British Nuclear Group Sellafield Ltd v Gemeinschaftskernkraftwerk Grohnde GmbH & Anor

A statement that industrial capacity has been established by a rigorous technical review may be materially misleading if the underlying capacity prediction lacks reasonable grounds. The court distinguishes a rigorous review of plant from the judgment used to allow for contingencies and unforeseeable outages. A contractual reference to an estimated capacity does not necessarily impose an obligation to achieve it, particularly where the wider agreement contemplates delay and provides for fee adjustments. Common mistake requires an exceptional mistake which radically changes the subject matter. In a cost-plus agreement, costs are determined by reading the principal charging clause with the agreed costing procedures; a strict necessity test is inappropriate unless expressly agreed.

BNFL supplied nuclear fuel reprocessing services at Sellafield under substantially identical service agreements with several German power-station operators. The agreements covered a 6,000-tonne uranium baseload. BNFL later offered additional capacity of 1,000 tonnes through side letters, stating that a rigorous technical review had reassessed THORP’s capacity as 7,000 tonnes over its first ten years.

The defendants alleged that the side letters imposed a ten-year contractual obligation, were affected by common mistake, and were induced by misrepresentation. They also alleged that BNFL breached the service agreements by prioritising MAGNOX reprocessing and improperly included various costs in its invoices. The central issues concerned construction, misrepresentation, common mistake, force majeure, reasonable endeavours and the contractual costing machinery.

1. Side letters. The reference to 7,000 tonnes in the side letters described capacity and formed part of the background. It did not impose an express or implied obligation to complete reprocessing within ten years. The existing service agreements contemplated delay and contained fee-abatement provisions inconsistent with such an obligation.
2. Common mistake. The defendants failed to establish a mistake satisfying the principles stated in Associated Japanese Bank (International) Ltd v Credit du Nord SA and Great Peace Shipping Ltd v Tsavliris Salvage (International) Ltd. The failure to achieve the predicted capacity was not wholly exceptional, the alleged mistake concerned matters within BNFL’s knowledge, and the subject matter remained the same reprocessing service.
3. Misrepresentation. Objectively construed, BNFL represented that its confident capacity prediction had reasonable grounds. By 1989 the plant had been rigorously reviewed, although the contingency allowance was not itself rigorously assessed. That allowance was nevertheless material to the overall representation that the confident prediction had reasonable grounds. The defendants relied on the representation and were entitled to rescind the side letters.
4. MAGNOX prioritisation. Clause 6.1 was subject to the reasonable-endeavours obligation in clause 2.7. Clause 6.2 was exclusive only for delay resulting from a legitimate exercise of the clause 6.1 discretion, not for breach. BNFL’s response to the regulatory stock limits involved no breach. The limits constituted circumstances beyond BNFL’s reasonable control for the force majeure clause.
5. Accounting. “Costs” were determined by clause 12.2 together with Appendix 16’s normal costing procedures. The court rejected a strict necessity test. West Cumbria Initiative expenditure and restructuring costs were recoverable in principle. The COGEMA expenditure was potentially recoverable, but its allocation between baseload and post-baseload work required later determination. No wider invoice inquiry was ordered.