Fuji Seal Europe Ltd v Catalytic Combustion Corporation [2005] EWHC 1659 (TCC)

[2005] EWHC 1659 (TCC)IN THE HIGH COURT OF JUSTICEQUEEN'S BENCH DIVISIONTECHNOLOGY ANDCONSTRUCTION COURTCourt No 7St Dunstan's HouseVenue 133-137 Fetter LaneLondon EC4A 1HDDate Wednesday, 20th July 2005
Before
THE HONOURABLE MR JUSTICE JACKSON
Between
FUJI SEAL EUROPE LIMITEDClaimant-v-
Between
CATALYTIC COMBUSTION CORPORATIONDefendant
Computerised Transcript ofSmith Bernal Wordwave Limited190 Fleet Street London EC4A 2AGTel No: 020 7404 1400 Fax No: 020 7831 8838(Official Shorthand Writers to the Court)
MR SIMON LOFTHOUSE (instructed by Brachers) appeared for Claimant.MR RICHARD HARDING (instructed by Hacking Ashton) appeared for Respondent.
JUDGMENTWednesday, 20th July 2005(10.30 am)JUDGMENT
[1]This judgment is in eight parts namely: part 1, introduction; Part 2, the facts; Part 3, the present proceedings; Part 4, the evidence given by witnesses of fact; Part 5, what contractual or tortious duties were owed by CCC to Fuji; Part 6, the principal issues between the expert witnesses; Part 7, liability; Part 8, quantum of damages.

Part 1. Introduction

[2]This is a claim for damages for alleged negligence and breach of contract in relation to the supply of chemical abatement plant to a printing works in Kent.[3]The claimant, Fuji Seal Europe Limited, is part of the Fuji group of companies whose head office is in Japan. I shall refer to the claimant as “Fuji”. Fuji carries on a substantial and successful printing business at Scimitar Close, Gillingham, in Kent.[4]The defendant, Catalytic Combustion Corporation, is a company incorporated in the USA, to which I shall refer as “CCC”. CCC is a reputable and long-established company which specialises in catalyst technology and environmental and industrial air technologies.[5]CCC formerly had a subsidiary company incorporated in the UK. This company was incorporated on 2nd June 2000. On 11th July 2000 its name was changed by special resolution to Catalytic Combustion Europe Limited. This change of name was registered on 20th July. I shall refer to this subsidiary company as “CCE”. CCE was wound up on 23rd March 2004.[6]Let me now say a little bit more about Fuji's activities at its premises in Gillingham. Fuji carries on the business of printing transparent film materials. The printed film material comes from the print presses and, after a drying process, is put in rolls which are supplied to customers, who then shrink-wrap the printed film on to their various products. Examples of such products are Lucozade bottles, sauce jars and Coca Cola or Pepsi bottles.[7]The printing operation is carried out by individual printing presses. These have rotating horizontal cylinders which feed the film material through the process. Some of these cylinders run in a horizontal tray containing ink, thereby conveying the ink on to the film medium in the pattern on the cylinder. There are separate trays for each colour.[8]The inks used in such processes may be either water-based or solvent-based. The Fuji process uses solvent-based inks as this is what the particular type of printing presses used by Fuji were designed for.[9]During the process, the solvents give off emissions known as volatile organic compounds or “VOCs”.[10]VOCs are harmful to the workforce in the area of the printing presses. Therefore hoods are positioned over the ink trays, cylinders and dryers in order to capture the VOCs. The exhaust gases from Fuji's premises were, in the past, discharged into the atmosphere. Since January 2001, however, they have been treated by abatement plant supplied by CCC. In this judgment I shall use the terms “abatement plant” and “abatement equipment” interchangeably.[11]Guidance Note PG6/17(97), to which I shall refer as “Guidance Note PG6/17”, was issued by the Secretary of State in March 1997 in order to give guidance on the printing of flexible packaging and in order to secure compliance with the Environmental Protection Act 1990.[12]Paragraph 20 of Guidance Note PG6/17 provides:
“The following emission concentration limits, expressed as 15 minute mean values, should apply to releases from contained sources: “Emissions ... “Volatile organic compounds (as total carbon excluding particulate matter) in cases other than described above 150 mg/m3.”
