Biosol Renewables UK Ltd v Lovering & Anor (t/a R & A Properties (A Partnership))

A supplier’s contractual and tortious duties depend on the purchaser’s particular purpose, as communicated when the contract is made. Where biomass boilers are acquired principally to generate renewable-heat income, suitability is not assessed solely by reference to efficient heating of existing buildings. Boiler sizing must be evaluated in the light of the client’s actual objectives, the relevant heat demand, the risks of over- and under-sizing, and the economic consequences.

A contractual restraint requiring fuel to be purchased from the supplier was unreasonable insofar as it required boilers to operate at maximum capacity regardless of heating need or environmental considerations. That provision could be severed by deleting the offending covenant. The counterclaim failed, but the supplier recovered the unpaid contract price, ancillary charges and damages for repudiation.

The claimant supplied, installed and commissioned ten biomass boilers for the defendants’ business premises. The defendants disputed liability for the unpaid balance of the boiler price, ancillary works, fuel and maintenance, and counterclaimed for misrepresentation, breach of warranty, unsuitable or oversized boilers, delay, defective installation and unsuitable fuel.

The defendants also alleged that the claimant had warranted specified renewable-heat income and capped fuel and maintenance costs. The claimant sought damages for repudiation of a three-year Maintenance and Woodchip Agreement. The central issues were the parties’ purposes, the suitability and sizing of the boilers, the contractual effect of the fuel and maintenance agreement, the restraint of trade doctrine, and the recoverable loss.

1. Outcome. Judgment was entered for Biosol for £296,814.80 for the unpaid boiler balance, contractual interest, £310,602.74 for ancillary works and woodchip, statutory interest, and damages for repudiation of the Maintenance and Woodchip Agreement. The counterclaim was dismissed.
2. Misrepresentation and warranty. The alleged income assurances, profitability assurances and fuel-cost warranties were not proved. The court held, alternatively, that the written disclaimers would have prevented reasonable reliance on projected performance and that the contracts for Boilers 5–10 were entered into on the strength of the performance of Boilers 1 and 2.
3. Fitness and duty of care. The relevant purpose was heating the buildings while obtaining financial advantage from renewable-heat payments and fuel savings. Biosol owed a common-law duty to advise with reasonable care concerning boiler suitability under Hedley Byrne & Co Ltd v Heller & Partners Ltd [1964] AC 465. Nevertheless, R&A failed to prove that the boilers were unsuitable or that Biosol’s recommendations fell outside reasonable practice. Boiler sizing required consideration of the client’s purposes, heat demand, design margins, the risks of over- and under-sizing, and capital cost. Automatic application of a design margin was unjustified, but sizing against peak load was not necessarily wrong in a case involving continuous heating and a biomass-only system.
4. Delay and installation. No specific commissioning dates were contractual. Boilers 3 and 4 were completed outside a reasonable time, but no recoverable loss was proved. The other delay claims failed. The allegations concerning defective installation were either unproved, irrelevant to the contractual obligation, or unsupported by proof of loss.
5. Fuel and maintenance agreement. R&A did not prove that Biosol supplied unsuitable fuel. The written agreement imposed reciprocal obligations: Biosol was required to provide the required fuel, repairs and maintenance, while R&A had to obtain them from Biosol. Its restraints were subject to the restraint of trade doctrine. The obligation to purchase fuel for the purpose of maintaining maximum boiler output was unreasonable because it required production irrespective of heating need and environmental considerations. The offending covenant could be deleted without rewriting the agreement or fundamentally changing its character. R&A’s purported termination was therefore repudiatory.
6. Damages. Loss of profit on fuel sales was limited to the actual fuel used and a profit of £7 per tonne. No separate damages were recoverable for loading resources. Loss of maintenance profit was recoverable in principle, subject to the stated calculation.