Trebor Bassett Holdings Ltd & Anor v ADT Fire and Security Plc [2012] EWCA Civ 1158

[2012] EWCA Civ 1158

Case No A1/2011/2179

IN THE COURT OF APPEAL (CIVIL DIVISION)

[2011] EWHC 1936 (TCC)

ON APPEAL FROM THE HIGH COURT OF JUSTICE

TECHNOLOGY AND CONSTRUCTION COURT

Mr Justice Coulson

Venue Royal Courts of Justice, Strand, London, WC2A 2LL

Date 23/08/2012

Before

THE CHANCELLOR OF THE HIGH COURT

LORD JUSTICE RICHARDS

LORD JUSTICE TOMLINSON

Between

Trebor Bassett Holdings Limited (2) The Cadbury UK Partnership (formerly known as The Cadbury Trebor Bassett partnership t/a Monkhill Confectionery) Appellants Appellant- and -- and -ADT Fire and Security plc Respondent Respondent

Roger ter Haar QC and Ben Quiney (instructed by DAC Beachcroft LLP) for Appellants

Nicholas Dennys QC and Dominique Rawley QC (instructed by Eversheds LLP) for Respondent

Hearing Hearing dates : 4,5 July 2012

Judgment

Introduction

[1]The First Appellant, Trebor Bassett, was in 2005 the owner of a factory in Pontefract known as the New Manufacturing Unit, generally referred to as the “NMU”. An extension to the NMU generally known as “Production Area B” was in 2005 used by the Second Appellant, Cadbury, for the production of popcorn by the “oil pop” method. The oil pop method of manufacture is a hazardous method which involves heating the popcorn in pans of soya oil over a naked gas flame until it reaches a temperature at which it “pops”. There were three other distinct areas of the NMU. In Production Area A Cadbury produced popcorn using the “air popping” method. There was also a packaging area and an area concerned with the production of other chocolate confectionery.

[2]On 8 June 2005 the entire NMU was destroyed by a fire which began in the oil pop production area.

[3]The Respondent and cross-Appellant ADT had, pursuant to a contract concluded with Cadbury in 2003, designed, supplied, installed and commissioned a fire suppression system which was intended to extinguish fires in two discrete but connected parts of the oil pop production area, the elevator and hopper arrangements. The system was designed to discharge carbon dioxide, CO2, into the hopper and elevator automatically upon fire being detected by one or more sensors located within them. The fire was at one stage of its development contained within the hopper, insofar as that is itself an enclosed area, albeit it originated elsewhere. One or more kernels of popcorn had overheated in a pan or pans. In a smouldering, i.e. burning but not flaming condition, the popcorn passed through the next two stages of the production process, the “dosing drum” and the “rotary sieve”, at which stage nothing untoward was observed. It was then conveyed by the elevator to the hopper. The air drop from the elevator into the hopper may have caused a transition from smouldering to flaming. A smouldering fire then developed in the mass of popcorn in the hopper. The fire was contained in the hopper for a period of about 8-15 minutes before it escaped in a manner which I will later describe.

[4]Having escaped the hopper, the fire spread quite quickly in spite of, indeed arguably because of, attempts to put it out and, despite the prompt attendance of the fire brigade, destroyed the entire NMU. The oil pop production area was not segregated from the rest of the building in such a manner as to prevent or retard the spread of fire therefrom. The building was unprotected by any sort of sprinkler system.

[5]The fire suppression system did not automatically discharge CO 2 into the hopper as, had it been properly designed to deal with a deep-seated fire of this nature, it would have done.

[6]It was common ground at the trial that, had the fire suppression system discharged CO 2 into the hopper at an appropriate moment, it would have extinguished the fire before it had had an opportunity to escape that enclosed place.

[7]Trebor Bassett and Cadbury sued ADTin respect of their loss suffered in consequence of the fire. Trebor Bassett claims in respect of the damage to the building. Cadbury claims in respect of the damage to the machinery, increased cost of working and business interruption. The trial of liability came before Coulson J in the Technology and Construction Court in March of 2011. On 22 July 2011 he delivered a long and detailed judgment, running to 627 paragraphs –

[2011] EWHC 1936 (TCC)

. It is now reported, although the full judgment is not reproduced, at

[2011] BLR 661

[8]The judge held that ADT owed to Cadbury a contractual duty to exercise reasonable skill and care in carrying out the design of the system. It was not in dispute that a co-extensive duty was owed in tort, and the judge so held.

[9]It was accepted that ADT owed a like tortious duty of care to Trebor Bassett.

[10]The judge found that ADT had failed to design the CO 2 suppression system installed in the hopper with reasonable skill and care, and was accordingly in breach of the contractual and tortious duties which I have identified. He accordingly found ADT liable to both Trebor Bassett and Cadbury.

[11]However the judge also found that Cadbury shared in the responsibility for the damage. He found that Cadbury was negligent, indeed “woefully at fault” and “even reckless” in its failure to segregate the oil pop production area from the rest of the building and to install sprinklers. Since the contractual duty of ADT owed to Cadbury was co-extensive with its tortious duty, he held, applying the decision of the Court of Appeal in Vesta v Butcher

[1989] AC 852

, that the damage recoverable by Cadbury from ADT could, in accordance with s.1 of the Law Reform (Contributory Negligence) Act 1945, be reduced to the extent appropriate to reflect Cadbury’s responsibility for the damage. He held the appropriate reduction to be 75%.

[12]The judge left open the question whether the damages recoverable by Trebor Bassett should be similarly reduced, the argument against such reduction being that the relevant acts or omissions were those of Cadbury rather than Trebor Bassett. That argument was not developed before the judge and he heard no evidence relevant to it. He did however indicate that he thought that the argument was unlikely to succeed. I note that the order subsequently drawn up, no doubt by consent, indicates that the damages recoverable by both claimants shall be subject to a reduction of 75%.

[13]It is the judge’s finding that the contractual duty owed by ADT to Cadbury is co-extensive with that owed in tort which has given rise to this appeal. Cadbury says that the judge should have found that ADT owed to it and was in breach of further contractual duties which are not co-extensive with a duty to take reasonable care. Cadbury does not challenge the judge’s finding that it was at fault in the respects which I have summarised, nor does it challenge the judge’s assessment that its responsibility for the damage was such that an appropriate reduction in the damages recoverable is 75%. Cadbury relies upon Vesta v Butcher as establishing, as indeed it does, that if ADT’s contractual duties of which it was in causative breach are of the nature and ambit for which Cadbury contends, then the court has no power pursuant to the 1945 Act to reduce the damages recoverable in respect thereof.

[14]Trebor Bassett, having no contractual relationship with ADT, has played no part in the appeal. Henceforth I will for convenience draw no distinction between Trebor Bassett and Cadbury and I shall refer to them compendiously as “Cadbury”.

[15]ADT responds to the appeal in two ways. It seeks to uphold the judge’s conclusion as to the nature and ambit of the contractual duty owed. If however Cadbury is successful in demonstrating that ADT had in effect guaranteed the success of its CO 2 suppression system in extinguishing any developed fire in the hopper, or had undertaken some form of absolute liability in relation to the efficacy of the system, then ADT says that Cadbury cannot rely upon ADT’s breach as causative of the loss, because a similar fire one year earlier in June 2004 had already demonstrated to ADT that the system was ineffective. This would have been a difficult point for ADT to run at trial consistently with its denial that it had failed to exercise reasonable skill and care in the design of the system. In fact the point was developed for the first time in final speeches, a circumstance which has given rise to some contention before us as to the extent to which it can properly be relied upon now. Nonetheless the judge resolved this point in ADT’s favour, albeit on a contingent basis, since he of course found against Cadbury on the premise of an absolute liability. Thus the judge held that had Cadbury established that ADT had in effect guaranteed the efficacy of the system, Cadbury could recover no damages consequent upon the system’s inefficacy because Cadbury had discovered in June 2004 that the system would not or might not prevent the escape of fire from the hopper.

[16]Further, ADT cross-appeals. It contends that certain actions by Cadbury’s employees in the immediate aftermath of the discovery of the fire should be regarded as the proximate cause of its subsequent spread and thus of the destruction of the building. It contends therefore that its breach, as found by the judge, was not causative of the loss and damage in respect of which the claim is brought.

The facts in outline

[17]I have already remarked that the judge’s judgment is very long and detailed. Resort can be had to it for a full account of the facts, and it is wholly unnecessary for the purposes of this appeal and cross-appeal to rehearse them all here. I must however sketch out the features which are relevant to the issues canvassed in argument before us on the appeal and cross-appeal. In so doing I rely exclusively on the account set out in the judgment, some passages from which I reproduce below without attribution.

The judge described the manufacturing process in this way:

[18]- “249. There were two ‘oil pop’ production lines in the former Production Area B. They were known as the C Line and the D Line. Each consisted of 12 cooking pans, arranged in 6 pairs. The popcorn was heated over naked flames in these pans using soya oil. Once the corn reached a certain temperature it ‘popped’, turning itself inside out in the process.250. Once the popcorn in the pan had popped, it was tipped onto a conveyor. If one or more pieces of popcorn were flaming on the conveyor at that point, there was no fire detection or suppression system in place to deal with it; the system relied on the operatives to see the burning piece, knock it off the conveyor, and stamp it out on the floor.

251. The popcorn was then carried along the conveyor to the rotary dosing drum, which was used to apply savoury coatings to the popcorn. There was some debate as to whether the dosing drum would cool the popcorn. It seems to me that it might have had that effect, but that was not its principal purpose. After the popcorn had been through the dosing drum, it passed along the conveyor and into what was known as the boot of the elevator.

252. Within the elevator were a series of plastic buckets, 151 in all, which were driven by a plastic chain. The popcorn was tipped off the conveyor and into these buckets. Almost immediately, the buckets swung vertically upwards to rise some 12 feet into the air. The elevator was enclosed in this vertical section. The buckets then turned horizontally and ran across the remainder of old Production Area B at ceiling level. The evidence was that the buckets, which had thin rims or lips, overlapped, so as to minimise the amount of popcorn falling out into the elevator itself.

253. As already noted, the Gough elevator carried on horizontally through the wall that separated old Production Area B from the Packaging Hall. The popcorn for the retail trade was dropped from the buckets into a retail bagging machine, which looked rather like a carousel, in the Packaging Hall. The popcorn for the cinema trade came back in the buckets along the elevator and returned into the ‘oil pop’ production area, and was then deposited into a hopper. When the buckets reached the relevant point in the conveyor, they were tipped into a position that was slightly greater than vertical, so that the contents of the bucket fell down the chute and into the hopper below. The chute was surrounded by a skirt, and there were also two inspection hatches, or lids. The evidence was that the buckets remained vertical for no more than 1 or 2 seconds. They then returned to the horizontal position and continued on their journey back down the horizontal section of the conveyor to collect a fresh load of popcorn.”

[19]Prior to 2003 Cadbury produced popcorn by the oil pop method at a factory in Leeds. In 2003 Cadbury decided to move that production facility to the recently extended NMU in Pontefract. The extension, constructed in 1997, was designated Production Area B from the outset but was in fact used simply for storage until 2003. The existing popcorn production unit was protected in Leeds by a wet chemical system over the cooking pans and a CO 2 suppression system in the elevator, which carried the popcorn in buckets up and across part of the factory so that it could be dropped into a hopper, also covered by the CO 2 suppression system, from which the sleeves of popcorn were then filled manually. A sleeve is a flexible plastic container or sheath about four feet in height which holds about 60 litres of popcorn. Those fire protection systems at Leeds had been provided by ADT and Cadbury decided that ADT should be engaged to provide similar systems at Pontefract.

