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

VAS issued a detailed quotation for refurbishment of the Abar (described as the “Abar HR50 6bar OPQ Vacuum Furnace”) on 31 October 2017. Refurbishment was to be “to a NEW standard” (emphasis in original). 25 items were listed. Items 1-22 and 25 listed various components of the Abar which were either to be replaced (such as a “hot zone”, graphite heater set, hearth assembly and PLC) or refurbished (such as pumps, a fan motor and a transformer). Item 23, valued at £4860, was commissioning and testing of the Abar, including a Temperature Uniformity Survey. Item 24 was the provision of a new operation manual and drawings. The total cost was £199,015. Payment terms were 30% with order placement, 60% on delivery and 10% “on completion”. No mention was made in the quotation of VAS’s standard terms and conditions of business. Under the heading “Conditions of contract” it referred only to a “24-month warranty excluding consumables” which was offered by VAS.

On 2 November 2017, David Woolger of MSL emailed VAS to say that he was happy with the quotation and would raise a purchase order for the work. He sent a purchase order on 9 November 2017 (“the PO”). This was for refurbishment of the Abar “as per the items detailed below, in accordance with your quotation dated 31 October 2017”. The PO then substantially repeated the 25 items from the quotation. There were certain differences in the formulation of the 25 items, including the omission of what may have been regarded as unnecessary explanations. The PO repeated the payment terms set out in the quotation, save that the final 10% was to be payable “on completion of testing”. Each page of the PO made reference to the MSL’s terms and conditions which were said to be available on its website or on request. VAS characterises the PO, correctly in my judgment, as a counter-offer.

On 10 November at 15.37, Mark Smith of VAS emailed Mr Woolger thanking him for his PO and stating that he attached VAS’s order confirmation and would shortly forward an invoice for the first tranche of payment. In fact, that email only attached MSL’s PO and Mr Smith emailed again at 15.38 with the same text but this time attaching both the PO and VAS’s “Sales Order”. The Sales Order stated that it was for refurbishment of the Abar “Order to cover all 25 items listed on VAS [sic]” and set out the payment terms, with “10% of order value on confirmation”. No reference was made in the Sales Order to VAS’s standard terms and conditions. At 15.44 on 10 November 2017, Mr Smith emailed an invoice to “Sarah” in MSL’s accounts department. This contained the same description of the transaction as in the Sales Order save that it stated “Order to cover all 25 items listed on VAS Quotation 10568B”. A box in the bottom left hand corner of the Invoice stated:

“Payment Terms:- Strictly 30 days from date of invoice, Total Net Amount £ 59,704.50 unless otherwise agreed in writing. The goods detailed on this invoice remain the property of Vacuum & Atmosphere until full payment is received, by Vacuum & Atmosphere, for said goods. For full details please refer to Vacuum & Atmosphere Services terms and conditions, which are available on request.”

In my judgment, the contract between the parties was formed when Mr Smith emailed at 15.38 on 10 November, completing the act of acceptance that he had commenced at 15.37, but which had omitted the promised order confirmation. VAS thereby accepted MSL’s standard terms and conditions, which were the only party’s terms which had been referred to up to then, in the PO, which Mr Smith attached to both of his emails, thereby indicating the terms which VAS was intending to accept. Although the wording of the 25 items of the quotation is not identical as between the quotation (which is cited in VAS’s Sales Order) and the PO, the various differences – none of which is said to be material to the proceedings – did not prevent the parties reaching agreement. I would interpret VAS’s Sales Order as accepting an offer that it provide the 25 items listed in its quotation, as they are described in the PO, which was sent alongside the Sales Order (but noting that the PO itself incorporates by reference certain of the contents of the quotation). Nor does the difference in the description of the trigger for payment of the final 10% of the purchase price prevent the parties from being ad idem. “Completion” in VAS’s documentation should be interpreted as “completion of testing”, as in the PO. No other interpretation of “completion” was suggested by VAS. It was not disputed by VAS that an operative reference to MSL’s standard terms being available on request was sufficient to incorporate them, without it being necessary for them to be repeated in the contract or actually asked for by and provided to VAS (see Circle Freight International Ltd v Medeast Gulf Exports Limited [1988] 2 Lloyd’s Rep 427). Exceptions are made to that general rule for onerous or unusual terms, but it was not suggested that any of MSL’s standard terms fell into that category.

It follows that this is not a “battle of the forms” case where both parties rely upon their own terms and conditions and, usually, the “last shot” – the latest reference to standard terms before contract performance commences – prevails (see, for example, B.R.S. v Arthur V. Crutchley Ltd [1968] 1 All E.R. 811). VAS’s last “shot”, its invoice, was fired after the contract had been completed, and in the direction of a different person at MSL, when negotiations had hitherto been with Mr Woolger. The invoice was not necessary to complete VAS’s acceptance and I would not read it as doing so. In any event, the invoice refers only to VAS’s payment terms (30 days from invoice, with property in any goods not passing until full payment is received by VAS), and I would not interpret it as a broader attempt to impose VAS’s terms and conditions on the transaction.