[13]I should explain that the phrase “cases other than described above” means cases excluding aromatic hydrocarbons.[14]Let me now mention some of the abatement plant which is available in order to reduce VOCs in exhaust gases.[15]First, there are catalytic oxidisers. These burn VOCs using a precious metal catalyst. A catalytic oxidiser may be combined with a concentrator wheel, which concentrates the VOCs in air crossing the catalyst bed. Next, there is a regenerative thermal oxidiser (“RTO”). The RTO is a system of towers linked by an air chamber containing a burner. Another form of abatement plant is the recuperative oxidiser. This does not call for any further explanation for present purposes.[16]A combined heating and power system may be combined with certain forms of abatement plant, in order to generate heat or electricity. A combined heating and power system is referred to as “CHP”.[17]Let me now mention some of the abbreviations which I shall use in this judgment. I shall refer to the Medway Council as “Medway”. “Megtech” is the abbreviation which I shall use for a company called Megtech Systems. “ABB” is the abbreviation which I shall use for a company called ABB Zantingh. “Thermotec” is the abbreviation which I shall use for a company called Thermotec Systems Limited. “Greenbank” is the abbreviation which I shall use for a company called Greenbank Technology Limited. “GMS” is the abbreviation which I shall use for a company called GMS (I&D) Services Limited. “Stanger” is the abbreviation which I shall use for the well-known firm Stanger Science & Environment. “Prototech” is the abbreviation which I shall use for a company which supplies catalyst called Süd-Chemie Prototech Inc. Finally the term “fugitive emissions”, in the context of this case, means emissions from Fuji's operations which are not captured by the hoods and sucked into the abatement system.[18]This, I hope, is a sufficient introduction and it is now appropriate for me to outline the facts.

Part 2. The Facts

[19]In this part I shall briefly outline the history of events as it emerges from the documents, without venturing into any areas of controversy. In January 1998 Stanger carried out emissions tests at Fuji's Gillingham premises on exhaust air coming from the 8-colour line and the 9-colour line. Stanger set out the results of these tests in a report dated 26th February 1998. This is generally referred to as “the Stanger report”.[20]On 21st May 1999 Medway served an Enforcement Notice on Fuji requiring Fuji to installed abatement plant which would control emissions to the extent required by clause 20 of Guidance Note PG6/17. Fuji sought proposals from various manufacturers of abatement plant. The proposal which seemed most attractive to Fuji was one submitted by ABB on 24th February 2000. This proposal was for a rotary concentrator and catalytic oxidiser combined with CHP.[21]In March 2000 CCC came on to the scene. On 8th March, Mr Rossiter of Greenbank sent the following e-mail to Mr Vidler of Fuji:
“I have spoken to Catalytic Combustion Corp. since our conversation yesterday. I have made it clear that they are invited to put in a proposal, but only if they can get a fully detailed bid in by two to three weeks' time. “They want to have a go at it, and are likely to want a look at site some time next week. “I'll contact you when I have a date suggested.”