[20]I have already remarked that the oil pop production method is hazardous. The evidence at trial revealed that the process had been moved to Leeds by a Cadbury subsidiary company “Kernels” after the factory formerly used had burnt down consequent upon a fire caused by burning popcorn from a pan fire spreading to the hopper. There were further fires at the Leeds factory caused by burning popcorn in 2002. The purpose of the transfer of production from Leeds to Pontefract was to increase production, not to improve the safety of the operation. The decision to make the move seems to have been made in the summer of 2003. Timing was tight as Cadbury wished to have the new facility up and running in time for the busy Christmas season, a time of high demand for popcorn in cinemas.

[21]By July 2003 Cadbury had determined, without any technical appraisal as to its suitability, that the existing CO 2 system at Leeds would be replicated at Pontefract. It was simply assumed to be appropriate. Capital expenditure approval had been given on that basis. All this had been resolved before ADT was invited to submit a quotation. That occurred shortly before 8 August 2003. On that day Mr McQuaid of ADT met Mr Hamilton of Cadbury at the Leeds factory. Mr Hamilton was heavily involved and played a key role in the moving of the oil pop production facility from Leeds to Pontefract, an operation known as “Project Kettle”. Mr McQuaid was told in terms that what Cadbury was looking for was for the existing system at Leeds to be replicated at Pontefract. There is no suggestion that ADT was told of or knew of the history of fires caused by burning popcorn.

[22]The production line at Leeds was not working at the time of Mr McQuaid’s visit on a Friday afternoon. The CO 2 system protected the elevator and hopper which I take to have been arranged and operating at Leeds in a manner for all relevant purposes identical to that at Pontefract as described above. When giving his evidence at trial Mr McQuaid did not recall having been shown the inside of the elevator or of the hopper. He said that he assumed that both the elevator and the hopper were enclosed spaces since CO 2 will only be effective within a reasonably airtight space. There was installed at Leeds a “single knock” process with two sensors or heat probes, one in the elevator and one in the hopper, either of which could trigger the suppression system. I infer that activation of either sensor would lead to the discharge of CO 2 into both the elevator and the hopper. Nothing however turns on this as it was common ground at trial that the fire at Pontefract in June 2005 was of insufficient size or development as the relevant smouldering kernels passed through the elevator to have activated a suitable and properly located sensor within the elevator. The case is concerned and concerned alone with the efficacy of the sensor in the hopper which, had it activated, would or should have discharged CO 2 into the hopper.

[23]Consistent with what it had been asked to do, ADT proceeded to replicate at Pontefract the system in place at Leeds. Nonetheless Mr McQuaid accepted responsibility for the design decisions, the judge recording him as saying:- “The probes were set at 100oC at Leeds, “so all we did was replicate what they had in Leeds on the conveyor in Pontefract. So the decision to put that probe in there, the type of probe and the operation temperature of that probe was my decision, based on what they had at Leeds.”” [Judgment paragraph 100] Of course, the nature of the duty or obligation assumed by ADT falls in the first instance to be determined by reference to the terms of the written contract to which I shall shortly refer. Insofar as Cadbury seeks the implication of a statutory term as to fitness for purpose, the circumstances in which the contract was concluded are relevant to the question whether it either relied or could reasonably have relied upon the skill of ADT in carrying out the design of the system. The judge was as critical of ADT’s role in the commission and design process as he was of that played by Cadbury. A design was produced on very limited information and was never the subject of review or subsequent checking. The judge recorded that “the Claimants’ haphazard approach at the outset was not picked up by the Defendant, and was compounded by the Defendant’s own rather cavalier attitude to what they were being asked to do.” [Judgment paragraph 113]. In consequence, as the judge found, ADT failed “to appreciate just how significant was the risk of a deep-seated fire in the hopper.” (Judgment at paragraph 140.)

The contract and its formation

[24]On 28 August 2003 ADT sent to Cadbury a quotation. The quotation was in the sum of £9009.00 “to supply, install and commission an ADT extinguishing system”. It is accepted that the quotation related to the “C” and “D” Lines at Pontefract although it in fact referred to the “Installation” as being the Kernel’s factory at Leeds. Note 2 to the Quotation read:- “This Quotation is based on the attached Proposal and General Specification Notes and where appropriate Enquiry Specification and Tender Drawings provided. Unless and until other terms and conditions have been agreed in writing ADT Fire and Security Standard Terms and Conditions as detailed in our Commercial Agreement shall apply.” There was attached to the quotation both a Schedule of Equipment and “Specification for a CO 2 Fire Fighting System.” ADT’s Standard Terms and Conditions, normally printed on the back of its Commercial Agreement, were neither enclosed with nor attached to the quotation. No Commercial Agreement was sent with the quotation.

[25]The Schedule of Equipment referred to three in number “OLSEN T54B Heat Probe 100oC”. This was the type of sensor installed at Leeds calibrated to activate the discharge of CO 2 when detecting a temperature of 100oC. I leave out of account that the system would have required four such sensors, one for each elevator and one for each hopper.

[26]The specification provided, relevantly, as follows:- “Client: Monkhill Hazard: Elevator and Hopper arrangements Date: 28/8/03 PROPOSAL For the protection of the above hazard, we propose the design, supply, delivery, installation, testing and commissioning of a CO2 Fire Fighting System. ADT Fire and Security CO2 fire fighting systems are designed, manufactured and installed to suit the specific requirements of the risks to be protected and comply generally with the requirements of BS5306 Part 4. CO2 extinguishes fires by reducing the oxygen to a level that does not support combustion and by cooling.” It was agreed that these proposals were in ADT’s standard form of wording and were typically used in ADT’s specifications. Hazard: Elevator and Hopper arrangements Date: 28/8/03 PROPOSAL There was then what was called a ‘Summary of Calculations’ identifying the volume of the areas to be protected and setting out the quantity of CO2 required to protect it. The specification went on to say:

“THE SYSTEM The CO2 Fire Fighting System is designed, manufactured and installed to suit the specific requirements of the hazard to be protected. The complete system consists of one or more storage containers coupled to a system of pipework of discharge nozzles specifically sized using a hydraulic flow calculation program designed to ensure discharge of the design quantity within a specified period of time… TOTAL FLOODING Total Flooding systems are generally for the protection of enclosed hazards. Nozzles would be designed to flood the entire hazard enclosure with CO2 to develop an even concentration. ANCILLARIES… Discharge Nozzles An appropriate number of discharge nozzles will be provided to ensure adequate distribution of CO2 within the hazard area… HOLDING TIME – Total Flooding Systems The design concentration of CO2 should be held long enough to ensure complete extinguishment. The holding time will vary with the gas tightness of the enclosure. The required holding time may vary between one and in excess of twenty minutes depending on the hazard involved. Openings or ventilation ducts/forced air handling must be closed or shut down automatically before or in conjunction with the discharge. All doors should open outwards and be fitted with self closing devices. Doors and windows should be in the closed position prior to the CO2 system discharging. Any penetrations through the walls, ceiling and floor of the protected area(s) for cables, pipes etc should be suitably sealed. It is difficult to calculate accurately the leakage rate from any particular enclosure without full scale discharge tests, however a technique has been developed known as the Room Integrity or Door Fan Pressurisation Test which can provide an enclosure retention time prediction. Where self-closing doors, dampers or shutters are required to reduce the loss of CO2, the client shall supply and install these items and ADT will install, at an additional cost if not included within our proposal, the necessary pressure-operated trips to control their release…”

TOTAL FLOODING ANCILLARIES… Discharge Nozzles HOLDING TIME – Total Flooding Systems Finally, the specification dealt with testing, commissioning and maintenance. Under the heading ‘Tests’ it said:

“On completion of the order, a test will be made to prove the correct function of the equipment installed. This would exclude any gas discharge. All parties concerned are invited to attend and witness the tests. Acceptance certifications will be signed as a record that the installation has met with your satisfaction. All such tests will be carried out during normal working hours.”

HOLDING TIME – Total Flooding Systems

[27]On 3 September 2003 Cadbury sent ADT a purchase order. The Purchase Order was divided into two parts, the first part dealing with the wet chemical system, and the second part dealing with the CO 2 suppression system. That part of the Purchase Order said:

“CO2 Fire suppression system. As per your quotation dated 28/8/03. Systems to be fitted to:- 2 Elevators 3 Hoppers 50% Payment”

The delivery date was 25 September 2003. The payments were to be made in two stages of £4,504.50 each. Finally, at the bottom of the Purchase Order, the following printed words could be found:

“This is subject to Monkhill standard terms & conditions already supplied, unless otherwise agreed. Additional copies available on request.”

It is common ground that these terms and conditions were not included with the Purchase Order, which assumed that they had been “already supplied”.

Systems to be fitted to:-

[28]Cadbury’s Standard Terms and Conditions in use at that time included the following:- “1. Definitions In the context of these conditions: . . . (d) the word “Goods” means the article or things specified in the Purchase Order (including their packaging materials, containers and accompanying pallets) ” and the word “Services” means the work described in the Purchase Order. . . . (j) “Specifications” means any specification and/or stipulation contained in or annexed to the Purchase Order (or supplied by the Buyer separately in writing referred to in the Purchase order and signed by an authorised representative of the Buyer.) . . . 3. Qualities and Defects (a) All Goods supplied and/or Services carried out shall be of good quality and subject to the Buyer’s approval and in particular must meet the governing Specification and CTB Standards but without limitation would also be as required by law in respect of title, quantity, quality, purpose or description . . .”

In the context of these conditions:

[29]The judge held that the contract pursuant to which ADT carried out the work between September and December 2003 incorporated Cadbury’s Standard Terms and Conditions of Purchase, not those of ADT.

[30]Against that background, and in order to set into context the issues arising in the appeal, I must now set out a more detailed description of the fire and of the circumstances in which it was not detected and extinguished by the fire suppression system.

The fire in June 2005

[31]The judge’s description of the fire, starting with an overall summary and then descending into more detail, is to be found in the following paragraphs of his judgment:- “8. During 2004, changes were made to both the hopper and the elevator. The defendant had some limited involvement in those changes. There were also other events, including a fire in the hopper in June 2004, on which the defendant now relies in these proceedings, not least to support its allegations of a break in the chain of causation. Generally, very few of the operatives in the ‘oil pop’ popcorn production area were aware that the CO2 suppression system protecting the elevator and the hopper could be manually activated, and even fewer knew how that manual activation was to be triggered. 9. On the evening of 8 June 2005, an operative, Alan Hardcastle, was filling the large plastic containers, known as sleeves, at the C Line hopper. He suddenly became aware that the sleeve that he was filling was melting because of the burning popcorn within it. He raised the alarm. The shift manager, Dave Carter, ran across to the C Line hopper and went up the ladder to the gantry. He looked down into the hopper and saw that the popcorn was on fire. Flames were coming to the top of the hopper. He shouted for the fire hose and the conveyor was switched off. He doused the hopper with water and, within a few seconds, he put out the fire. 10. Meanwhile, following a procedure which the operatives had used before (and which had been approved by the managers), Mr Hardcastle released some of the burning popcorn from the bottom of the hopper. It is estimated that a total of about three sleeves of burning popcorn were deposited on the floor before the hatch jammed, which may have been as much as 180 litres of popcorn altogether. The operatives then endeavoured to stamp out the burning popcorn on the factory floor. When the fire alarm sounded, the operatives thought that the fire had been put out, and they left the ‘oil pop’ production area, went into the next door packaging hall, and exited the NMU. 11. When the Fire Brigade arrived, they were told that the fire had been put out. There was then a curious episode, explored in greater detail below, in which the Fire Brigade did not immediately begin the fire-fighting operation, but instead sought a key to a door that led into the back of the ‘oil pop’ area. This involved a security guard being called and, so it appears on the CCTV footage, potentially valuable time was lost. At about 8.52pm, it became apparent that there was a serious fire, and smoke could be seen venting at the eaves on the south wall of the NMU. Very shortly thereafter, at about 9.08pm, it became apparent that the fire had taken such a firm hold that the Fire Brigade would adopt only a defensive attitude towards it. In essence, this meant that the fire was fought from the outside only, allowing it to rage through the empty NMU but keeping it away from any adjoining buildings. In consequence, the whole building, and the machinery within, was destroyed. . . .371. On the evening of 8 June 2005, the ‘oil pop’ production area was working normally. Mr Norton was working six pans on the C Line. Mr Hardcastle was at the hatch of the C Line hopper, bagging the popcorn into sleeves. There were a number of made-up boxes close to the bottom of the hopper, but not more than about half a dozen. There was a pallet truck in the vicinity on which there were boxes containing completed sleeves. Mr Carter was doing some paperwork close to the south wall of the ‘oil pop’ production area.