It is common ground that the contract between the parties, when it was entered into, required VAS to refurbish, commission and test the Abar so that it could operate “as new”, as a “6 bar” furnace. I understand that even as a 6 bar furnace, the likely maximum operating pressure of the Abar would be 5 bar (Experts’ Revised Joint Statement, §2.1.1). I should explain that Dr Camplin agreed during his oral evidence that commissioning was the process whereby VAS demonstrated to MSL that the Abar could operate to the contractual standard and do so safely. In the event, James Long of VAS commissioned the Abar on the basis that it would be operating at 0.8 bar (less than 1 bar, and so less than atmospheric pressure), although he tested it at pressures of up to 2 bar. This had various consequences, including that the filter which blew off in the overpressure event had been attached only by a jubilee clip rather than being screwed in to the metal outer shell of the Abar. This method of fixing ought to have been sufficiently robust for a furnace which was operated at negative pressure but was insufficient for a furnace operating at significant positive pressure, hence the filter blowing off after the Abar reached 3 bar pressure.

MSL was responsible for providing services to the Abar – that is, electricity, water and gas – in the facility in which it was installed. During the installation and commissioning work, VAS raised with MSL a potential problem that the supply of nitrogen to the Abar, which was through a 15mm pipe, was insufficient to enable the Abar to operate at 5 bar pressure. In VAS’s opinion, a wider pipe, or a buffer tank to store nitrogen close to the furnace, would be necessary. VAS claims that in light of the limitations of the nitrogen supply to the Abar, David Woolger of MSL instructed VAS, in the person of Mike Long, its Managing Director, to commission the Abar to operate at 0.8 bar pressure, because that was how MSL intended to use it, but on the basis that VAS would return in the future to recommission it to operate at 5 bar pressure if MSL did the work necessary to enhance the nitrogen supply. MSL denies that any such instruction was given and denies that the contract was varied so as to change VAS’s commissioning obligations.

VAS does not allege that the instruction allegedly given by MSL was written down and cannot point to any document which could be said to constitute a written variation of the contract. In those circumstances, MSL also relies upon §16.8 of its Terms and Conditions of Purchase, a standard “no oral modification” clause which states:

“Variation. Except as set out in these Conditions, no variation of the Contract, including the introduction of any additional terms and conditions, shall be effective unless it is agreed in writing and signed by the parties or their authorised representatives.”

Mike Long of VAS argued during his oral evidence that the instruction which he alleges he was given by David Woolger did not amount to a modification of the contract because VAS remained committed to commissioning the Abar to operate at 5 bar pressure once the nitrogen supply issue had been resolved. Counsel for VAS, Mr Shirazi, did not pursue that argument in his closing submissions and I reject it: it would clearly be a change, and a significant one, for VAS to be able to collect full payment for the refurbishment project whilst having done commissioning and testing appropriate to a negative pressure furnace and not as appropriate to the Abar “as new”. (Whilst it does not matter for present purposes, I understand the former to be, at least potentially, a less onerous task than commissioning and testing a furnace to operate at a much higher, 5 bar pressure).

Mr Shirazi did argue that §16.8 only applied to agreed variations of the contract and did not prevent MSL from issuing valid oral instructions, even if these were relied upon by VAS as altering its obligations under the contract. I agree with the submission of Ms Atkins, Counsel for MSL, that that interpretation of §16.8 would substantially undermine its utility and cannot have been what was intended by its draftsman. The upshot is that in the absence of a written variation of the contract, VAS was obliged by the terms of the contract to commission and test the Abar to operate at 5 bar pressure.

Mr Shirazi then argued that MSL was estopped from relying upon §16.8, and so from taking the point that there had been no written variation, on account of having given the instruction alleged by VAS. He pointed to authority, including Kabab-Ji v Kout [2020] EWCA Civ 6, [2020] 1 Lloyd's Rep 269, §§74-75, in which it was accepted that a party may be precluded by its conduct from relying upon a no oral modification clause when the other party has reasonably relied upon that conduct.

There are a number of problems with VAS’s invocation of the doctrine of estoppel in this context. First and foremost, promissory estoppel must, in any case, be founded upon a clear and unqualified representation (see Chitty on Contracts, §7-006). In the case of a no oral modification clause, a party seeking to rely upon the clause must not merely have made an informal promise but must have represented that the alleged oral contractual variation was valid notwithstanding its informality (MWB Business Exchange Centres Ltd v Rock Advertising Ltd [2018] UKSC 24, [2019] AC 119, §16). In my judgment, VAS cannot establish that a clear and unequivocal representation was made by MSL that VAS’s contractual obligations were to be varied so that the Abar would be commissioned and tested to operate as a negative pressure furnace. In particular:

In summary, therefore, I conclude that the contractual terms agreed by the parties were those set out in MSL’s PO dated 9 November 2017, with the addition of MSL’s standard terms and conditions of business. I reject VAS’s contention that the contract was subsequently varied as to the specification of the pressure at which the Abar was to be commissioned and tested. I also accept, as is common ground between the parties, that the contract also included the terms implied by the Supply of Goods and Services Act 1982 whereby VAS was to perform the contracted services with reasonable care and skill (s. 13), and that goods supplied were to be of satisfactory quality (s. 4(2)) and fit for their purpose (s. 4(5)).