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

There is a list of alleged defects in §20 of the Particulars of Claim (“PoC”) which is taken directly from the defects identified in the VFS report (see §5 above). Reading §20 with §24 PoC, these defects are alleged to represent breaches of contract including because of a failure to perform the contracted works with reasonable care and skill or a failure to carry out the contracted works in a workmanlike manner.

§20.1 PoC alleges that: “The vacuum furnace was said by VAS to have been commissioned as a low pressure, sub-atmospheric, quench furnace yet is capable of back filling with gas past atmosphere”. For reasons I have already considered, VAS breached the contract by commissioning the Abar as a negative pressure furnace. I also accept that its conduct left MSL in the worst of all worlds, in the manner identified by VFS. MSL got a furnace which it understood was commissioned and tested to 5 bar pressure, but which was in fact only commissioned to 0.8 bar pressure and tested to 2 bar pressure. Further, as demonstrated by the overpressure incident, despite having been commissioned as a negative pressure furnace the Abar was able to reach pressures substantially higher than that (3 bar on that day) yet was not fully equipped to cope with such pressures. Hence the ejection of the air admit filter, which – James Long accepted in his evidence (second witness statement, §54) - was appropriate to a negative pressure furnace but not one operating at positive pressures. The breach pleaded in §20.1 PoC is established.

§20.8 PoC alleges that: “The safety pressure valve is set to 6.6 bar and should have been downgraded to just above atmosphere if the system had been programmed as a low pressure, sub-atmospheric, vacuum furnace”. The safety pressure valve, which is the final fail-safe to prevent potentially dangerous overpressure, was set by VAS at 6.51 bar. The mechanical experts, Mr Barraclough and Dr Camplin, agreed that this was too far above the 5 bar maximum operating pressure of the Abar, and unacceptably reduced the engineering safety margin between the maximum operating pressure and the manufacturer’s test pressure. They agreed that the valve should be reset to 5.4 bar (Revised Joint Statement, §§2.1.5-2.1.6). That is not quite the breach pleaded in §20.8 but I am prepared to read that paragraph as alleging that the safety pressure valve was incorrectly set at too high a level, albeit that the correct level is mis-stated. I also agree with Mr Barraclough (§3.1.9 of the Revised Joint Statement) that, as pleaded in §20.8, the setting of the safety pressure valve was also too high for the valve to be effective in a negative pressure furnace which was not intended to exceed 1 bar pressure. There would have to be an enormous overpressure in such a furnace before a safety valve set at 6.6 bar would be triggered, meaning that the safety pressure valve would not serve any useful purpose as a final fail-safe for smaller but still potentially dangerous overpressure events. The breach pleaded in §20.8 PoC is established.

§20.2 PoC alleges that: “The water flow IFM switches on the power-in lead circuits are faulty and do not alarm for a flow fault when the water is turned [off]”. The mechanical experts agreed that the water flow switches were faulty, giving incorrect readings when the water flow was turned off and, in one instance, failing to raise a safety critical alarm to alert the operator to loss of water flow (Revised Joint Statement, §§2.1.14-2.1.15). However, the experts were unable to determine whether these problems were caused by defective software or hardware (which would have been VAS’s responsibility) or contamination of the water supply to the Abar due to insufficient maintenance by MSL. MSL argues that even contamination of the water supply would have been down to VAS because Mr Leggett gave evidence of VAS’s failure to clean the Abar’s water system properly before it was installed. That failure is said to have resulted in a report of 11 September 2019 by a company called Hydratech which identified sediment and biological contamination in the water, and then in MSL installing a new water system to ensure a better water supply in the future. There is, however, no firm basis on which I could accept that any such problems caused by VAS’s work before the Abar went into service continued almost two years later when VFS inspected the Abar. It is more likely that if (which is unclear) the water flow switch problems identified in 2021 by VFS and confirmed subsequently by the experts were caused by contamination of the water supply that this was down to ineffective maintenance by MSL between 2019-2021. The breach pleaded in §20.2 PoC is not established.