372. There was nothing particularly unusual in the condition of the elevator and hopper. Although, since the elevator had been enlarged, the old lid for the hopper could no longer be used, there was a skirt arrangement at the top of the hopper which operated as a rough and ready enclosure. I also find on the evidence of Mr Carter that at least one of the two inspection hatches was in place, and probably both. The top of the hopper was therefore enclosed, save for the opening into the elevator.

373. Mr Carter was the fire marshal. He told me that he felt qualified to tackle any fire that might arise. Mr Challinor, who was the senior fire marshal in the NMU at the time, was not based in the ‘oil pop’ production area. Furthermore, he was unlikely to have been of very much assistance in the event of a fire, because on his own evidence he had had no training in evacuation procedures, and had also had no training in detailed matters such as the manual activation of the CO2 suppression system. To that extent, therefore, Mr Challinor was the senior fire marshal in name only.

374. At about 8:30 pm, there was a commotion at the C Line hopper and it seems that somebody shouted ‘Fire!’ and whilst filling a sleeve with popcorn from the hatch at the bottom of the hopper, Mr Hardcastle became aware that the sleeve in his hands was melting. Mr Carter looked up and saw what he described as ‘smouldering’ popcorn in the ‘melting’ bag. Mr Carter was adamant that the popcorn in Mr Hardcastle’s sleeve was not flaming. At most, it appears that the popcorn might have been smoking. I again accept Mr Carter’s evidence.

375. Mr Carter got up from where he was sitting and ran towards the hopper. Mr Norton thought that he or someone else shouted “the hopper’s gone up”. As Mr Carter climbed the gantry, Mr Norton pressed the emergency stop button and the C Line conveyor came to a halt. Mr Norton looked towards the top of the hopper, where he could see orange flames reflected in the underside of either the elevator or the ceiling panels (he was not sure which). Those orange flames were the flames in the hopper.

376. Mr Carter had noticed, as he moved towards the gantry, a wisp of smoke at the bottom of the hopper, and also at the top of the hopper. When he climbed the gantry and looked inside, he could see the same flames which were in the reflection that Mr Norton had seen. Mr Carter told me, and I find, that he saw flames across the surface of the corn in the hopper, which he said was about a quarter full. The flames were coming up to the top of the hopper but, at the time that he was looking, those flames were not rising above the hopper or reaching up into the elevator. He confirmed that, as he leaned in to look, the flames ‘were not singeing his eyebrows’. Mr Norton also said that he did not see flames coming out of the top of the hopper.

377. Mr Carter shouted for the fire hose. He said that he was used to using the fire hose in the hopper because that was the way in which the hopper was cleaned out on a Friday during its weekly clean. Mr Norton heard the shout for the hose. Mr Carter told me that he switched the hose on when it got to the top of the gantry and he put the hose on full to drown the fire in the hopper. He said that within a few seconds, the fire had gone out. A lot of water came out of the fire hose, and there was a good deal of steam which was drawn up into the elevator.

378. Shortly after this, the fire alarm went off. There is an issue as to whether the fire alarm was activated as a result of steam and/or smoke passing through the C Line elevator into the Packaging Hall, or around the gap in the wall between old Production Area B and the Packaging Hall. Either way, it appears that it was the fire alarm in the Packaging Hall that was first activated.

379. Whilst Mr Carter was dealing with the fire in the hopper, the other operatives were dealing with the burning popcorn at the dispatch chute. They endeavoured to stamp out the smouldering/smoking popcorn from the sleeve that had begun to melt in Mr Hardcastle’s hands. In addition, in accordance with the approved procedure, and as had happened during the fire the previous year, the operators opened the chute to release further burning/smouldering popcorn from the hopper in order to put that material out on the floor in the same way. The evidence as to this came from Mr Norton and the various interview notes with Mr Hardcastle. Although there is a lack of clarity as to the precise quantity of popcorn that was emptied out onto the floor, the most reliable estimate would appear to be a total of 3 sleeves’ worth of popcorn (the one that was burning in Mr Hardcastle’s hands, and two more). Mr Hardcastle said that, after dropping the first sleeve, he managed to press the handle (ie to release the popcorn) twice more. On that basis, a large amount of popcorn, possibly as much as 180 litres (3 x 60 litres), almost all of which would have been burning, was discharged over the floor of the production area. Even on the claimants’ case, it was 150 litres of popcorn. A fire extinguisher was also used to try and put out this popcorn.

380. The operatives moved the made-up boxes away from the bottom of the hopper. Mr Carter thought they had been moved a few feet out of the way. Mr Norton said that they were moved away from the hopper towards the east wall, “just into open space, so they weren’t near anything…away from the other cardboard.” Again, his evidence would appear to suggest that the boxes were moved only a few feet. That was also the recollection of Mr Kear, who thought the boxes were moved 4 or 5 feet.

381. Generally, it would seem that Mr Carter and the other operatives acted coolly on discovering the fire and, particularly in Mr Carter’s case, with a good deal of personal bravery. But, as Mr Kear said, everything happened very fast. He said, and I accept, that it was ‘quite a confusing scene’. He memorably described it as “just a big dash and a big panic”.

382. Mr Carter and the other operatives then left the ‘oil pop’ production area. They left through the plastic door in the wall and went into the Packaging Hall. That was immediately next to the roller shutter door which, on the evidence, had been hit by a forklift truck some weeks earlier and was jammed in a half closed position. As they left, the men thought that they had put out the fire in the hopper (using the hose) and on the floor of the production area (by stamping). Whilst in evidence Mr Carter was confident that he had put the fire out, it seems that there was a lingering doubt about it. I note that in a number of the interviews, those who were there queried whether or not the fire had in fact been extinguished. Thus Mr Bray told WYFRS that the operatives “were not sure if the fire was out”; he told Ms Irving that Mr Carter said that he did not think that he had put it out; and he told Mr Siddons that “the oil pop lads were flustered…and weren’t quite sure they had put it out”.

383. The fire alarm had gone off at 8:33 pm. Just over a minute later, the operatives left the NMU. At 8.35 pm, the defendant notified the Fire Service of the fire alarm activation. At 8:36 pm, when the operatives from the ‘oil pop’ production area were already outside at their muster station, Mr Bray went into the NMU building and looked at the fire alarm display board. He left the building immediately afterwards. It seems that he went back again a couple of minutes later but returned within 30 seconds. At 8:41 pm, he went into the NMU building for a third time but was again outside by 8:43 pm, when the first fire appliance arrived. It seems that these repeated visits were to check the main control panel. The second fire appliance arrived at 8:44 pm and the fire crews entered the building. At that stage, there was no external sign of any fire at all, and Mr Carter explained to the fire fighters that he thought that the fire had been put out.

384. At 8:46 pm, smoke became visible for the first time above the roof of the NMU. It seems that that smoke was blown from the ‘oil pop’ canopy extraction fans. At about the same time, Mr Bray and some of the fire men went into the Packaging Hall. Much more smoke was apparent. A point arises as to the type of smoke it was.

385. There was then a rather puzzling delay. It appears that the fire fighters wanted to enter the ‘oil pop’ area through the small door in the northern section of the east wall of the NMU extension, tucked away in the corner of old Production Area B, furthest from the seat of the fire. That door was locked, and there was a delay whilst a security guard was summoned to unlock the door. During the same period, there was also some time lost whilst the firemen offloaded and laid out the hoses.

386. At 8:52 pm, heavy white smoke was seen venting from the eaves on the south elevation. This is the south wall of the ‘oil pop’ production area. I find that the presence of this smoke at that location meant that, just 22 minutes after the fire had started, the integrity of Mr Caldicott’s fondly-imagined ‘fire box’ had already been breached.

387. For the next few minutes, the fire fighters continued to lay out their hoses. Further fire fighting vehicles were requested. However, it is not clear whether any attempt had been made at this point to try and fight the fire. Although one report produced by WYFRS suggested that the first water onto the building was at 8:55 pm, that time is contradicted by other evidence, also from WYFRS, which suggests that, as late as 9:08 pm, no such equipment was yet in use. There is no CCTV footage of water going onto the fire before that time. Taking into account all the circumstances, it seems to me unlikely that any water was used to fight the fire until 9:13 pm, when the WYFRS incident log finally reports “1 large jet and 2 BA use”.

388. By the time the water was on to the building at 9:13 pm, the WYFRS had already decided that they would operate in defensive mode only. That decision had been taken at 9:08 pm, once it became clear that no lives were at risk. It meant that the fire would be fought from outside the building only, with the priority on controlling the fire and ensuring that it did not spread to other buildings. It appears that this decision was taken because of the hold that the fire had taken on the NMU in the 38 minutes since the sleeve melted in Mr Hardcastle’s hand. How and why the fire had spread so quickly is addressed in detail in Section Jbelow.”

[32]The judge accepted that some small mass or block of smouldering popcorn, possibly equivalent in size to a tennis ball or something of that order, found its way into the hopper from the pans. It will have been introduced on top of popcorn already in the hopper and further popcorn will in turn have been emptied into the hopper on top of the smouldering block. The smouldering block will have increased in size, with fire spreading more quickly upwards than downwards, resulting in flaming popcorn appearing on the surface of the hopper at about the same time as smouldering popcorn appeared in the sleeve being bagged by Mr Hardcastle.

[33]As to the spread of the fire once the smouldering popcorn had escaped from the hopper, the judge accepted the theory which became known at trial as “Lygate 2”, it being the second theory espoused by ADT’s fire expert, Dr Lygate. The judge described the theory thus:- “446. . . . This theory postulated that there was one sleeve of smouldering popcorn which was dropped or fell out of Mr Hardcastle’s hand, spreading burning popcorn onto the floor. The operatives then added to that by discharging two further sleeves’ worth of popcorn (a total of up to 180 litres) onto the floor, in order to put out the burning popcorn by stamping on it. This theory suggests that, with this large volume of popcorn on the floor, spread and scattered across a wide area, it was not all stamped out and that, when and shortly after the men left the ‘oil pop’ production area, the smouldering/flaming popcorn on the floor set fire to other combustible materials and thereby caused the fire to spread.” The judge found that there was sufficient combustible material, including the boxes and the pallet truck, to carry the fire to the south wall, all within the necessary time frame, particularly given the widespread displacement caused by stamping – judgment paragraph 454.

[34]Thus the judge concluded that the fire spread as a result of the discharge from the hopper onto the floor of a large quantity of burning popcorn, which was then displaced by stamping. Part of that discharge was inadvertent, namely the smouldering popcorn that melted the sleeve in Mr Hardcastle’s hand, but a larger proportion of that discharge was deliberate, because it was the way in which the operatives had been taught to deal with a hopper fire – judgment paragraph 486.

[35]In the light of the fact that the fire suppression system did not detect the fire in the hopper and did not automatically activate a discharge of CO2, the judge made the following observations about the characteristics of a properly designed automatic fire suppression system in an application such as this:- “494. . . . it seems to me that I have to approach the allegations of breach in the knowledge that, at the time of Mr Carter’s intervention, there was smouldering, burning popcorn at the bottom of the hopper, and flaming popcorn all across the top of the hopper, which flames were large enough to extend to the top of that hopper. That was not only a potentially very dangerous situation, which required immediate intervention, but it was also something which, it might be thought, a properly-designed, automatic fire suppression system in the hopper ought to have dealt with. Instinctively, therefore, it seems to me that there is, and always was, a case for the defendant to answer. I stress that that cannot affect the burden of proof, which remains on the claimants throughout. But the critical question remains: if the automatic suppression system had been properly designed, commissioned, and installed, how was it that the hopper contained a large mass of burning and flaming popcorn which had not been extinguished?”