[22]Mr Randal Hanan of CCC duly got to work. On 20th March he sent a fax to Mr Tooke of GMS setting out his preliminary comments. These were that the solvent loading seemed to be around 2 grams per cubic metre with higher peaks during the day. Accordingly, CCC should design for around 3 grams per cubic metre. The better choice of equipment for Fuji may be an RCO, an RTO or a catalytic recuperative oxidiser.[23]On 24th March GMS carried out emissions tests at the Gillingham premises on Fuji's instructions. The report setting out the results of those tests was dated 31st March. That report was written on Greenbank-headed paper because GMS did this work as subcontractors to Greenbank. This report has been referred to during the trial as “the GMS report” or “the Greenbank report”. I shall use the former term. The GMS report records emissions which were detected in exhaust air from the 7-colour print line, the 8-colour print line and the 9-colour print line at the time of testing.[24]Whilst GMS was preparing this report, CCC was preparing a formal proposal to send to Fuji. This proposal was finalised and submitted to Fuji on 31st March. It included the following passage:
“2.0. System Recommendation. “After a thorough application and review of your process and conditions, we have determined that a Zeolite Rotary Concentrator System with a Catalytic Oxidiser provides the best balance between required operational conditions, initial capital costs, and annual operational costs. Catalytic Combustion recommends the application of a CCC designed Vision Model 350 Rotary Concentrator to destroy the volatile organic compounds from the Printing Press Exhaust air stream through the capture and destruction of the VOCs with the chemical reaction process of catalytic oxidation. “The Vision Rotary Concentrator is a VOC Abatement device designed to remove Volatile Organic Compounds from the Printing Press Exhaust air stream through a two step procedure: “1) Adsorption and Concentration of the VOCs using a Hydrophobic Zeolite Rotor “2) Destruction of the Concentrated VOCs by a Catalytic Oxidiser “The system will be mounted on a single skid assembly, pre-wired and pre-piped to provide for ease of shipment and field installation. Onsite installation is limited to unloading, setting on the concrete pad and connecting to ductwork and utilities. “The catalyst we recommend for your system is a precious metal catalyst, based upon a ceramic bead substrate. A catalyst is a substance that accelerates the rate of the chemical reaction of the volatile organic compound without being consumed. The VOCs in the process exhaust stream, and any CO2 generated by the system burner combustion, are converted to carbondioxide, H2O, and thermal energy ... “The advantages of a Rotor Concentration System over a traditional thermal or catalytic oxidation system are the following: “a) Lower Operating Cost due to the reduction of air volume requiring destruction and the high VOC loading through the concentration of the larger air stream. “b) a more compact, lighter, less expensive materials of construction which equates a lower initial capital cost for the equipment. “c) reduced maintenance requirements due to the smaller equipment size.”
[25]The process stream parameters set out in the proposal included the following: process stream volume 50,500 normal cubic metres per hour at 34 degrees Centigrade, VOC destruction efficiency less than 50 milligrams per cubic metre as carbon. The latter statement was supplemented by the following:
“Achieve a minimum of 94 per cent plus Total Destruction Reduction Efficiency of the VOCs in the exhaust stream - Less than 50 mg/m3 as carbon.”
[26]After the submission of this proposal, correspondence followed in which CCC urged the merits of its own proposal and the demerits of ABB's proposal. In a letter to Mr Vidler dated 24th April, Mr Hanan of CCC wrote as follows:
“Catalytic Combustion understands that the UK has had its share of problems with VOC Abatement Systems. Many of the companies offering various technologies do not have a solid track record with the systems, and therefore are still in a learning curve phase for the supply of equipment. Catalytic Combustion has the process knowledge, engineering expertise, and experience to assure you that your system will be one of the most reliable components that Fuji has in its plant. Our references will put any questions you have to rest.”
