised that the provision of the method statement had not been effective and that the procedure contemplated by the method statement was not being implemented. In that state of knowledge, the making of further requests was a precaution that was within Central’s power and was necessary for the prevention of fires. [Back] Note 83 “Contractor will conduct all operations under the Contract Documents in a manner to avoid, and will within its scope of Work promptly take all reasonable and necessary precautions against risk of loss, theft or damage by vandalism, sabotage or otherwise, to all or any part of the Work.” [Back] Note 84 Borealis at [45] [Back] Note 85 See by analogy in the law of tort, Reeves v Commissioner of Police [2000] AC 360 [Back] Note 86 T2/146.1-2, which is consistent with his evidence generally that he was relying upon Central to tell him what they wanted done. [Back] Note 87 See Parsons T5/8-12, Marsh D212.8b/[7] [Back] Note 88 Marsh T8/49.19-24, 56/7-19 [Back] Note 89 Parsons T5/16-20 [Back] Note 90 Parsons T5/120.1-7, 139.17-140.5 [Back] Note 92 The Kingsway [1918] P 344 [Back] Note 93 The London Corporation [1935] P 70; and see, more recently, Jones v Stroud DC [1986] 1 WLR 1141, The Maersk Colombo at [71(1) & (2)], Burdis v Livsey [2003] QB 36 CA at [84].
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