§20.3 PoC alleges that: “The water pressure switch mounted on the bottom [of] the water inlet manifold is likely blocked due to incorrect positioning and does not function when the pressure in the vacuum furnace drops. A service valve should be fitted”. The breach pleaded in §20.3 PoC is established on the basis of the evidence of Dr Camplin, VAS’s mechanical expert. I found Mr Camplin to be a measured and balanced witness, who readily accepted points which he considered to be correct, but which were contrary to the interests of his clients, and whose explanations were of considerable assistance to my understanding of the technical aspects of the claim. He has compiled a minimum list of modifications to the Abar which should be carried out in order to ensure that the Abar is operational to its original specification (which was a contractual obligation of VAS) and can operate safely, without repeat of the overpressure incident: see §2.2.23 of the Revised Joint Statement. One of the essential modifications is that “the water flow manifold should be remounted in the vertical orientation as it is on the Solar furnace” (another furnace operated by MSL). I accept Dr Camplin’s list as a fair and accurate assessment of the mechanical work which needs to be done to render the Abar safe for use (noting that Dr Camplin’s colleague Mr Heath was engaged to comment on electrical, including PLC, issues).

§20.4 PoC alleges that: “The vacuum furnace does not have a pneumatic pressure switch fitted”. The original Abar specification included a pneumatic pressure switch on the nitrogen supply to the furnace, as did the functional design specification drawings for the PLC. The purpose of the pneumatic pressure switch was to detect and sound the alarm when nitrogen flow dropped below minimum levels. I cannot see that VAS was under a contractual obligation to replicate in full the original design of the Abar. According to the experts, the original pneumatic pressure switch was installed for a gas supply system which supplied nitrogen independently for the backfilling of the furnace on the one hand and the pneumatic manifold (a device containing several pneumatic valves) on the other. Whereas the nitrogen supply to the Abar, which was MSL’s responsibility, was not independent as between these two destinations, and the experts agree that a pneumatic pressure switch would not have been effective in such a configuration. Dr Camplin’s list of essential works recommends that the nitrogen supplies be separated, which would be a matter for MSL. Based again on the common view of the experts, it may be that the task of a pneumatic pressure switch is performed elsewhere within VAS’s refurbishment design, but the documentation supplied by VAS to MSL and disclosed in the proceedings is inadequate to demonstrate what if any risk assessment was done of the performance of the Abar’s pneumatic system. Unsatisfactory as this is, the breach pleaded in §20.4 PoC, which is simply that the Abar should have had a pneumatic pressure switch fitted, is not established.

§20.5 PoC alleges that: “The heat exchanger in the vacuum furnace is unsafe and currently relies on the pressure switch for water safety, which allows water loss to build up internal pressure. This should be protected by a mechanical flow temperature switch”. The mechanical experts agree (Revised Joint Statement, §2.1.41) that relying on a pressure switch in the Abar’s heat exchanger could lead to overheating and overpressure within the heat exchanger and that a flow switch would protect against both of these conditions. Dr Camplin includes replacing the pressure switch with a flow switch within his list of essential works. The breach pleaded in §20.5 PoC is established.

§20.6 PoC alleges that: “There is no flow switch installed on the heating transformer cooling circuit, which is standard for safety purposes”. This allegation is not supported by the expert evidence. The mechanical experts did not accept that the presence of a flow switch on the heating transfer cooling circuit was standard for safety purposes (Revised Joint Statement, §2.1.45). They agreed that additional safety equipment would have been fitted to the transformer electrical supply (§2.1.46) and Dr Camplin’s view, which I accept, is that a flow switch need only have been fitted if such other measures failed to address an unacceptable safety risk, of which there is no evidence (§2.19 of his joint report with Mr Heath dated 15 February 2024). Mr Barraclough complained on behalf of the Claimant that VAS had not produced a design risk assessment or safety assessment which would reveal the safety system which was in place for the heating transformer. I would accept that that is unsatisfactory, but I agree with Dr Camplin, and with VAS, that this does not establish that there was no safety assessment (VAS says there was, albeit poorly documented) or that the system put in place by VAS was insufficient without a flow switch. The breach pleaded in §20.6 PoC is not established.