[27]Mr Hanan added that the life expectancy of the equipment was at least 15 years and on average 20 years. That is set out on the following page of this letter.[28]On 8th May, CCC submitted two further proposals to Fuji. The proposal submitted in the morning of 8th May bore the reference 0238A. This proposal was for a rotary concentrator plus CHP. In the process parameters the process stream volume was shown as 60,000 normal cubic metres per hour. The VOC destruction efficiency was set out in the same terms as before.[29]Sections 2 and 3 of this proposal read as follows:
“2.0 System Recommendation “After a thorough application and site review of the Fuji Seals process and conditions, we have determined that a VOC Abatement Plant that utilises a Rotary Concentrator with a Combined Heat and Power System provides the best balance between required operational conditions, initial capital costs, and annual operational costs. Catalytic Combustion recommends the application of a CCC designed Vision Model 350 Rotary Concentrator with CHP to destroy the Volatile Organic Compounds from the Gillingham Works Exhaust air stream through the capture and destruction of the VOCs with the chemical reaction process of thermal oxidation. “All items of supply have been selected to ensure optimum trouble free operation with minimum downtime. We recognise the importance to Fuji Seal of uninterrupted operation, and as providers of system maintenance have no desire to introduce excessive plant attention demands, as may be seen from the appended reference list for major supply components there are in existence numerous installations. We would welcome the opportunity to host visits by Fuji Seal personnel to sites [where] precisely the same equipment is in current use affording the opportunity to solicit information directly from existing users. “Notwithstanding the experience referred to above we are always keen to seek new and innovative designs and plant. This encourages us to constantly consider alternatives, such as the employment of a reciprocating engine in lieu of a turbine for power generation. In this case our investigations gleaned such a poor history of failures and problems that we have no hesitation to stress that in the interests of both purchaser and vendor this project must remain with tried and tested equipment. “Catalytic Combustion is a North American company but has for some time planned a presence in the United Kingdom. It is now our intention to implement that plan by establishing an office in England staffed with experienced personnel. Fuji Seal thus would be the first customer to benefit from that arrangement, and would be provided with a system which, with Fuji Seal approval we would wish to make our showpiece of European operations. For the purpose of this contract our local office would be in addition to the head office support, and would be assisted by GMS for maintenance duties, and GreenBank Technology for ancillary supplies and site activities. The assembly of such a team offers unrivaled experience specific to this project. “The Vision Rotary Concentrator is a VOC Abatement device designed to remove Volatile Organic Compounds from the Gillingham Works exhaust air stream through a two-step procedure: “1) Adsorption and Concentration of the VOCs using a Hydrophobic Zeolite Rotor “2) Destruction of the concentrated VOCs by an oxidiser “The CHP plant will be comprised of an Allied Signal Natural Gas Turbine, that will process the concentrated VOCs as fuel during the oxidation process. The reaction of the oxidation will be used to turn an electrical generator included with the plant. The generator will produce 525 kW of continuous electricity for use by the Plant. “The system will be mounted on a single skid assembly, pre-wired and pre-piped, to provide for ease of shipment and field installation. On-site installation is limited to unloading, setting on the concrete pad, and connecting to ductwork and utilities. The plant has been designed with regard to the business park setting, and will incorporate the most advanced noise abatement techniques available to assure [quiet] operation. The noise level of the plant would be less than 85 dba at 5 metres. “3.0 Program “Due to the requirement for immediate action that has been brought about to resolve odour complaints with the local council, the attached schedule has been provided for Fuji Seals review. Upon receipt of a letter of intent from Fuji Seals, the project will immediately begin Phase 1 of the schedule. “Phase 1 will entail addressing and correcting the plant odour problem to satisfy the local council. Catalytic Combustion will immediately commission GreenBank Technologies to begin the manufacture and installation of the necessary ductwork and components required to discharge the Gillingham Works plant exhaust through a single exhaust stack at a height of 15 metres above grade. Liaison with the local council will immediately notify the proper authorities of the corrective action being taken and will begin the process of permitting towards final compliance with the UK Environmental Laws. The course of action for Phase 1 has been designed to minimise any waste of funds between Phase 1 and Phase 2. All of the equipment and installation for Phase 1 will be utilised for the final installation of equipment during Phase 2. This eliminates Phase 1 from being a temporary solution. “Phase 2 will entail the design and manufacture of the VOC Abatement Plant and the CHP System. Phase 2 will begin when the final financial documents have been agreed upon and signed by Fuji Seals. Phase 2 is expected to last approximately 99 business days and would be completed before the end of September.”