[36]Section 13 of the Supply of Goods and Services Act 1982 provides as follows:- “13. Implied term about care and skill In a contract for the supply of a service where the supplier is acting in the course of a business, there is an implied term that the supplier will carry out the service with reasonable care and skill.” It was, unsurprisingly, common ground at trial that such a term fell to be implied into the contract.

[37]The judge’s general conclusions to the effect that there had been a breach by ADT of its obligation to design with reasonable skill and care are to be found in the following paragraphs:- “495. As set out in paragraphs 216-217 above, the defendant was obliged to take reasonable skill and care in designing this system. I have already said that I consider this design obligation to be central, because it was that which required the defendant to sit down and work out how a fire in the hopper might be dealt with by a CO2 suppression system. It seems to me that, given the size of the hopper, the designer would have thought that there was at least a risk of a deep-seated fire in the hopper and one which needed to be suppressed before quantities of burning popcorn were discharged from the bottom and/or before the fire spread, either to the elevator, or in some other way, outside the hopper. 496. I have concluded that the defendant failed to comply with this design obligation. I have concluded that the highly developed fire in the hopper at 8:30 pm on 8 June 2005 was not one which a properly-designed automatic suppression system should have allowed to develop to such an extent. The system should have been designed to ensure that the risk of burning popcorn being discharged from the dispatch chute was minimised (even if it could not be eliminated altogether), and that any fire with flames that were rising to the top of the hopper, and had spread across its whole surface area, together with burning popcorn at the bottom of the hopper, was a fire which should have been extinguished. The defendant was in breach of contract for failing to design a system which met those reasonable requirements. . . . 531. I have already set out in Section L2 the general evidence from Mr Jackman which has persuaded me that my initial impression was correct, and that a fire in the hopper that produced large flames at the top, and smouldering popcorn at the bottom, was a fire which a reasonable CO2 system should have been designed to avoid. Although the expert evidence as to the precise deficiencies in the design which led to that situation was somewhat haphazard, I have concluded that particular problems lay with the way in which the defendant approached the design (and the inadequate information on which it acted); the failure to identify the nature of the fire risk being designed against; and (particularly) the type and the location of the sensor in the hopper. The evidence was that the temperature of the flames at the top of the hopper, being in excess of 100°C, should have activated the system within, at most, 2 ½ minutes. In fact, due to the deficiencies that I have noted, the fire in the hopper burned for much longer than that without automatically triggering the system. . . . 536. My initial impression was that this fire was just the sort of developed, extensive fire which the automatic CO2 suppression system in the hopper was designed to put out. That view was confirmed by the answers that Mr Jackman, the defendant’s expert on fire suppression systems, provided in his cross-examination by Mr ter Haar. In the light of those answers, it seems to me clear that, on any view, the defendant was in breach of contract.”

[38]The judge’s more detailed findings as to the inadequacy of the type of sensor and its location within the hopper were as follows:- “518. The choice of the particular sensor and the location of that sensor in the hopper were both fundamental matters of design. It seems to me that, probably following on from the decision to do a design on admittedly inadequate information, and the failure to design for a deep-seated fire in the hopper, the defendant did not properly consider the type and the appropriate location of the sensor in the hopper. The sensor was the critical piece of equipment if a fire in the hopper was to be satisfactorily detected and extinguished by the CO2 suppression system. But, on the evidence, I find that insufficient consideration was given to choosing the most appropriate sensor and placing it in the best location within the hopper.519. That both the type and the location of the sensor were inadequate can be demonstrated by the fact that, despite the flames which Mr Carter could see coming up to the top of the hopper when he stood on the gantry, and which Mr Norton could see reflected in the elevator or the ceiling, the automatic system was not triggered. There cannot be any doubt that the temperature in those flames was more than 100°C (the temperature that the sensor was set at). So why had the system not been activated? There seemed to be two particular reasons for that.

520. First, the type of sensor that was chosen did not have a particularly fast reaction time (RTI) which, given the risk of a deep-seated fire in the hopper (as opposed to the elevator), I consider that it should have had. Secondly, the sensor was located very much to one side of the hopper. Thus the flames, which naturally concentrated in the middle of the hopper, and which, up to a point, may have given rise to some form of chimney effect into the opening of the elevator above, would have been slow to be detected by the single sensor off to one side of the hopper. I expand on those two design failures below.

521. The type of sensor was an Olsen 54B. Although this was a detector that had been used for this kind of system in the past, the evidence was that this had a relatively slow RTI. It was thermally insensitive. Although Mr Stephens would not necessarily have used one of these kinds of detectors at all, he was critical of the decision to use the Olsen sensor in the hopper. When other kinds of sensors were put to Mr Stephens, he made plain that he would have in fact used an infra-red detector to stop the elevator (which was not in fact very different from the VESDA system). However, that was not to be taken (as the defendant maintains in its closing submissions) that Mr Stephens was in some way giving the Olsen sensor a clean bill of health; on the contrary, he was critical of all such sensors, and therefore would certainly not have countenanced using a sensor that was thermally insensitive.

522. It seemed to me that the biggest single difficulty was in relation to the location of the sensor. Mr Stephens said:

“I think the problem with the detector in the hopper is it is actually almost in the corner, which is not going to be one of the locations where you will get the highest velocities and highest gas temperatures.”

I find that this evidence was not only unchallenged but unchallengeable (indeed, I note that the issue as to location was not really addressed in the defendant’s closing submissions, despite the fact that it featured early on in the claimants’ closing submissions, at paragraph 10). It was perfectly possible that a deep-seated fire could start in the hopper and not be detected by the sensor because it was not located in a centralised position, where the flames and heat would be at their highest. That seems to me to be a singular deficiency in the design of this system. 523. This was also a point that was revisited with Mr Stephens in his re-examination. Although he said that he thought that the position of the sensor in the hopper was better than the position of the sensor in the elevator, he thought that the problem with the sensor in the hopper was that it was away from the place where the hot gases would build up. He said “that if you had a perfectly sealed hopper, the fire is still going to burn because you will get the hot gases going up through the elevator. And my opinion is that it will draw in air from the elevator down into the hopper at the same time. So you will have hot fire gases going up from the hopper and at the same time you will have air coming back down into the hopper from the elevator.” The difficulty was that the sensor was located away from the central area where the hot gases rose and the air came down. 524. I accept Mr Stephens’ evidence as to the inadequate location of the sensor. It seems to me that the combination of a sensor that was itself slow to react, with a location to the side of the hopper, out of the way of the likely area of flaming, created the problem on 8 June 2005: a flaming fire at the top of the hopper which the single sensor simply did not pick up so as to trigger the CO2 suppression system. That failure can also be linked back to the defendant’s failure to go about the design in the way that Mr Jackman said that he would have expected (paragraphs 509-513), and the different approaches as to the type of fire (paragraphs 514-517). The failure to locate a more reactive sensor closer to the central part of the hopper was the principal cause the failure of the automatic suppression system on 8 June 2005.” “I think the problem with the detector in the hopper is it is actually almost in the corner, which is not going to be one of the locations where you will get the highest velocities and highest gas temperatures.”

[39]Thus the judge concluded, at paragraph 526, that the choice made by ADT of the type of sensor and, more particularly, the choice made by ADT as to its location within the hopper, gave rise to a breach by ADT of its implied contractual obligation to use reasonable skill and care in the design of the system.

[40]It was also common ground at trial that ADT was under an express contractual obligation, by reason of Clause 3(a) of Cadbury’s Standard Terms and Conditions, to supply goods of good quality. The judge found that there was no breach of that obligation by ADT because there was nothing wrong with the sensor itself. It was of good quality and not defective or broken. The design should have called for a probe of greater thermal sensitivity with a faster reaction time, but that amounted to a design failure, not to a failure to supply goods of good quality.

The issues on the appeal

[41]Cadbury’s case on appeal is that the judge should have found that the obligation cast upon ADT went beyond an obligation to use reasonable skill and care in the design of the system. As I understood it, it is said that the judge should have acceded to one or more of the following arguments:- i) The representations in the Specification became a term of the contract once formed. The judge found that the “risks” which the system was designed to address was a developed fire (i.e. not just a burning piece of popcorn or two) in the hopper or the elevator which might escape the enclosure and, because of its developed nature, prove difficult to extinguish – judgment paragraph 240. He also found that the system did not in fact meet that risk as it manifested itself in this case. He should therefore have found that ADT was in breach of a contractual term to the effect that the system was designed to suit the risk. The system was simply not in accordance with the specification. The obligation to supply a system meeting the specification is absolute and it is irrelevant to the establishment of the breach to consider why the specification was not met (Grounds of Appeal 7-9). ii) The same passage in the Specification imports a requirement to comply generally with BS5306 Part 4. That part of the Standard distinguishes between surface fires and deep-seated fires and prescribes for each different requirements for such matters as rates of application and quantity of CO 2. Since the judge found that the design of the system was here inadequate to deal with a deep-seated fire, he should have found that ADT had failed in its obligation to comply generally with the requirements of BS5306 Part 4 (Grounds of Appeal 3 and 4). iii) Clause 3(a) of Cadbury’s Terms and Conditions required that the goods supplied should be of good quality. Cadbury contracted to buy a fire suppression system. For the purposes of Clause 3(a) the system should be regarded as the goods supplied and the system was not of good quality (Grounds of Appeal 5 and 6). iv) The judge should have characterised the contract between Cadbury and ADT for the supply of a fire suppression system as one for the supply of services pursuant to which goods were also to be supplied. In such circumstances there was pursuant to s.4(2) of the Supply of Goods and Services Act 1982 an implied condition that the goods supplied, i.e. the system, were to be of satisfactory quality. Further, the judge’s findings showed that there was a purpose for which the system was acquired, the extinction of a developed, extensive fire in the hopper or elevator, which was jointly understood by the parties. In such circumstances s.4(4) of the 1982 Act imported into the contract an implied condition that the goods supplied are reasonably fit for that purpose. The goods supplied, i.e. the system were/was neither of satisfactory quality nor reasonably fit for the understood purpose. (Grounds of Appeal 10 and 11.) The success of any of these arguments would have led the judge to find breaches of contract of a nature which precluded the application of the 1945 Act because the relevant contractual duty would extend beyond the tortious duty also owed.

Discussion

[42]There is some considerable overlap between these points. However it is convenient to start with the question whether ADT should be regarded as having supplied a system which can be equated with goods so attracting the express requirement that it be of good quality or the implied requirement that it be of satisfactory quality or reasonably fit for the purpose.

[43]Mr Roger ter Haar QC for Cadbury rightly characterised this as very largely a matter of impression, as indeed are most of the points related to the proper analysis of the obligations undertaken by ADT. In agreement with the judge, I do not regard it as either natural or accurate to regard Cadbury as having bought from ADT a system which can be equated with goods which are either of good quality or not as the case may be. I can understand that that description might possibly be apt if Cadbury had contracted to purchase, or ADT had contracted to supply, a standard kit or assembly. In such circumstances there would, ordinarily, be no element of design in order to meet specific requirements. The “product” would be what it is described to be, possibly available in different versions, with the decision as to its suitability left to the purchaser. In such circumstances it may sometimes make sense to describe the system as being of either good quality or not, provided that such an evaluation can be made without reference to the particular characteristics of the location in which it is to be or is installed or the particular characteristics of the job it is or was expected by the purchaser to do. Those matters are of no relevance to the contractual relationship. The seller simply offers a system the capacity and capability of which he will describe in such terms as he chooses consistent with the need to market the product. His liability will depend upon the descriptive words used and upon such terms as can be implied into the sale of generic goods of that description. There may in such circumstances be room to evaluate a system in terms of its inherent quality, for example because it is simply unreliable for use in the generic application for which it is sold.

