Weatherford Global Products Ltd v Hydropath Holdings Ltd & Ors

Key legal principles and grounds of decision:

The court held that Hydropath supplied Clearwell Product units that did not meet the contractual warranties (notably Clause 9.1 of the Supply Agreement and the Specifications in the Schedule) and failed to satisfy applicable hazardous‑area safety requirements. The product’s propensity to produce short‑circuit sparking, under foreseeable conditions in Zone 1 upstream installations (including Group IIC atmospheres), meant the units were not fit for purpose and endangered compliance with the ATEX Directive and related Regulations/standards (including the requirements reflected in Annex II / the EHSRs and IEC 60079‑11 intrinsic safety testing).

The judge accepted experimental and expert evidence (including independent TUV tests and Dr Stevens’ analysis) that sparks induced by the device can exceed ignition energy limits applicable to gas groups relevant to oilfield use. The court found the Intertek testing and subsequent re‑certification insufficient to cure the underlying defect and capable of giving rise to legitimate doubts about the certification’s reliability.

The counterclaims by Hydropath and Clearwell for misuse of confidential information, for misuse of the Clearwell name and for breaches of directors’ duties (Companies Act 2006 ss.172 and 175) were dismissed: the court found inadequate evidence that Weatherford, MSL or Messrs Clark and Lauretti had used Hydropath/Clearwell confidential know‑how, that Clearwell owned exclusive rights in the name as pleaded, or that Messrs Clark and Lauretti breached their fiduciary duties.

Background and procedural posture:

Weatherford sued Hydropath (with Clearwell joined as third party) for breach of warranty and contract arising from supply of a patented electronic descaling device (the Clearwell Product). Weatherford alleged the products were capable of creating incendive sparks on adjacent pipework and thus failed contractual and regulatory requirements (Supply Agreement warranties and ATEX/regulatory standards). Hydropath/Clearwell counterclaimed for declarations of valid certification, unpaid commissions (abandoned at trial), misuse of confidential information in the development of a successor product (Clearwell R), wrongful use of the Clearwell name and that Messrs Clark and Lauretti had breached Companies Act duties and induced breaches of the Licence Agreement.

Nature of the claim / relief sought:

• Claimant: damages/indemnity/declaration for breach of contract and warranties relating to safety and ATEX compliance.
• Defendant/third parties: declarations of valid ATEX/ETL certification; relief for alleged misuse of confidential information; claims under company law and inducing breaches of contract.

Issues identified by the court:

1. Whether the Clearwell Product complied with the Supply Agreement warranties (including conformity with the Specification and fitness for purpose) and applicable hazardous‑area standards (ATEX/IEC/NEC) for Zone 1 / Group IIC environments.
2. Whether Weatherford had misused or passed on confidential know‑how to MSL or to Messrs Clark and Lauretti in developing the Clearwell R (misuse of confidential information / breach of licence obligations).
3. Whether use of the Clearwell name by Weatherford or MSL was a contractual breach.
4. Whether Messrs Clark and Lauretti breached fiduciary duties (Companies Act 2006 ss.172, 175) or induced breaches of the Licence Agreement.
5. Reliability and weight of various test reports and expert evidence (Intertek, SIRA, TAS, TUV and party experts) and the admissibility of late experimental evidence.

Court’s reasoning (concise account):

• The court analysed the contractual terms (Supply, Licence and Technical Services Agreements) including warranties to conform with Specifications and to comply with applicable laws and standards. The Specification and marking on supplied units showed Zone 1 and Group IIC applicability.
• Legal and regulatory context (ATEX Directive, Annex II EHSRs, application in UK Regulations, and IEC 60079 series) required designers/manufacturers to consider foreseeable misuse, surrounding conditions and potential ignition sources. The judge concluded it was foreseeable that short‑circuits producing sparks across the ferrite ring could occur in upstream Zone 1/Group IIC settings and that manufacturer design must address that risk.
• On the factual and expert evidence the court accepted Weatherford’s position that sparks produced by short‑circuits can produce energy well above ignition thresholds for the relevant gas groups. Independent testing (TUV) and the accepted physics modelling (Dr Stevens) supported that conclusion. The court found Intertek’s later testing and re‑certification problematic (failed tests, inconsistent safety factors, repeated revisions to instructions) and insufficient to cure the underlying defect.
• The court found Hydropath’s and Clearwell’s counterclaims largely unproved. The breach‑of‑confidence allegations lacked direct evidence and the experts’ analysis did not demonstrate that the Clearwell R design required use of the alleged confidential material; most of the confidentiality allegations were abandoned at trial. The claim about the Clearwell name failed on construction of Clause 9.1. Allegations that Messrs Clark and Lauretti breached ss.172/175 were rejected: their involvement in investigating and attempting remedial or alternative solutions fell within permitted services and improvements under the agreements and they acted in good faith.
• The judge weighed witness credibility and expert reliability in detail, accepting Weatherford’s technical witnesses and Dr Stevens, and finding Hydropath’s witnesses (notably Dr Stefanini and Dr Rodrigues) and some defence experts less reliable on key points.

Wider observations: the judge commented on procedural and case‑management problems (overlong bundles and witness statements, verbose submissions) and emphasised the need for concision and adherence to experimental timetable orders.

First instance: The claimant's claim is allowed on liability. The court found that Hydropath supplied Clearwell Products that breached contractual warranties (including Clause 9.1 and the Specifications) and failed to meet applicable hazardous‑area requirements; the products could generate incendive sparking under foreseeable conditions and the available certification/testing did not cure that defect. The counterclaim by Hydropath and Clearwell (confidential information misuse, use of the Clearwell name, inducing breaches, and breaches of directors’ duties) is dismissed for lack of persuasive evidence or on proper construction of the contract.