[30]The price quoted was £1,574,658. The proposal which CCC submitted to Fuji on the evening of 8th May bore the reference 238 Rev 1. This proposal was for a rotary concentrator and catalytic oxidiser with the option of adding CHP plant at a later date. The process parameters stated were the same as before. Section 2 of this proposal was drafted in substantially the same terms as section 2 and 3 of the earlier proposal, subject to this qualification: section 2 now also includes a catalytic oxidiser, and appropriate descriptions are given of the catalytic oxidiser.[31]On 17th May there was a meeting between representatives of Fuji and two representatives of CCC. According to the minutes of that meeting a P&ID drawing was reviewed. A P&ID drawing is a process and instrumentation diagram. A process and instrumentation diagram sets out the configuration of the plant. It shows what pipes and ducts will go where. It shows how the exhaust gases will proceed through the plant from the moment when they leave the printing presses to the moment when they are discharged to atmosphere. There is a box in the left-hand corner headed “Design Data”. This box shows the volume of gases at each point in the process. It shows the temperature of the gases at each point in the process and it gives various other useful and necessary data.[32]Also at the meeting on 17th May, Fuji informed CCC that they were working on increasing the line speed.[33]On 19th May, Mr Tierie, the managing director of Fuji Seal Europe Limited, wrote to Fuji's head office in Japan recommending that they should purchase the abatement equipment offered by CCC. On the same day there was a meeting between Fuji, CCC and Greenbank. The minutes of that meeting include the following passage:
“Total Maximum Air Flow: In sizing the system fan Doug will look at both 60,000 and 75,000 nm3/hr for pricing estimate. Need to know what Fuji wants for worst case air flow and potential cost increases.”
[34]On 30th May, CCC submitted a further proposal to Fuji. This bore the reference 0238B. This proposal was for a rotary concentrator, a catalytic oxidiser and CHP. The process stream volume stated in the process parameters was 75,000 normal cubic metres per hour. [The reference to 60,000 normal cubic metres per hour in the following line must be a typographical error, as Mr Hanan said in evidence.] The VOC destruction efficiency was shown in the process parameters of this document in the same terms as it had been shown in the earlier proposals.[35]The wording of section 2 and section 3 of this proposal was substantially the same as the wording of sections 2 and 3 in the two previous proposals. The prices quoted were as follows:
“VOC Abatement Plant: “To include complete Scope of Work supply per quotation 1,078,000BSP “Combined Heat and Power Plant: “To include complete Scope of Work supplied per quotation 572,643BSP.”
[36]On 12th June, Mr Hanan sent an e-mail to Mr Vidler setting out certain options. This e-mail included the following passage:
“New Option 1 “VOC Abatement Plant with Catalytic Oxidiser. I have given a very low price for a turn-key VOC abatement plant, which will obtain less than 100 mg/nm3 as VOC discharge. This is the option I recommend for Fuji to solve the EPA and Odour problems. We can then review CHP designs after the system is under manufacture.”
[37]It can be seen from the correspondence that Fuji in Gillingham strongly favoured the abatement plant proposed by CCC. The head office in Japan, however, had reservations. The head office favoured alternative equipment such as an RTO. Mr Vidler discussed this matter with Mr Hanan. On 19th June, Mr Hanan sent the following e-mail to Mr Vidler:
“I have now received a copy of the response from the Japan office. There is a point I believe that they are missing here. If there was not a Concentrator System with the application, I agree with their statements. For the full 70,000 nm3/hr volume, a 70,000 nm3/hr Regenerative Thermal Oxidiser would be a better choice than a 70,000 nm3/hr Catalytic Oxidiser - not in every case, but for your project an RTO would be a better choice. In looking at the Fuji Exhaust Stream and doing an extensive process stream characterisation and application engineering review, CCC did compare an RTO vs a Rotary Concentrator. Besides the point that Fuji Seals did not want a 'Thermal Oxidiser' or RTO because of the problems the US plant was having, a RTO was not the correct choice for Fuji Seals ...”
[38]On 21st June, Mr Hanan sent the following e-mail to Mr Vidler:
“Attached is the comparison document between an RTO and a Rotary Concentrator. “As I told you previous, CCC and our European Partner Eurocad manufacture the best RTO System on the market. The reliability of the system cannot be matched due to a patented single shaft mechanical drive to move the valving system. We would be more than willing to quote an RTO to Fuji. “But, for you plant and process, an RTO does not make good sense as a technology choice, mostly due to the high operating cost of the required natural gas and electricity. That is why we did not offer an RTO previously ... plus with the problems that Fuji America has had with their RTO it did not make sense. The purchase price of a 70,000 nm3/hr RTO is going to be higher than a concentrator also.”