[44]The present is, as it seems to me, a very different situation. Whatever the implications of Cadbury’s desire simply to replicate what it had at Leeds, and ADT’s apparent acquiescence in that approach, this was not simply the supply of an off-the-shelf system or product. So much is clear from the first two sentences of the Proposal in the Specification which accompanied the Quotation. Admittedly this is apparently in standard form language habitually adopted by ADT in its specifications. There is however no finding that Cadbury would have known that, and as Lord Steyn emphasised in Slater v Finning

(1997) AC 473

at 487, “Our law generally subscribes to an objective theory of contract”. The words used are therefore to be construed at face value, a point which militates in Cadbury’s favour in another context with which I deal hereafter just as it tells against it in this. Thus the reasonable understanding of the parties would have been that ADT was offering to undertake the design of a system which was to be tailored “to suit the specific requirements of the risks to be protected”. So what was offered was not a standard product to be taken off the shelf and chosen by reference to its description. If what was offered could properly be described as a product at all, which I doubt, it was at best a bespoke product in respect of which what was of importance was not so much the inherent quality of the constituent parts (which was of course required to be good) but rather their selection as being suitable for the task and the manner in which they were to be combined, located and installed in such manner as “to suit the specific requirements of the risks to be protected”.

[45]In these circumstances it is I think wholly artificial to regard ADT as having contracted to supply a system which can be equated with “goods” and of which it can simply be asked in the abstract, was it or was it not of good quality. The judge put it this way at paragraph 215 of his judgment:- “215. It is worth identifying at the outset the nature of the contract between the parties. It was a contract in which the defendant was to supply to the claimants a system designed to suppress fire in the elevator and/or hopper. That system was made up of various pieces of equipment, such as the sensors and the nozzles, as well as the fire alarm panels and the electrical wiring. But what made it a system (as opposed to a random selection of equipment) was the design: the pulling together of all the relevant information into a designed system that used CO2 to suppress fire in the elevator or hopper. Accordingly, the most important element of the workscope was that done by the defendant’s designers: the decision to use a particular piece of equipment in a particular place, with the intention of achieving a particular effect.” I agree with this approach.

[46]Another way of expressing the same conclusion is that it is not possible to say of the system supplied that it was in the abstract not of good quality. As Cadbury itself points out in its written submission for the purpose of this appeal, at paragraph 41, what may be a good system for one application may not be a good system for another application. That tends to suggest that the quality of the system cannot be assessed without reference to its intended or actual application. In so saying I do not overlook that in Young and Marten Limited v McManus Childs Limited

(1969) 1 AC 454

, Lord Upjohn observed, at page 474, that good quality and reasonable fitness for purpose are two distinct concepts “although it very frequently happens that for any relevant purpose there is no difference between the two.” One finds an echo of this, as Mr ter Haar pointed out, in s.14(2B)(a) of the Sale of Goods Act 1979, to the effect that in appropriate cases the quality of goods may include their fitness for all the purposes for which goods of the kind in question are commonly supplied. The point here is however that the system does not have any inherent characteristics which can be independently assessed as indicative that, as a free-standing system, it is or is not of good quality. Furthermore there are no purposes for which this system is commonly supplied. It is a one-off bespoke system, designed for one particular application. All this tends to support my view that it is not a natural or accurate use of language in this context to regard “the system” as simply “goods” attracting without more the well-known statutory incidents of quality and fitness for purpose. What ADT was agreeing to supply was primarily design skills and care in exercising them, not goods, and the goods which they did supply were of good quality.

[47]The contract here, in the shape of Clause 3(a) of Cadbury’s Terms and Conditions, to my mind suggests, if it does not compel, the same approach. The clause clearly distinguishes between goods supplied and services carried out.

[48]It follows that I reject as an inappropriate characterisation of the contract the building block upon which much of Cadbury’s appeal is constructed. What ADT was agreeing to supply was primarily design skills and reasonable care in exercising them, not goods, and the goods which they supplied were of good quality. The shortcomings in the system were matters of design, not the inherent quality of the goods which were also supplied.

[49]It follows from the foregoing that Cadbury cannot in my view pray in aid the statutory implied terms. Once it is accepted, as I do, that “the system” cannot be equated with or is not be regarded as without more “goods”, those implied terms have no relevance since it is not suggested that the equipment supplied was in itself of poor quality or reasonably unfit for the known purpose for which it was supplied. In those circumstances it is unnecessary to deal with Mr ter Haar’s further arguments to the effect that:- i) the judge was wrong to regard Robinson v Graves

(1935) QB 579

as precluding the characterisation of this contract as one to supply goods as well as services and ii) the judge was wrong to regard the implied condition as to fitness for purpose as not arising because no particular purpose for requiring the goods was indicated by Cadbury to ADT and/or as negatived by s.4(5) of the 1982 Act because there was no reliance by Cadbury on the skill or judgment of ADT. I will however just indicate that in my view Mr ter Haar was right in the first of these points but wrong in the second. Robinson v Graves was concerned with the question whether a contract to paint a portrait was unenforceable for want of a written note or memorandum at a time when that was a requirement for an enforceable contract for the sale of any goods of value of £10 or upwards – Sale of Goods Act 1983 s.4(1). The case tells one little about how a modern contract for the supply of services pursuant to which goods will also be supplied should be characterised. In fairness the judge I think recognised this at paragraph 219 of his judgment, although in my view he erred in thinking that because what mattered most here was the design there was no room for the implication of the statutory terms even as regards the goods or materials to be supplied. As to the second point, my reasons for agreeing with the judge that this point, had it arisen, should be resolved against Cadbury will for the most part sufficiently appear from my discussion of the argument concerning the construction and effect of the contractual specification. I would just add this in the statutory context. Mr ter Haar was I think right to remind us that in Grant v Australian Knitting Mills

(1936) AC 85

at 99 Lord Wright observed that “reliance will seldom be express: it will usually arise by implication from the circumstances.” I note too that in the Hardwick Game Farm case,

(1969) 2 AC 31

at 82/83 Lord Reid observed that “It can only be in unusual circumstances that a buyer does not rely in part at least on the skill or judgment of the manufacturer, or that a manufacturer is entitled to assume that the buyer is not relying on him at least to some extent.” Key however to the enquiry is in my view a further observation of Lord Steyn in Slater v Finning, to which Mr ter Haar also drew our attention, at page 486 to the effect that “. . . if the buyer’s purpose is insufficiently communicated, the buyer cannot reasonably rely on the seller’s skill or judgment to ensure that the goods answer that purpose.” It is here in my judgment that Cadbury’s case runs into difficulty, not just in relation to s.4(4) and 4(5) of the 1982 Act but also in relation to its attempt to spell out of the Specification some guarantee or assumption of strict liability in respect of the performance of the system.

[50]I turn next therefore to that latter point. I would remark at the outset that it is not I think an answer to Cadbury’s case that the relevant wording of the Specification is in standard form. Cadbury is not found to have known that and is entitled to put upon it such construction as would to a reasonable person appear appropriate. Even so, it is as it seems to me inappropriate and inapt to read the Specification as a guarantee of the success of the system or, to put it another way, as importing the result that if the system failed on a given occasion to prevent the development and spread of a fire it must follow that ADT is in breach of a contractual obligation as to the suitability of the system.

The judge dealt with this argument in the following passage in his judgment:

[51]- “229. The remaining issue is whether or not the first three paragraphs of the Specification (paragraph 107 above) amounted to a warranty or guarantee that the CO2 suppression system would meet the risk of fire. It is, I think, the claimants’ case that this warranty or guarantee cuts across the implied terms, particularly the implied term as to reasonable skill and care, and imposed an absolute obligation on the defendant to design a system which prevented fire. 230. For a whole series of different reasons, I have concluded that this argument, although undoubtedly ingenious, does not stand up to proper scrutiny, and I find that there was no such warranty or guarantee. I reject it under two broad heads: the proper definition of the word ‘risks’ in the specification, having regard to the background to the contract, and generally, as a matter of construction. i) ‘Risks’ 232. I take first the definition of the word ‘risks’ used in the specification (paragraph 107 above). That was not a word that the parties defined in their contractual or post-contractual exchanges. It was not really a matter to which they devoted any attention at all until shortly before the trial, when it suddenly loomed large as an important element of the claimants’ warranty/guarantee case. However, the background to the contract provides some assistance in identifying and interpreting ‘the risks’ referred to in the specification. 232. It is the claimants’ pleaded case that ‘the risks’ were the occurrence and spread of fire: any fire in the hopper and/or elevator, of any kind, from any source. That was exemplified by the second reply to the defendant’s request for further information where, at reply B, in answer to that very question, the claimants said:

“The risk that the CO2 fire suppression system was supposed to guard against was the occurrence and spread of fire. The whole point was that the CO2 suppression system would automatically activate to extinguish or control a fire in either the hopper and/or Gough Elevator. It failed to either activate within a reasonable time and/or suppress/extinguish the fire sufficiently or at all.” 233. In my view, the suggestion that the risk referred to in the specification was the occurrence and spread of any fire cannot be sustained. On the contrary, the CO2 system depended on the occurrence of a fire in order to operate at all: there had to be a fire in order to cause the sensors to be activated and the CO2 suppression machinery to be triggered. The CO2 suppression system did not prevent a fire from starting: it was instead designed to put it out. Thus the risk cannot have been the occurrence of fire; on the contrary, the CO2 system presupposed that there would be a fire before it could be activated. 234. In the claimants’ closing submissions, Mr ter Haar refined his analysis still further, and instead argued that the ‘risk’ referred to was the risk of the fire getting out of the hopper or elevator. Although that case was not at the time pleaded, it seems to me to be a rather more thoughtful attempt to define the word ‘risk’, as used in the specification. But I have concluded that it is still not a persuasive submission. 235. First, I find that nobody, on either side, thought for a moment that if, for example, one piece of popcorn was passing through the system and caught fire somewhere between the pan and the hopper, and then dropped straight through the hopper and into the bagging hatch, the CO2 suppression system would or should have been triggered. One flaming or smoking piece of popcorn would not (and was not intended to) have triggered the system, because the flame from one piece of popcorn would not have reached the necessary temperature in order to activate the sensor. 236. Secondly, there was the clear evidence from Mr Hamilton that he was aware that the sensors could not necessarily respond to every fire. I refer in particular to the note at Bundle R/310 in which, during a post-fire interview, Mr Hamilton said that he knew that the sensors in the system at Leeds may not have been sensitive and that “we expect to have to put out small fires manually”, a point he also accepted in cross-examination (Transcript Day 5/24). 237. Thirdly, there was the evidence (paragraphs 70-72 and 76 above) that Mr Hamilton (and everyone else at the claimants) was aware that the only truly reliable way to deal with the risk of fire in the ‘oil pop’ production area was with the use of sprinklers. He knew that the CO2 system would not necessarily deal with all fires, including fires escaping from the elevator and hopper, and was aware of that from the outset of his involvement (because he knew that there was a CO2 system at Leeds and that this did not prevent the outbreak of fires there). 238. Fourthly, and perhaps most significantly of all on this point, it must be remembered that this was a system that was designed to provide, in the alternative to an automatic operation, a manual system, whereby the release of the CO2 could be triggered manually. The immediate question that arises is: how would an operative have realised that the CO2 system needed to be triggered manually unless and until he or she was aware of a fire, and how would he or she become aware of a fire in the hopper or the elevator, in circumstances where both were wholly enclosed? The answer, of course, is that he or she would have become aware of the fire, and the need for the manual activation, only when the fire escaped either the hopper or the elevator. Thus the very existence of the manual activation system negated the suggestion that the defendant warranted that the system would suppress all fires before they escaped the hopper or the elevator. 239. Finally on this point, I note that the specification also uses the word “hazard” but this, too, cannot be read as a reference to the spread of fire. Indeed, the hazard appears to be defined by the specification itself as simply the area – the “elevator and hopper arrangements” – to be covered by the CO2 system. 240. Taking into account the background to this contract, and the information available to both parties at the time that it was made, it seems to me that the ‘risks’ which the system was designed to address was a developed fire (ie not just a burning piece of popcorn or two) in the hopper or the elevator which might escape the enclosure and, because of its developed nature, prove difficult to extinguish. The mere fact that fire escaped from the enclosure would not necessarily mean that the defendant had failed to comply with its obligations under the contract. But if the design failed to address the risk that a fire would build up in the enclosure and then escape, such that it might no longer be possible for the claimants to control it, it might point to a failure by the defendant to exercise reasonable skill and care in the design. ii) Construction Generally 241. I also reject the warranty/guarantee argument as a matter of broader construction. It seems to me that the first three paragraphs have to be read in the context of the specification as a whole. That document, read as a whole, was plainly not providing any kind of warranty or guarantee, but explaining the various assumptions that had been made as to the design and the various matters, such as openings, which were in any event beyond the defendant’s control. In such circumstances, it seems to me that the words in the first three paragraphs cannot be taken out of context and then transformed into some form of strict liability provision. 242. In addition, the fact that the system had been designed “to suit the specific requirements of the risks to be protected” (to use the words of the specification) does not mean that the system was guaranteed to eliminate those risks every time. It was designed, manufactured and installed with those risks in mind, but the obligation as to design was to take reasonable skill and care and there was nothing in these words to impose upon the defendant a more onerous obligation. A design intended ‘to suit the specific requirements of the risks’ may or may not be done with reasonable skill and care, but it was not a promise that the design would eliminate all risks. A promise that a particular risk will be eliminated must say so in clear terms. The specification did not do so. 243. If there was any doubt about that last point, I note that the words in the specification go on to say that the system was designed, manufactured and installed to “comply generally with the requirements of BS 5306 Part 4.”

