Energy Works (Hull) Ltd v MW High Tech Projects UK Ltd & Ors
Citation:  EWHC 2537 (TCC)
MW High Tech Projects UK (“MW”) was engaged as the main contractor under an EPC Contract to design, procure, construct, commission and test a fluidised bed gasification power plant, capable of processing refuse derived fuel (“RDF”) produced by commercial, industrial and municipal solid waste (“the Main Contract”). The parties entered into a contract based on the IChemE Red Book, with bespoke amendments.
Outotec was engaged by the contractor to supply elements of the plant under the IChemE Yellow Book (“the sub-contract), with bespoke amendments. Outotec provided a collateral warranty in favour of the employer, whereby the employer could step into the sub-contract if the main contract was terminated. Both the sub-contract and main contract was assigned to Outotec if the main contract was terminated.
The project suffered difficulty and the employer terminated the main contract, the basis on which that occurred was disputed. The employer never ended up stepping into the sub-contract. However, MW did assign the sub-contract to the employer.
The employer commenced proceedings against MW for damages of breach of contract relating to delay, losses arising from termination and the need to engage third parties to complete the works and defects in the works. MW added Outotec as Part 20 defendant, alleging that the losses claimed by the employer related to the Outotec’s breach of the sub-contract.
This was a preliminary hearing to determine:
- Whether MW retained the benefit of accrued rights against Outotec or, if not, whether assignment transferred both the benefit and burden of the sub-contract; and
- whether MW can pursue its claims for contribution against Outotec as direct claims, in respect of accrued rights under the sub-contract, or based on its liability for “the same damage” pursuant to the Civil Liability (Contribution) Act 1978 (“the 1978 Act”).
It was held, by O’Farrell J, that the assignment of an IChemE sub-contract from the contractor to the employer on termination of the main contract transferred the benefit of all accrued and future rights, leaving the contractor with no contractual claim against the sub-contractor.