Energy Works (Hull) Ltd v MW High Tech Projects UK Ltd & Ors

A contractual reference to assigning a subcontract ordinarily transfers the assignor’s accrued and future rights, unless clear words limit the assignment. It does not transfer contractual burdens or create a novation without clear language, the necessary consent and sufficiently certain replacement terms.

For contribution under the Civil Liability (Contribution) Act 1978, the relevant question is whether the parties are liable for the same damage, not merely similar losses or different damages calculated under separate contracts. Overlapping delay and common defective work may constitute the same damage. Termination losses require a separate legal basis of liability and cannot be established by a bare but-for causal connection.

Energy Works (Hull) Ltd engaged MW High Tech Projects UK Ltd under an EPC contract for a waste-to-energy plant. MW subcontracted key plant elements to Outotec (USA) Inc and later assigned the subcontract to Energy Works after Energy Works terminated the main contract.

The court was asked to determine two preliminary issues: whether the assignment transferred accrued as well as future rights, and whether it transferred the burden so as to amount to a novation; and whether MW and Outotec could be liable for the same damage for contribution purposes in relation to delay, termination losses and defects.

1. Assignment. The words “assign the Sub-Contract” in the main contract, subcontract and notices meant an assignment of all MW’s rights, both accrued and future. The parties could have separated accrued and future rights by clear drafting but had not done so. The commercial difficulties identified by MW did not justify rewriting the parties’ bargain.
2. Novation. Assignment and novation were distinct concepts. Novation required the original contract to be extinguished, a new contract to be created and consent from all relevant parties. Although advance consent could in principle be given, the documents contained no clear intention to novate. The proposed replacement contract was also insufficiently certain, since its terms were to be revised to reflect altered circumstances and no agreement was reached. There was therefore no novation.
3. Direct contractual claim. Because all rights under the subcontract had been assigned, MW retained no right to pursue Outotec directly under that subcontract, including a claim for liquidated damages.
4. Contribution. Applying the “same damage” requirement in the Civil Liability (Contribution) Act 1978, different contractual measures and caps did not prevent liability for delay from being liability for the same damage where the periods of delay overlapped. On the assumed facts, at least part of the delay damage was common.
5. Termination losses were not the same damage. Outotec had no obligation under the subcontract or warranty to satisfy MW’s main-contract time obligations or pay the main-contract delay damages triggering termination. Causation alone did not establish liability.
6. Defect claims concerned the same defective plant and therefore involved common damage. The effect of contractual exclusions, limitations and exclusive-remedy provisions was left to the full trial under section 2(3) of the 1978 Act.

The preliminary issues were answered accordingly. Consequential matters, including any applications for permission to appeal, were adjourned.

not stated in the judgment.