That was a non-specific and general obligation to comply generally with requirements which are, in this British Standard, often set out by way of recommendation rather than obligation. That is again entirely consistent with the exercise by the defendant of reasonable skill and care and inconsistent with a guarantee or warranty. 244. For all these reasons, I do not consider that the words in the specification amounted to a warranty or a guarantee. What they do is to provide the benchmark against which the obligations as to reasonable skill and care and good quality are to be measured.” “The risk that the CO2 fire suppression system was supposed to guard against was the occurrence and spread of fire. The whole point was that the CO2 suppression system would automatically activate to extinguish or control a fire in either the hopper and/or Gough Elevator. It failed to either activate within a reasonable time and/or suppress/extinguish the fire sufficiently or at all.”

[52]I am not sure that the judge was, when determining the proper construction and effect of the Specification, entitled to take into account Mr Hamilton’s knowledge, although it would have been highly relevant to the question of reliance in the context of the 1982 Act. However I am otherwise in respectful agreement with the judge’s approach.

[53]Mr ter Haar submitted that the judge’s identification at paragraph 240 of his judgment of “the risks which the system was designed to address” should have led the judge to the conclusion that, since the system was not or was not properly designed to address a developed fire as there described or did not in the event deal with that sort of fire, the system was simply not in accordance with the Specification and it is irrelevant to enquire why that result has come about. Whether the reason be defect in workmanship, design defect or negligence there is still a breach consisting in the failure to conform to specification.

[54]In my judgment the judge was right to regard as implausible a construction of the Specification which imposed an absolute obligation. One must stand back and remember that the context is fire suppression, not even fire prevention. Very clear words indeed would be required to bring about the result that a designer and supplier of fire suppression systems had contracted to extinguish all fires occurring in either the hopper or the elevator. In this regard I note the following passage in the judgment of Nourse LJ in Thake v Maurice

[1986] 1 QB 644

at 687-688 as follows:- “Valuable too are the observations of Lord Denning MR in Greaves & Co (Contractors) Ltd v Baynham Meikle & Partners

[1975] 1 WLR 1095

, 1100 which I now quote in full:

“Apply this to the employment of a professional man. The law does not usually imply a warranty that he will achieve the desired result, but only a term that he will use reasonable care and skill. The surgeon does not warrant that he will cure the patient. Nor does the solicitor warrant that he will win the case.”

Lord Denning thought, and I respectfully agree with him, that a professional man is not usually regarded as warranting that he will achieve the desired result. Indeed, it seems that that would not fit well with the universal warranty of reasonable care and skill, which tends to affirm the inexactness of the science which is professed. I do not intend to go beyond the case of a doctor. Of all sciences medicine is one of the least exact. In my view a doctor cannot be objectively regarded as guaranteeing the success of any operation or treatment unless he says as much in clear and unequivocal terms. The defendant did not do that in the present case.” Of course medicine is not the same as fire suppression, but it is in my judgment for present purposes sufficiently analogous. The success of an attempt to suppress a developed fire will depend upon an infinite number of variables, most beyond the control of the supplier of a fire suppression system. Most properly informed people would I think regard a guarantee of success as in this context extravagant. The specification does not expressly say that a guarantee of success is given and in my judgment it is neither necessary nor appropriate to construe it in that way. One does not ordinarily expect that a contractor will do more than exercise reasonable skill and care in order to bring about a certain result and one selects a reputable contractor, experienced and perhaps specialised in the field, in the expectation that the exercise of reasonable skill and care by him may bring about a better result than the exercise of reasonable skill and care by someone less experienced or specialised. Ordinarily however one would not expect that the obligation of a supplier of services, whether he be a surgeon or a fire suppression system supplier, would extend beyond the exercise of reasonable skill and care and one would, or in my view should, look askance at a supplier who undertakes to bring about a certain result in circumstances where it is well-known that the forces of nature are unpredictable. One would for example be slow to read the warranties in a shipbuilding contract as involving a guarantee that the ship, when constructed, will be unsinkable. “Apply this to the employment of a professional man. The law does not usually imply a warranty that he will achieve the desired result, but only a term that he will use reasonable care and skill. The surgeon does not warrant that he will cure the patient. Nor does the solicitor warrant that he will win the case.”

[55]I agree with Mr ter Haar that there are passages in the judge’s long judgment which one can regard as apparently leading to the conclusion that the system as designed did not address the risk of a deep-seated fire with the result that the system was not as on one view described in the specification. But the judgment needs to be read as a whole, and one needs to bear in mind that the judge’s conclusion at paragraph 240 as to the “risks” which the system was designed to address, or perhaps more aptly as I would think should have been designed to address, is contained within a single paragraph within which the judge is also at pains to emphasise his overarching conclusion that the obligation undertaken was to exercise reasonable skill and care in the design. Thus in his conclusions on liability at paragraph 537 the judge said:- “The specific breaches of contract did not occur during the latter stages of the contract, namely at the time of the installation of the equipment and its commissioning. What went wrong in this case was the original design and specification of the CO2 suppression system insofar as it related to the hopper. No or insufficient thought was given to the risk that there could be a deep-seated fire in the hopper which, the longer it burned, could spread both downwards, towards the dispatch chute, and upwards, to the top of the hopper and over into the elevator, as well as threatening the integrity of the hopper itself. The system was dependant upon one single sensor, which did not provide a quick RTI, and which was located away from the central part of the hopper where, on the expert evidence, the flames were likely to be strongest. A different sort of sensor, in a more centralised position, was vital if the large volume of popcorn in the hopper was not to create a very real risk of a significant and deep-seated fire.” 56. In earlier passages at paragraphs 517 and 518 the judge said:- “517. . . .The system did not suppress a smouldering fire in the hopper, as it should have done, because the system had not been specifically designed to deal with a deep-seated fire in the hopper. d) Type and Location of Sensor 518. The choice of the particular sensor and the location of that sensor in the hopper were both fundamental matters of design. It seems to me that, probably following on from the decision to do a design on admittedly inadequate information, and the failure to design for a deep-seated fire in the hopper, the defendant did not properly consider the type and the appropriate location of the sensor in the hopper. The sensor was the critical piece of equipment if a fire in the hopper was to be satisfactorily detected and extinguished by the CO2 suppression system. But, on the evidence, I find that insufficient consideration was given to choosing the most appropriate sensor and placing it in the best location within the hopper. These are failings in exercising reasonable skill and care which manifested themselves in a failure properly to address the particular problems posed here by a deep-seated fire.

[56]If the wording of the specification were to be construed as a guarantee, or as akin in its effect to a guarantee, then I agree with Mr Nicholas Dennys QC for ADT that one would need to identify with much more specificity precisely what it is that ADT is alleged to have been impliedly asked to do and, in consequence, what result it is that it is said to have undertaken to bring about. Here one runs into the difficulty to which I have already adverted and which the judge addressed at paragraphs 232 – 240 of his judgment. It is not sensible to think of a guarantee that no fire of whatever size or intensity would in any circumstances escape either the elevator or the hopper as the case may be. Nor, with respect to Mr ter Haar, is the judge’s formulation at paragraph 240 of his judgment any more sensible a basis out of which to construct an obligation in the nature of a guarantee. That formulation talks of a fire which “might” escape the enclosure and, because of its developed nature, prove “difficult” to extinguish. This is not the language of a guarantee or absolute obligation. It is far too imprecise and hedged about with uncertainty. Speaking of a developed fire which “might” escape the enclosure suggests that there is a defined point of time at which it should be extinguished, presumably before it escapes the enclosure. But here the fire escaped the enclosure in a manner and at a time which was entirely unpredictable and beyond the control of ADT, viz, because Mr Hardcastle happened to be emptying popcorn out of the hopper. There is no evidence that ADT was either told or knew about the manner in which the hopper was to be operated. When Mr McQuaid visited the factory at Leeds the production line was not in operation. When he visited the factory at Pontefract neither the elevator nor the hopper had been installed. It is implausible to construe the specification as involving an absolute undertaking that a developed fire would be extinguished before its unpredictable escape when it is accepted that no such undertaking can be regarded as having been given in respect of one or two (and how many more?) smouldering or flaming kernels of popcorn. One might also legitimately ask the question whether the fire which escaped in this case was in fact difficult to extinguish. In the event it was not extinguished and, subject to the cross-appeal, the judge has found that the chain of causation between ADT’s breach of contract and the spread of the fire leading to the ultimate destruction of the building was not broken. However that is not to conclude that the fire which initially escaped was difficult to extinguish. It was confined within the sleeve which Mr Hardcastle was holding, whilst the remainder of the fire was contained within the hopper. The fire within the hopper appears to have been quickly and successfully extinguished using the fire hose. Indeed, consistently with the judge’s other findings, it seems likely that it could equally have been extinguished by manual operation of the CO 2 system. The fire in the sleeve could no doubt have been tackled more effectively had not further quantities of popcorn been discharged onto the floor in an uncontained manner. The point however is that “difficult” is an imprecise and relative term. If the guarantee or strict undertaking is of the nature alleged by Cadbury, how is it to be determined that there has been a breach? It surely cannot be determinative that the fire suppression system failed to extinguish a fire which might on escape prove difficult to extinguish that the fire was not in the event successfully fought.

[57]It is for these reasons too that I have concluded that Cadbury cannot, for the purposes of s.4(4) of the 1982 Act, show that it made known to ADT a particular purpose for which the system was being acquired. Cadbury did not sufficiently explain the process or its hazardous nature. Cadbury came nowhere close to explaining that whereas the discharge through the hopper of one or a few smouldering and flaming kernels would not, and routinely did not, cause difficulty, nonetheless there was a point along the spectrum at which it was expected that the system would operate so as to prevent any possibility of more than a few (and how many?) smouldering kernels escaping. The response would no doubt have been that no such absolute but undefined obligation could be undertaken or guarantee given.

