Biffa Waste Services Ltd & Anor v Maschinenfabrik Ernst Hese GmbH & Ors

A duty of care in tort may exist alongside contractual duties where negligent work causes physical damage and consequential financial loss. The contractual structure remains relevant to the duty’s existence, scope and extent. Tort cannot circumvent an agreed exclusion or limitation of liability.

Liquidated damages provisions expressed to be the only monies due for delay constitute an exhaustive damages remedy. They cover delay caused by breach of other contractual obligations and reasonable mitigation costs.

Where welding or grinding in an area containing combustible material is inherently dangerous, the employer’s duty to take reasonable precautions is non-delegable. Vicarious liability turns principally on entitlement to control how the negligent work is performed.

The claim arose from a fire at a recycling plant during welding and grinding works inside a Ball Mill. Biffa Waste Services Limited and Biffa Leicester Limited claimed against Maschinenfabrik Ernst Hese GmbH (MEH) and Outokumpu Wenmec AB (OT) for losses caused by delay to commissioning. MEH had contracted with Biffa Waste and had given Biffa Leicester a direct warranty. OT had designed and arranged remedial works and engaged Pickfords and Millteam.

The court determined the cause of the fire, contractual liability, duties of care in tort, vicarious liability, non-delegable duties, the effect of liquidated damages and limitation provisions, and the relevant period of delay.

1. Cause and contractual breach. The fire was caused by welding or grinding sparks igniting combustible waste. Inadequate method statements and hot-work precautions, failure to maintain a continuous fire watch, and inadequate wetting down caused or materially contributed to the fire. MEH owed Biffa Waste a non-delegable contractual duty to exercise reasonable skill and care and was in breach. MEH was also in breach of its direct warranty to Biffa Leicester.
2. Liquidated damages. Clause 47.1 of the Design and Build Deed made liquidated damages the exhaustive monetary remedy for delayed completion. The clause applied whether the delay resulted from a failure to complete alone or from breach of another obligation causing delay. Reasonable mitigation costs were included within that exhaustive remedy. Biffa Waste could recover only the stipulated liquidated damages.
3. Direct warranty and double recovery. Clause 2.2 limited MEH’s liability to Biffa Leicester to the liability that would have existed had Biffa Leicester been named as provider. Biffa Leicester could not recover additional damages for the same delay where Biffa Waste recovered the liquidated damages. The court could use a stay to prevent double recovery.
4. Tort duties. Biffa Leicester, Biffa Waste and MEH had sufficient proprietary or possessory interests in the Plant. The fire risk and consequential delay loss were foreseeable. The contractual arrangements did not exclude a duty of care owed by MEH or OT, because consequential loss from the fire was not otherwise allocated. However, MEH’s tort liability was subject to the contractual limitation in clauses 2.2 and 47.1. OT’s contractual cap with HU had no effect on its duty to parties higher in the chain because there was no evidence that the cap had been authorised by them.
5. Vicarious liability. The relevant question was who was entitled to control the manner in which Pickfords’ employees performed the negligent work. OT had arranged the work, supplied supervision through Millteam and was entitled to control how the work was done. OT was therefore vicariously liable for Pickfords’ negligence.
6. Non-delegable duty. Welding and grinding inside the Ball Mill while combustible waste was present were inherently dangerous operations. Applying Honeywill v Larkin [1934] 1 KB 191, an employer could not avoid responsibility by engaging an independent contractor. MEH was liable for HU’s negligence and OT was liable for Pickfords’ negligence.
7. Disposition. MEH was liable in contract and tort to Biffa for the 217-day delay from 28 June 2004 to 31 January 2005, subject to the liquidated damages limits. OT was liable in negligence to Biffa Waste, Biffa Leicester and MEH. Judgment was entered against Pickfords with damages to be assessed, and HU was liable to indemnify MEH. Contribution issues were reserved.

First-instance decision. No prior appellate decision is stated in the judgment.