HT-2022-000079 - [2024] EWHC 2260 (TCC)

A vacuum furnace is a substantial piece of equipment used in the manufacture of metal and ceramic products. The contents of the furnace are heated to very high temperatures in a vacuum, air having been removed from the furnace chamber. This protects the contents from oxidation, contamination and other potential side effects of the heating process. The contents are then cooled, or quenched, using an inert gas such as nitrogen. The purpose is to alter the properties of materials, such as their strength, ductility, toughness and hardness. Depending upon the desired manufacturing process, a vacuum furnace may be a positive pressure furnace, pressurised to pressures above atmospheric pressure, or a negative pressure furnace, where the pressure is less than atmospheric pressure.

The Claimant (“MSL”) owns and operates a number of vacuum furnaces across multiple manufacturing sites. In June 2017, MSL acquired two used vacuum furnaces, one of which was an Abar HR50 furnace (“the Abar”), originally built in the 1980s and designed to operate at pressures up to a positive pressure of 5 bar absolute. (Footnote: ¹) In November 2017, MSL engaged the Defendant (“VAS”) to refurbish the Abar to an “as new” standard specification (and, separately, to refurbish the other furnace bought alongside the Abar (“the CVE furnace”)). The operation of the Abar is controlled by a Programmable Logic Controller (“PLC”) and a new PLC was to be supplied as part of the refurbishment.

The Abar was refurbished on VAS’s premises in West Bromwich, before being installed and commissioned at MSL’s premises in Staplehurst from October 2018 onwards. Certain difficulties arose during this process, but it was completed to the apparent satisfaction of both parties and the Abar entered into service for MSL in October 2019.

On 15 June 2021, a serious incident occurred during the operation of the Abar. During a negative pressure cycle, where the PLC was set so that the pressure of the Abar would not exceed atmospheric pressure of 1 bar, pressure unexpectedly reached 3 bar. When steps were taken to reduce the pressure in the Abar, in accordance with an operating manual provided by VAS, by opening its “Air Admit Valve”, a filter was ejected from the air admit outlet at speed, striking a wall approximately 8m from the Abar. Clearly, all was not well with the Abar, and MSL stopped using it whilst investigations were undertaken into the cause and remedy of what I will refer to as the overpressure incident.

MSL commissioned a competitor of VAS, Vacuum Furnace Solutions (“VFS”), to assess the safety of the Abar and recommend any appropriate modifications. Following visits to MSL in July and August 2021, VFS compiled a report on 3 September 2021 listing a number of problems it had identified and the necessary remedial works, which it costed at £12,850 (“the VFS report”). Certain of the works could require a modification to the PLC’s software, but VFS noted that it had not been given full access to that software and entered caveats both that the cost of the remedial works could be reduced if the software issues turned out to be less serious than it had surmised, but also that further issues might emerge once it was able to fully test the operation of the Abar.

VFS was not commissioned to carry out the works it had recommended. Nor did MSL insist that VAS did so, either pursuant to the terms of a two year warranty which had been offered with the refurbished Abar or otherwise. The Abar has remained out of service ever since the overpressure incident and indeed MSL purchased a brand new furnace in May 2022 to carry out much of the work which the Abar had been intended to perform.

On 14 March 2022, MSL issued proceedings against VAS claiming damages – which are now put as being for breach of contract only – arising out of the allegedly defective refurbishment of the Abar. As originally pleaded, its claim was for the costs of essential repairs identified by VFS (£12,850) and the cost of replacing the Abar’s PLC (£74,000) (without any explanation of why this was necessary) alternatively the full cost charged by VAS for refurbishing the Abar, including supply of a new PLC (£199,015) (without explanation of why it would be necessary to start the refurbishment from the beginning). In addition, MSL claimed the additional costs, characterised as staff overtime costs, caused by running other furnaces in order to perform the work which the Abar had been intended to do.

VAS initially failed to acknowledge service and MSL applied for judgment to be entered. I apprehend from the first witness statement in the proceedings of David Woolger, the Managing Director of MSL, which was filed in support of that application, which dealt almost entirely with quantum matters, and offered to accept £199,015 to resolve its claim, that MSL expected a speedy resolution of the dispute. Regrettably, no such resolution was achieved, and the claim reached trial just over two years after issue, taking approximately five days of court time, during which I heard oral evidence from four witnesses on each side and three experts, Mr Camplin (on mechanical engineering issues) and Mr Heath (on electrical engineering issues) for VAS and Mr Barraclough (on all engineering issues) for MSL. The value of the claim, although reformulated by MSL in an “Updated Schedule of Loss”, continues to range from as little as £12,850 (or indeed less, as VAS argues that there should be some discounting from VFS’s quotation) to the full cost of refurbishment charged by VAS (£199,015), with now additional costs totalling £78,543.17 arising out of the operation of other furnaces, the continued maintenance of the Abar, the engagement of VFS and the costs initially incurred by MSL in taking delivery of and installing the Abar.

In this judgment I shall address first the question of which contractual terms applied between the parties. There was a dispute as to whether the contract for refurbishment of the Abar (“the contract”) was on MSL’s standard terms and conditions of business or those of VAS. There was also an important dispute between the parties as whether the contract had been varied to the effect that the Abar was not to be commissioned by VAS to its original, 5 bar, specification but only to work as a negative pressure furnace, at 0.8 bar pressure. I shall next consider in turn the list of defects in the refurbishment works which are relied upon by MSL, before turning to causation of loss and quantification of damages. There are also two counterclaims brought by VAS seeking payment of unpaid invoices which I shall address last.