Energy Works (Hull) Limited v MW High Tech Projects UK Limited & Anor

A construction contract may confer an extension of time only where the contractor proves an employer breach, causation of delay and compliance with any contractual notification condition precedent. A party cannot suspend its contractual performance merely because the other party is in breach, unless the contract or the common law provides that right. Liquidated damages accrued before termination remain recoverable unless the contract clearly provides otherwise. A contractual exclusion or limitation clause does not exclude common-law remedies without clear words. An exclusive-remedies clause may, however, confine defect claims to an agreed notification and remedial scheme.

Energy Works (Hull) Limited engaged MW High Tech Projects UK Limited to design and build an energy-from-waste plant. The plant was substantially delayed and had not achieved Take Over when EWH purported to terminate the EPC contract under clause 44.1(c), alternatively at common law. M+W claimed extensions of time based principally on alleged failures concerning the supply and quality of refuse-derived fuel, and counterclaimed for sums under the EPC contract.

EWH claimed delay damages, termination losses and defects damages. M+W also sought contribution from Outotec (USA) Inc., the gasifier subcontractor, and Outotec counterclaimed for unpaid milestone payments. The central issues were whether M+W had established contractual entitlement to extensions, whether EWH’s termination was valid, and the extent of liability under the subcontract and related contractual remedies.

1. Extensions of time. M+W had to prove an EWH breach, that the breach caused delay affecting completion, and timely notification under clause 14.1. Notification of delay and its cause was a condition precedent. M+W established limited breaches concerning heavy metals, fines and the ability of RDF, after processing and blending, to meet the Fuel specification for net calorific value, but those breaches did not cause the claimed delay. The extension claims therefore failed.
2. Suspension. In the absence of an express contractual right, M+W could not suspend commissioning while affirming the contract. Its contractual duty was to continue performance and pursue any extension or payment claim. The contract also expressly required continued performance during disputes.
3. Termination. Since M+W had no qualifying extension, the Delay Damages Cap had been exceeded and EWH validly terminated under clause 44.1(c). Alternatively, the delay, coupled with M+W’s unjustified suspension, amounted to repudiatory breach. Clause 44.12 did not exclude that common-law route.
4. Damages. Accrued liquidated damages remained payable up to termination. The Delay Damages Cap did not prevent recovery of post-termination losses, which were not liquidated damages. Additional financing costs were costs rather than excluded loss of revenue. EWH nevertheless had to prove causation and mitigation; some quantum issues required further submissions.
5. Wilful default. M+W deliberately or recklessly failed to report the nature and likely consequences of defects in the fuel-feed system and deliberately suspended commissioning. The wilful-default exception removed contractual limits only for loss caused by those defaults, not for unrelated post-termination losses.
6. Third-party proceedings. Outotec’s liability for defects was governed by the subcontract’s notification machinery. Unnotified defects could not support contribution claims. M+W retained the common-law defence of abatement against Outotec’s milestone claim because abatement reduced the contractual burden and had not been assigned.
7. Disposition. EWH succeeded on the principal termination issues, obtained substantial awards subject to causation and further quantum issues, and M+W’s counterclaim was dismissed. Some contribution claims succeeded in principle, while others failed for want of notification or proof.