§20.9 PoC alleges that: “The gas backfill valve should be a spring assisted return on closing in actuator so as to keep the valve closed should pneumatic pressure failure occur”. Dr Camplin agrees in his list of essential works that the co-dependent nitrogen gas supply system (see §28 above) which was in place when the Abar was commissioned and tested should incorporate a spring return valve on the nitrogen backfill supply (as opposed to the dual action actuated butterfly valve which was installed). Although this would not be necessary if nitrogen supplies were independent as between the supply for backfill and the supply to the pneumatic manifold. Dr Camplin and Mr Barraclough agree that a spring return actuator could have been closed even under very low gas pressure to the manifold. This would be a potentially valuable safety addition in the event that there is a loss of pressure to the manifold caused by the co-dependence of its gas supply with the backfill supply. It could have prevented the overpressure event. The breach pleaded in §20.9 PoC is established.

§20.10 PoC alleges that: “The vacuum furnace does not have a high-pressure safety switch (BSP3) to cut gas backfill out and the electrical schematic is wired to KF10”. This plea is not supported by the expert evidence. The experts agree that the Abar had a chamber pressure switch which would activate an input on the PLC in the event of a threshold being exceeded but which did not operate to cut the nitrogen gas backfill. Mr Barraclough and Dr Camplin are agreed that “we have not seen evidence of design risk assessments by VAS that justify the inclusion or exclusion of a high-pressure safety switch as a safety function to cut the gas backfill, rather than rely on the PRV, which would be considered to be a “last line of defence”” (Revised Joint Statement, §2.1.60). I understand this to mean that they are unable to say one way or the other whether it was necessary for there to be a pressure safety switch in the furnace chamber which cut the nitrogen gas backfill. In closing, MSL made a different point, that the chamber pressure switch had not sounded an alarm during the overpressure incident and therefore was defective. It is unclear whether no alarm was sounded because the switch failed, or whether it was not sounded or was not heard because there was already a different alarm sounding (as the cross-examination of Mr Heath revealed). In any event, however, this is not the pleaded breach, which argued for a different switch than the one which had been installed. The breach pleaded in §20.10 PoC is not established.

§20.12 PoC alleges that: “The fitting of the air admit filter is not suitable for the high-pressure release of gas through the air admit valve”. This breach, which was evident from the overpressure event, is admitted (see above, §24).

§20.14 PoC alleges that: “Electrical schematic drawings were not prepared or completed by VAS”. VAS’s quotation had offered, under Item 24, “All new manuals and drawings” and, under Item 25, that “an all new full set of wiring schematics will be created and supplied”. The latter wording was not expressly included in MSL’s PO, but the items listed in the PO were, in general, to be understood “in accordance with [the] quotation”. In his oral evidence, James Long accepted that wiring drawings sent to MSL at the conclusion of the project had not been updated to show the “as built” wiring (Day 2/204/3-9), which must have been what was intended by the contract terms. The breach pleaded in §20.14 PoC is established.

§20.15 PoC alleges that: “The vacuum furnace software programme suffers from intermittent issues particularly related to setting values returning to default after the [power] cycle”. MSL complained about the PLC losing data during the commissioning process, and prior to handover in October 2019. There is a dispute between the parties as to whether that issue persisted at and following handover – James Long of VAS contends that the PLC was saving data as expected and there is no documentary evidence to show that it wasn’t. There is a large file of “UUH data” which tracks the performance of the Abar during its use by MSL over 200 cycles, between 22 August and 17 December 2019, 6 January and 21 December 2020 and 4 January to 14 June 2021. Mr Heath notes, and I accept, that there is nothing in the documents to indicate that these cycles did not complete successfully. Mr Barraclough and Mr Heath agree that without extensive research and analysis of the data files, it is not possible to say if they support the alleged intermittent PLC issues (Revised Joint Statement, §2.1.75). During the trial, MSL pivoted to arguing that the overpressure incident was evidence of the PLC not functioning as intended. The PLC was one possible contributory cause of the overpressure incident, but even if it was to blame on that day, this is not the “intermittent issues” alleged in §20.15 (but a single event, not said to be related to reverting to default settings after a cycle). The breach pleaded in §20.15 PoC is not established.