[58]For all these reasons the judge was in my view right to regard the obligation undertaken as one of the exercise of reasonable skill and care. I agree with him that the reference to the British Standard adds nothing to the debate. It is not suggested that there is any particular provision of the Standard with which ADT failed to comply. The significance of the Standard is simply that it prescribes rates of application and quantity criteria relevant to and prescribed for deep-seated fires in addition to those relevant to and prescribed for surface fires. It is not suggested that the system failed to comply with the stipulated criteria, simply that it was not in the event adequately designed to deal with a deep-seated fire. In my view the circumstance that the Standard happens to refer to deep-seated fires cannot of itself convert ADT’s obligation to exercise reasonable skill and care to design a system suitable to deal with such fires into some form of absolute obligation.

[59]The appeal should in my view be dismissed. The judge was right to conclude that the damages recoverable by Cadbury fell to be reduced to reflect its responsibility for the damage caused by the fire.

[60]These conclusions render it unnecessary to consider Cadbury’s challenge to the judge’s finding at paragraphs 551 and 552 of his judgment, to the effect that, had he concluded that ADT had warranted or guaranteed that no fire would ever escape from the hopper, then the chain of causation between breach of that undertaking and the destruction of the NMU was broken by Cadbury’s knowledge, derived from the experience of a hopper fire in June 2004, that the system did not work. I refer to this point at paragraph 15 above. Although strictly it does not arise for decision, as it was very fully argued before us I propose to deal with it for completeness.

[61]The factual findings upon which this conclusion was based are at paragraphs 267-269 of the judgment:- “267. The third kind of fire was when burning popcorn entered the enclosed elevator, or caught fire somewhere that it could not be seen. That happened in November 2003 (paragraph 144 above). It happened again in June 2004, when a fire occurred in one of the hoppers. Both Mr Carter and Mr Norton were there on that occasion. Mr Norton said that the burning popcorn became apparent when it was emptied out of the hopper onto the floor. He thought that the operatives had put the burning popcorn out using two CO2 fire extinguishers and the fire hose, “just to make sure”. He was asked whether standard procedure when faced with a hopper fire would be to empty the hopper. He said:

“It depends how bad it was because – and how full it was, because you have got to think if it were, say, quarter full, half full, there were a lot of popcorn there, so if we were chucking it on the floor, it would have just spread and gone everywhere. If it were only a little bit of popcorn you could just set it out and contain it.” 268. In my judgment, this was an important event. It demonstrated beyond any doubt that the CO2 suppression system would not necessarily be triggered automatically by flaming popcorn entering the elevator or the hopper. Even more importantly, it demonstrated that popcorn could burn undetected in the hopper and only be discovered when it was discharged. 269. It does not appear that the claimants were particularly concerned about the hopper fire in 2004. There was very little report documentation relating to that fire. There were no corrective action notices or any health and safety follow-up at all. If nothing else, the absence of any such follow-up material demonstrates that no-one at the claimants believed that the CO2 suppression system would definitely, and in every case, ensure that fire could not escape from the elevator or the hopper. Had anyone have been of that view, then they would have expressed their surprise and concern after the fire in June 2004, and the defendant would have been asked to explain what had gone wrong.” “It depends how bad it was because – and how full it was, because you have got to think if it were, say, quarter full, half full, there were a lot of popcorn there, so if we were chucking it on the floor, it would have just spread and gone everywhere. If it were only a little bit of popcorn you could just set it out and contain it.”

[62]The conclusions which the judge derived from those findings are at paragraphs 550-554:- “550. It was the defendant’s primary case on causation that, in accordance with the Court of Appeal decision in Schering, they were not liable for any of the damage caused by the fire. The argument ran as follows. There had been a fire in the hopper in June 2004. As a result, the claimants knew that the defendant’s automatic fire suppression system did not work but failed to do anything about it. Accordingly, there was a break in the chain of causation which meant that, a year later, the defendant was not liable for the consequences of the fire.551. It seems to me that, if I had upheld the claimants’ argument as to the warranty/guarantee, and found that there was a term of this contract that the defendant had warranted that no fire would ever escape from the hopper, then the defendant’s argument of a complete break in the chain of causation would have had considerable force. Indeed, it would then be impossible to distinguish this case from that of Schering because, on this assumption, the claimants would have known in June 2004 that the CO2 suppression system was not providing the guaranteed situation (whereby no burning popcorn escaped the hopper), and they would have had plenty of time (far longer than the plaintiffs in Schering) to do something about the breach before the fire in June 2005.

552. In his closing submissions, Mr ter Haar complained about this argument and said that, had it been properly pleaded, then further investigation would have been carried out in relation to the fire in June 2004. I do not accept that submission. Evidence was adduced from the claimants’ own witnesses about the fire in 2004, and evidence and records relating to all the fires in the NMU following the moving of the ‘oil pop’ process to that facility were disclosed. No additional documents or other material was identified as being relevant to the fire in June 2004 but somehow missing or otherwise not disclosed. I am therefore satisfied that the argument is open to the defendant. I am also satisfied that, if the defendant had provided the warranty or guarantee alleged by the claimants, the fire in June 2004 would have demonstrated to the claimants that the defendant was manifestly in breach, and their failure to act would have broken the chain of causation in its entirety.

553. But, for the reasons given in paragraphs 229-244 above, I have concluded that there was no such warranty or guarantee. In my judgment, the defendant was obliged to exercise reasonable skill and care in the design of the fire suppression system, but provided no warranty or guarantee that burning popcorn would never escape from the hopper. If that analysis is right, then the fact that there was a hopper fire in June 2004 would not necessarily have alerted the claimants to the possibility that the defendant was in breach of contract. I accept that the claimants ought to have investigated that hopper fire more thoroughly than they did, and this may have led to modifications to the system, but I cannot find that, in circumstances where there was no guarantee that burning popcorn would not escape from the hopper in certain circumstances, the claimants’ failure to do anything about the earlier fire broke the chain of causation.

554. Indeed, I consider that the dearth of contemporaneous material indicates that the claimants were unfazed by the hopper fire in June 2004, and that only demonstrates still further my conclusion that at no time did the claimants ever believe that the CO2 suppression system provided any sort of guarantee or warranty at all. If anyone within the claimants’ management at Monkhill had thought for a moment that there was such a warranty, then they would have reacted very differently to the June 2004 hopper fire. As it was, it appears that they considered the hopper fire to be unremarkable, which was only consistent with the conclusion that the contract between the parties contained no warranty or guarantee of the sort so vigorously contended for by the claimants in their closing submissions. Thus, in the light of the contractual obligations that I have found, this contention that the fire in June 2004 broke the chain of causation must fail.”

[63]In fact this argument is in a sense doubly academic since before us it was not contended that the warranty or guarantee was that no fire would ever escape from the hopper. On the other hand it may be suggested that the June 2004 fire was similar to the June 2005 fire so that it demonstrated that there had been allowed to develop without being extinguished a fire which might escape and might prove difficult to extinguish. I have some problems with that approach since the fire in June 2004 seems to have caused no-one any alarm and was evidently not difficult to extinguish. Was it therefore indicative of a breach of warranty of the type for which Cadbury contends?

[64]However Mr ter Haar had a more fundamental objection to the judge’s approach. ADT had not in its pleaded case before the trial referred to there having been a fire in June 2004, still less relied upon it as breaking the chain of causation between breach and loss, or as in any way impacting upon Cadbury’s ability to recover damages from ADT. There was some very limited discussion in the evidence at trial of an incident which at any rate one witness put as having occurred in June 2004, but it was hardly explored. In particular, there was no investigation of the question to what extent, if at all, knowledge of this incident and/or its implications percolated, or ought to have percolated, through to management level. There was no focused investigation of the manner in which the incident was or ought to have been investigated. Mr Dennys however for ADT made it a part of his closing submissions that Cadbury’s conduct in the face of the fire in June 2004 broke the chain of causation. Mr ter Haar objected to the point being raised in this manner. The judge was naturally reluctant to decide a case on which he had heard evidence over eleven days on pleading points and he allowed to both sides a measure of latitude, allowing amendments in the course of final speeches. Although at the hearing I was inclined to think that ADT had not even then adequately pleaded this point, on reflection I consider that it did. Re-Amended Paragraph 2(viii) of the Defence read:- “Monkhill ought not [to] have rejected the VESDA system because it knew, inter alia from the June 2004 hopper fire incident, that there was a risk of smouldering popcorn causing hopper fires and that there was a risk that burning or smouldering popcorn would be let out of the bottom of the hopper before being detected or extinguished by the CO 2 system.” Taken alone, that would not suffice. The VESDA system was “an early fire detection system” and this was an allegation of contributory negligence. However the also newly introduced paragraph 66A of the Defence said this:- “For the avoidance of doubt, it is denied the Defendant caused the Claimants to incur the losses set out in paragraph 42 of the Amended Particulars of Claim, such losses not being admitted, as alleged or at all. If the Claimants have suffered any of the losses alleged, those losses were caused by the acts or omissions of the Claimants as set out in paragraph 62 above.” This does I think cover the ground, albeit Mr Dennys was gracious enough to acknowledge that it could be said that it was not sufficiently made clear that ADT relied upon the June 2004 incident as alone breaking the chain of causation, not simply as one in a series of triggers to that conclusion. However, there remains the question whether the significance attached to the June 2004 fire by the judge was justified by the evidence and whether, more particularly, his findings go far enough to attribute knowledge at an appropriate level within Cadbury’s management to impress Cadbury with corporate knowledge of what had occurred. Such knowledge would, as it seems to me, be necessary however the principle enunciated in Schering Agrochemicals v Resibel NVSA is to be understood – [unreported, Hobhouse J, 4 June 1991; CA (Civil Division) transcript No 1298 of 1992.]

[65]Mr ter Haar took us through the evidence which bore on this incident. The limited permission to appeal granted to Cadbury does not I think permit Mr ter Haar to challenge the judge’s basic findings as set out in paragraphs 267-269 of his judgment, although the evidence for Mr Carter having been present on that occasion is sparse. It consists in the following passage in the cross-examination of Mr Carter:- “Q. Now, can I just get some impression as to the frequency of other types of pan fires. Before leaving that, I think there was also a hopper fire in about June 2004, wasn’t there, do you recall that? A. I think so. Q. Was that one dealt with in the same way? A. Yes.” It is very easy to be critical after the event, and one should never lose sight of the shifting dynamics of a complex trial about technical matters. That said, I have no doubt that had Mr Dennys appreciated at the time the importance which this point might subsequently assume, he would have ensured that the foundation for his later submission was more impressive than a tentative assent to a tentative leading question. It is also right to say that certain of the witnesses appear to attribute the incident to a period before the CO 2 system was operative. The evidence fixing the fire at June 2004 comes principally from one of the operatives, Mr Norton, to whom the judge refers at paragraph 267. He was not asked whether this incident demonstrated to him that the system was ineffective or even unreliable. It is plain that the incident did not bring home to Mr Carter, the shift supervisor, that the fire suppression system was ineffective. The judge found that in June 2005 Mr Carter thought that the system had failed and that he would have expected it to activate automatically – see paragraph 558 of his judgment. There is no finding that Mr Carter made any report to management about the June 2004 fire. There was some totally inconclusive evidence from a Miss Priestley, a Cadbury Line Manager, from which it emerged that if the incident had been reported to her and if she had investigated it that investigation might not have generated a written record or report.