[39]The comparison document which was attached to Mr Hanan's e-mail included the following passage:
“The existing Gillingham Works operating conditions were determined on March 23rd and 24th 2000 by conducting a thorough site survey. The survey was conducted by Green Bank Technologies, and the following operating conditions were established: “Existing Total Volumetric Exhaust Flow .... 50,880 nm3/hr. “Existing Exhaust Flow VOC Loading .... average 0.8 grams per nm3. Maximum 1.5 grams per nm3. “Existing Works Operational Hours per annum .... 8,400. “Current Regulations for Emission Discharge .... less than 150 mg/nm3. “It should be noted that the existing printing presses and dryer hoods are currently out of balance, and that the total exhaust flow from the presses and hoods will increase upon balancing of the system. Also, the speed of operation for the printing presses is quite low, and further increase of press speed will require the increase of the dryer exhaust flow to achieve proper curing. “Subsequent conversations about future operating conditions and projections have [led] to the following design criteria for the VOC Abatement Plant. “Existing Total Volumetric Exhaust Flow .... 70,000 nm3/hr. “Existing Exhaust Flow VOC Loading .... average 0.8 grams per nm3. Maximum 2 grams per nm3. “Existing Works Operational Hours per annum .... 8,400 [plus] “Future Regulations for Emission Discharge .... less than 150 mg/nm3.”
[40]There then follows a description of the different types of abatement plant available. On the last two pages of this document Mr Hanan sets out a number of reasons why a rotary concentrator with catalytic oxidiser was to be preferred over an RTO. Mr Heyworth duly forwarded to the Japan office the information and advice coming from CCC. At the request of the Japan office, Mr Heyworth also obtained the views of GMS and communicated these to the Japan office. GMS, who had a close working relationship with CCC, supported CCC's recommendations. The Japan office also requested that Sun Chemicals should give its views on the matter. It appears, however, both from the documents and from the oral evidence, that Sun Chemicals made little contribution to the debate. In their closing speeches yesterday, neither counsel suggested otherwise.[41]Finally, on 7th July the Japan office was persuaded. The Chairman of the Fuji group gave the necessary authorisation that morning.[42]On 14th July, Mr Tierie and Mr Heyworth, on behalf of Fuji, signed a Letter of Intent addressed to CCE. It will be recalled that CCE was a subsidiary company of CCC set up in the UK for the purpose of handling European business. The Letter of Intent signed on 14th July related only to Phase 1 of the works. On 19th July, Mr Hanan sent to Mr Fuji costings for VOC abatement plant, both with and without various alternative features. The total exhaust volume was taken as 70,000 nm3/hr.[43]On 21st July Mr Brewer, CCC's technical manager, sent a fax to Prototech who were suppliers of catalyst. Mr Brewer asked Prototech to provide a quotation for supplying the catalyst required for Fuji's oxidiser. In that fax Mr Brewer stated:
“We have an anticipated exotherm of - 90 degrees Fahrenheit. We would like to control the catalyst outlet temperature at - 750 degrees Fahrenheit ...”