§20.16 PoC alleges that: “There is no evidence to demonstrate that the vacuum furnace has been tested and commissioned prior to handover”. This breach is not established. There is in fact evidence of the Abar being commissioned and tested by James Long prior to handover in the form of his handwritten notes, supported by his witness evidence. James Long himself accepted that his notes are in certain respects incomplete and misleading. They seem to me to be surprisingly informal given the safety-critical nature of the activities being carried out, and the potential need to evidence in the future what work had been done on the Abar after installation. The experts agree. Mr Barraclough and Dr Camplin state (Revised Joint Statement, §2.2.19): “We would therefore expect the commissioning records to detail that suitable levels of risk assessment, planning and coordination with the client were carried out. The current handwritten records fall short of that level of detail”. But the notes do constitute contemporaneous evidence of commissioning and testing of the Abar prior to handover.

§24 PoC sets out the various different ways in which the defects pleaded in §20 are alleged to constitute breaches of contract. The only sub-paragraph of §24 which was relied upon at trial as adding something to the defects in §20 was §24.5 which alleged that VAS had “[Failed] to carry out adequate testing during the commissioning process, particularly in relation to potential for the furnace to exceed pressure when the specific furnace cycle should have prevented this”. There is agreement between Mr Barraclough and Dr Camplin that the cause of the overpressure event was a failure of nitrogen supply to the pneumatic manifold, which was itself caused by the co-dependence of the nitrogen supplies to the backfill and valve manifold, and which resulted in the failure to close of the pneumatic backfill valve when the Abar reached the programmed pressure. They agree that it was foreseeable that an overpressure event could occur if the backfill valve was open and there was a failure of gas supply to the pneumatic manifold. They also agree that the particular failing which led to the overpressure event would have been revealed by a detailed risk assessment of the system for operating the Abar (Revised Joint Statement, §2.2.21). Mike Long accepted in his oral evidence that VAS should have risk-assessed the possibility that a reduction in gas supply to the manifold would mean that the backfill valve failed to close. A failure to risk-assess is not the same as a failure to test, which is the pleaded allegation, but the former can be expected to lead to the latter, as without a risk assessment, an engineer will lack essential guidance as to which tests need to be carried out and why. Further, Mr Barraclough and Mr Heath agree that there is no evidence of a risk assessment or a commissioning test relating to the ability of the PLC to prevent an overpressure event (Revised Joint Statement, §2.2.21). James Long was cross-examined at length on this issue and was unable to provide a convincing explanation or any satisfactory documentary support for his contention that he had carried out relevant testing in relation to the issues which had led to the overpressure event. I conclude that the breach pleaded in §24.5 PoC is established, taking into account (a) the fact that the overpressure event occurred, (b) VAS’s failure to compile a risk assessment in relation to the potential for the Abar to exceed pressure, in particular as occurred during the overpressure event, (c) James Long’s unsatisfactory evidence on this point and (d) the absence of evidence of appropriate testing of the PLC.

In summary, I find that MSL has established breaches of contract as pleaded in PoC §§20.1, 20.3, 20.5, 20.8, 20.9, 20.12, 20.14 and 24.5.

There was considerable debate during the trial about other possible breaches of contract, beyond those expressly pleaded, in particular concerning VAS’s failure to compile or produce in evidence detailed design risk assessments. No application was made to amend the PoC, and I have not treated failure to risk assess as a separate head of claim. I have, however, taken into account the absence of documented risk assessments insofar as relevant to the pleaded breaches. It is also relevant to the issues of causation and quantification of loss, to which I now turn.