DBE Energy Ltd v Biogas Products Ltd

A supplier undertaking design work for components intended to operate within a wider system must take reasonable care to ensure that the components can be safely integrated into that system. This includes identifying and allowing for relevant operating pressures, even where the wider design is not yet finalised. Contractual obligations to comply with applicable legislation and regulations require compliance with the Pressure Equipment (Safety) Regulations 2016 and relevant engineering standards where the equipment falls within their scope. A claimant must prove causation separately for each item of defective equipment. The duty to mitigate requires reasonable conduct in the emergency created by the breach, and the burden of proving avoidable loss rests on the defendant.

DBE Energy Ltd engaged Biogas Products Ltd to design and supply tank heaters and pasteuriser tanks for an anaerobic digestion facility. The equipment was incorporated into a wider hot-water and digestion system. The components buckled or failed during testing and commissioning.

DBE claimed damages for breach of contract, negligence and breach of implied terms as to fitness for purpose. Biogas disputed the scope of its design obligations, the applicability of pressure-equipment and construction-product requirements, causation, mitigation and quantum. Biogas also advanced a counterclaim for unpaid invoices. The central issues concerned the extent of Biogas’s responsibility for system compatibility and whether the failures and claimed losses were proved.

The claim succeeded in substantial part. Judgment was entered for DBE in the sum of £224,303.77, subject to consequential matters. Biogas’s counterclaim was dismissed. Interest and costs were reserved for a consequentials hearing.

1. Scope of contractual design obligations. The Contracts could not be viewed in isolation from Biogas’s wider involvement in the mechanical and process design of the facility. Biogas was required to exercise the contractual obligation of the “utmost skill, care and diligence” and to design the Tank Heaters and Pasteuriser Tanks so that they could be safely integrated into the overall system. It had to understand and take account of the operating pressures of the hot-water system. The fact that the wider design was incomplete did not relieve Biogas of that obligation.
2. Tortious duty. Biogas had assumed responsibility for ensuring compatibility between its components and the hot-water system, and DBE had relied on its expertise. Its tortious duty therefore mirrored its contractual design obligations.
3. Regulatory compliance and testing. The Pressure Equipment (Safety) Regulations 2016 and the Construction Products Regulations applied. Sound engineering practice required appropriate calculations, testing, certification, instructions and design documentation. Biogas failed to carry out adequate structural checks, provide the necessary records or comply with the applicable requirements.
4. Fitness for purpose and breach. The equipment was not fit for the purpose of safe integration into the hot-water system and Biogas was negligent and in breach of both Contracts. DBE’s separate claim that the equipment was of unsatisfactory quality was rejected for want of sufficient evidence.
5. Causation. DBE failed to establish that Biogas’s breach caused the Tank Heater damage because the mechanism and timing of that damage remained uncertain. The first Pasteuriser Tank, however, failed when subjected to pressures for which it should have been designed. Biogas’s breach caused the Pasteuriser Tank failures.
6. Mitigation and damages. DBE acted reasonably in obtaining replacement tanks. Biogas failed to prove that hydraulic separation was a quicker, cheaper or safe alternative. DBE recovered replacement and temporary-tank costs and a two-week loss of revenue, but not the alleged fifteen-week critical delay.

First-instance decision. The judgment records no prior appellate decision.