Q. Was that one dealt with in the same way?

[66]There is some uncertainty as to the proper characterisation of the decision in Schering. There, the defendants provided safety devices to guard against known risks of fire on a production line. The devices were defectively designed and did not provide the required protection. There was a serious fire which gave rise to the claim. However, three weeks earlier, there had been a small fire in the same place which had disclosed to a supervisor, Mr Williams, that the safety devices did not work. The supervisor took the matter no further. It was held, both at first instance and in the Court of Appeal, that the defendants were not liable in respect of the loss occasioned by the second fire. Hobhouse J put his decision on the basis of the knowledge of the defective system giving rise to a duty to act reasonably to mitigate loss. In the Court of Appeal Purchas LJ analysed the matter in terms of causation, although he thought it mattered little in the circumstances of that case whether it was analysed in terms of causation or mitigation. Nolan LJ treated it under the rubric mitigation, although noting that the same result was reached if one adopted a causation analysis and noting also that “causation and mitigation are, of course, closely linked”. He also pointed out that in The Elena D’Amico [1980] 1 Ll Rep 75 at 88 Robert Goff described the three aspects of mitigation which he there identified as “aspects of the principle of causation”. Scott LJ saw the matter in terms of causation. In Beoco Limited v Alfa Laval Co Ltd

[1995] QB 137

it was noted by this court that the decision in Schering had been upheld by a majority on the basis of causation, although Stuart Smith LJ indicated that he could not follow why in any event it should make any difference – see page 153. In County Limited v Girozentrale Securities

[1996] 3 All ER 834

Hobhouse LJ in this court perhaps unsurprisingly held that the judgment of Nolan LJ in Schering was to be preferred. Aldous LJ agreed with him. Beldam LJ noted that Purchas LJ in Schering had thought that the result in that case would be the same whether the concept of causation or mitigation was applied.

[67]Whatever be the correct approach, I have no doubt that it is critical to a proper analysis to determine whether the knowledge alleged to break the chain of causation or to give rise to a duty to mitigate can properly be attributed to the claimant party. The basis for denying recovery on the first footing is that continuing to operate the production line in the knowledge that the fire detection or suppression system is defective is a voluntary act which can be held to be the cause of the subsequent damage – see per Purchas LJ in Schering at pages 4, 5 and 9 of the transcript of his judgment. On the second basis, the analysis is that it is reasonable to expect the claimant party to take appropriate steps to minimise the consequences of the breach-caused defect of which he has become aware – see in particular per Hobhouse LJ in the County case at pages 858/9. On both bases the act can only be said to be voluntary or the duty to mitigate to arise if the relevant knowledge comes to the attention of the claimant party. The identification of the natural person whose knowledge is appropriate for this purpose will depend upon questions of delegation of duty within the organisation and, in the present context, the system of supervision which Cadbury might reasonably have been expected to have in place. The problem was addressed in these terms in the Schering case by Hobhouse J at page 22 of the transcript of his judgment and by Purchas LJ at page 4 of his judgment in the Court of Appeal.

[68]The judge here refers at paragraph 554 of his judgment to the Cadbury management at Monkhill and says of it that it would have reacted very differently to the June 2004 fire had it thought that ADT had given a guarantee or warranty as to the efficacy of the system. However, with respect to the judge, he had made no finding upon the basis of which knowledge of the June 2004 fire can properly be attributed to the Cadbury management. That is unsurprising, given that the point was neither pleaded nor explored at trial. I agree with Mr ter Haar that Cadbury was deprived of the opportunity properly to address this point. I agree with him that it would have been necessary for the incident to have been investigated and examined specifically in the context of whether in the circumstances it should be regarded as having brought home to Cadbury at the appropriate level that action was required in order to deal with the risk posed by a defective system.

[69]For these reasons, had the point arisen, I would not have concluded that the occurrence of the June 2004 fire precluded Cadbury from recovery. I would not uphold the judge’s contingent conclusions on this point expressed at paragraphs 551 and 552 of the judgment.

The cross-appeal

[70]Mr Dennys submitted that the judge was wrong not to find that the actions of the Cadbury operatives in emptying out more popcorn from the hopper onto the floor, over and above that already discharged into Mr Hardcastle’s sleeve, and in attempting to stamp out the fire on the floor, broke the chain of causation between ADT’s breach of contract and the subsequent spread of the fire and the destruction of building. The judge dealt with this argument as follows:- “561. The defendant’s third causation argument concerns the stamping out of the popcorn by the operatives. They maintain in their closing submissions that it was not foreseeable that once burning popcorn had been detected, the operatives would empty out more burning popcorn from the hopper on to the floor in an attempt to stamp it out. Again, it is said that this broke the chain of causation.562. I reject that submission for a number of reasons. First, it assumes that the fire was caused by the burning popcorn deliberately discharged from the hopper (which, on this hypothesis, was unforeseeable), as opposed to the burning popcorn that was discharged into Mr Hardcastle’s sleeve (which I find was the foreseeable consequence of the defendant’s breach of contract). I cannot make that distinction; on the evidence, the fire might have been caused by either or both, so the defendant cannot show a break in the chain of causation anyway.

563. Secondly, I reject that submission for much the same reasons as I have rejected the previous submission in relation to the absence of training as to the manual operation of the system. To the extent that the discharge of further popcorn was simply a manifestation of the failure to train the men in the proper use of the CO2 system, the reasoning above applies again. To the extent that the defendant now maintains that they could not have foreseen that, with burning popcorn released inadvertently from the chute, the operatives would deliberately let out more, it seems to me that the argument is unsustainable. It must have been foreseeable that, if burning popcorn was released inadvertently from the hopper, so as to alert the operatives to the existence of a developed fire in the hopper without the CO2 system having gone off, burning popcorn might then be deliberately released in order that it could be extinguished.

564. Further and in any event, for the reasons noted in paragraphs 557 and 558 above, it is not appropriate to criticise the operatives in the ‘rush and the panic’ of the situation, particularly in circumstances where, as here, that situation had been created by the defendant’s breach of contract. It is not therefore possible to say in the circumstances that the stamping out of the burning popcorn broke the chain of causation. Accordingly the defendant’s third causation argument is also rejected.”

[71]Mr Dennys submitted that the conclusion was inescapable that the immediate cause of the spread of the fire was the employees’ actions. Not only was Mr Hardcastle’s sleeve of popcorn emptied onto the floor but the operatives emptied more popcorn out of the hopper and attempted to stamp out the fire therein, all the while in close proximity to the highly flammable packing materials. They ended up therefore attempting to deal outside the hopper with a quantity of flaming popcorn three times greater than that which had inadvertently escaped and they scattered it over a wide area in an uncontrolled fashion. What is more the operatives did this because it accorded with their training. The proximate cause of the loss was therefore, suggested Mr Dennys, Cadbury’s fault in training the operatives to react inappropriately to an emergency. In such circumstances the “rush and panic” of the situation was of limited relevance – the men did what they were trained to do.

[72]Mr Dennys also submitted that in any event the judge’s finding at paragraph 562 that he could not distinguish, in terms of their causative potency, between the burning popcorn discharged into Mr Hardcastle’s sleeve and that deliberately discharged onto the floor, must logically involve that Cadbury had simply failed to prove that ADT’s breach of contract, which permitted only the first discharge, had caused the loss.

[73]It is true that the judge found, at paragraph 486 of his judgment, that “a larger proportion” of the discharge from the hopper was deliberate because it was the way in which the operatives had been taught to deal with a hopper fire. However Mr ter Haar pointed out that the evidence actually supported a slightly less sweeping or more nuanced finding that stamping out was something to be done in the event of a “small fire”. Thus the judge recorded Mr Carter’s evidence, at paragraph 281, as follows:- “. . .Mr Carter’s answers to the subsequent questionnaire, dated April 2005, revealed that it was his understanding that, in the case of a serious fire, he would break the glass to activate the overall fire alarm system (not the CO2 system) and that if there was a small fire, he would empty out the hopper contents using the chute at the bottom and put out the contents on the floor of the factory. In that event, he said, he would use the CO2 extinguisher. He later reiterated that he was not aware that it was dangerous to be around CO2. ” To similar effect was Ms Clough at paragraph 336:- “Ms Clough, who was a trainer at Monkhill, gave evidence about the approved fire procedures actually in place for the different kinds of fire. She said that if there was a small hopper fire, the approved procedure was to open the chute, let the burning popcorn drop to the floor and stamp out the fire. If it was more serious, it was left to the CO2 system to put it out. The judgment as to whether the hopper fire was serious or not was to be made by the team leader or the supervisor. She said that she had not been involved in training the operatives in the event that the CO2 system failed to discharge.” I do not think that the evidence went so far as to support the notion that the Cadbury trained response to a situation such as that which confronted Mr Hardcastle was to empty further burning material onto the floor and to attempt to stamp it out.

[74]This is of some importance because it undermines, I think, the attempt to draw a distinction in terms of causative potency between the popcorn in Mr Hardcastle’s sleeve and the popcorn later discharged deliberately in the “rush and panic” of the situation. Looking at his findings and his reasons as a whole, I cannot think that the judge in fact intended to draw such a distinction, and it may be that his language in the last sentence of paragraph 562 was not wisely chosen. At all events, looked at in the round, the judge has I think plainly found that ADT’s breach was causative of the loss. The failure which he found was a failure properly to design a system which would extinguish a fire which might, if it escaped, prove difficult to control. I have already given my reason for thinking that the contractual situation was not one which gave rise to an absolute undertaking or guarantee. Nonetheless, the judge’s finding at paragraph 504 of his judgment was to the effect that had the system been properly designed, CO 2 should have been automatically triggered some time before Mr Hardcastle’s sleeve began to melt. There is no evidence to support the notion that a melting sleeve in Mr Hardcastle’s hand is to be equated with a “small fire” of which the witnesses spoke in the context of their training. Indeed the judge described the situation with which Mr Hardcastle and the other operatives were faced as an emergency – see paragraph 557 in his judgment. It seems to me inherent in the judge’s findings taken as a whole that the breach consisted in allowing to develop a situation which might well be perceived as an emergency. It is trite that in such circumstances one does not weigh too finely in the balance the reaction of those called upon to respond.

[75]In my judgment the judge’s finding is effectively that the spread of the fire to the rest of the building, once it had been released into Mr Hardcastle’s sleeve, was one seamless whole or development without there intervening some event or conduct which was “of so powerful a nature that the [breach of ADT] was not a cause at all [of the loss of the building] but was merely a part of the surrounding circumstances.” See for this last formulation per Buxton LJ in Roberts v Bettany

[2001] EWCA Civ 109

at paragraph 21, a passage to which the judge referred at paragraph 541 of his judgment.

[76]In this regard I note that it was no part of ADT’s pleaded case that the Cadbury operatives had acted in a foolhardy or even negligent manner in response to the fire and they were not cross-examined to that effect. There was a pleaded allegation that Cadbury failed properly to train the staff in the operation of the CO 2 system, but no similar allegation of a failure in training concerning the stamping out procedure adopted in the case of small fires. It was not pleaded that the act of emptying further popcorn from the hopper onto the floor and attempting to stamp out the fire broke the chain of causation between breach and damage. That argument was evidently made in final submissions, but in my judgment the judge was right to reject it. Had he expressed himself slightly differently in the last sentence of paragraph 562 of this judgment the cross-appeal would I think have gained little traction. As it is, on reflection I do not think that the last sentence of paragraph 562 of the judgment adequately describes the judge’s overall conclusion, which was to the effect that the employees’ reaction to the emergency was entirely predictable. In such circumstances, the spread of the fire was a seamless development, and it was therefore simply inappropriate and unnecessary to attempt to distinguish between the contribution of the burning popcorn in Mr Hardcastle’s sleeve and the burning popcorn thereafter released from the hopper. I would also dismiss the cross appeal.

[77]I would not wish to part with the case without paying tribute to the judge. After a 16 day trial he had to resolve a mass of technical issues with the assistance of what he described as “unsatisfactory and disparate expert evidence, often unrelated to the real issues, . . . delivered . . . in an unacceptably partisan way” in circumstances where the experts had apparently “fallen out”. He was faced with arguments in final speeches which were not reflected in the pleadings and upon which the evidence had not been focused. Given the hand he was dealt, and bearing in mind his many other commitments, it is remarkable that he was able in relatively short order to produce so detailed and comprehensive a judgment.

[78]I agree.

The Chancellor of the High Court :

[79]I also agree.