[44]It should be noted that, if one converts those temperatures to Centigrade, the exotherm becomes 50 degrees and the outlet temperature becomes 400 degrees. On 31st July, CCC produced drawing 238/500/1D. This is the final version of the P&ID drawing for the abatement plant to be installed at Fuji's premises.[45]What the P&ID drawing shows is this: air enters the system from the 9-colour press, the 8-colour press and the 7-colour press. It passes through duct work at an initial volume of 70,000 Nm3/hr. The exhaust air arrives at the rotary concentrator. This is a Munters wheel. At this point, the exhaust air is separated into two parts. The majority of the exhaust air, namely 63,000 Nm3/hr, passes through the Munters wheel, and the VOCs in that exhaust air are adsorbed by the Munters wheel. This air, freed from its VOCs, then proceeds through various pieces of duct work and is exhausted to the atmosphere through the chimney stack. The separate stream of air which is 7,000 Nm3/hr, passes through a cooling system and a cooling air fan. It then passes up through a secondary heat exchanger. It passes round some duct work and it goes back to the Munters wheel. At this point a desorption process occurs. This air picks up all of the VOCs which have been adsorbed on to the Munters wheel. Thus the 7,000 Nm3/hr of air now carries on it all of the VOCs from Fuji's printing presses. This air I shall refer to as “the desorption air”.[46]The desorption air proceeds around the system and it passes through a primary heat exchanger. Upon passing through the primary heat exchanger, the temperature of this air is raised from 66 degrees Centigrade to 205 degrees Centigrade.[47]The air then passes across a burner where the temperature is further raised to 345 degrees Centigrade. At this temperature, the air passes through the catalyst chamber. The air passes over a catalyst bed. The intention is that the VOCs are all combusted within the catalyst chamber. The air then leaves the catalyst chamber at a temperature of 400 degrees Centigrade. Use is then made of this heat. The air passes first through a secondary heat exchanger which is used to heat up the desorption air before the desorption air carries out the desorption process. The air then passes through the primary heat exchanger, which is used as the first stage of heating up the desorption air in preparation for the combustion of VOCs.[48]After passing through these two heat exchangers, the desorption air, now liberated from its VOCs, joins the chimney stack and is exhausted to the atmosphere.[49]On 3rd August, a further Letter of Intent relating to Phase 1 was signed both by Fuji and CCE. On 12th August, Fuji submitted its purchase order to CCE. The purchase order shows as the price £1,078,000. That corresponds with the price shown in the proposal dated 30th May.[50]The Phase 1 works were carried out in October 2000. On 12th October, CCE produced a document entitled “Final Pricing and proposal”. This document included the following passage:
“System Parameters: “Concentrator Maximum Volume: 70,000 Nm3/hr “Oxidiser Maximum Volume: 7,000 m3/hr “Maximum VOC Input: 800 mg/m3 “Emission Limits: less than 50 mg/m3 as Carbon at 800 mg. “VOC Abatement Plant Design Based Upon: “The CCEL Design of the supplied VOC Abatement Plant was based upon a Green Bank Technologies report, dated 24th March 2000, Airflow Survey Report submitted to CCEL by Fuji Seals during the initial stages of the quoting process. The report was a recording for the normal operational exhaust conditions of the 3 existing gravure print lines including the airflow balance for the 3 printing lines with solvent levels and airflow recordings. The report was originally commissioned by Fuji Seals as a method for specification of the requirements for the size and design of a VOC Abatement System for the Gillingham Works. “The report is attached to the contract as attachment A of section 1.”
[51]The total contract price quoted, if certain options were omitted, was £1,078,000. On 17th October there was a meeting between the following persons: Mr Hanan of CCC, Mr John Strey of CCC, Mr Richard Sutherland of R&R Controls, Mr Malcolm Pym of CCE, Mr Geoff Rossiter of Greenbank Technology, Mr Paul Vidler and Mr Peter Graves of Fuji.[52]As can be seen from the minutes of that meeting, numerous technical matters were discussed relating to both Phase 1 and Phase 2 of the works. Mr Malcolm Pym, who was about to start as an employee of CCE, was “officially installed as CCC project manager for the Fuji Seal project”.[53]Phase 2 of the works was carried out during November and December 2000. Mr Pym prepared a snagging list on 22nd December, and the items on that list were duly dealt with.[54]In January 2001, GMS carried out emissions tests at Fuji's premises. The results were satisfactory. In the light of these results, Medway abandoned the criminal proceedings which it was bringing against Fuji in the Magistrates' Court.[55]One problem which affected the abatement plant at an early stage was overheating of the desorption air (see item 6 of the snagging list). This overheating of the desorption air occurred before the desorption air arrived at the Munters wheel in order to perform the process of desorption. Mr Pym effected a temporary solution to this problem in early January. In February or March he effected a permanent solution. In the meantime, a new and more serious problem was coming to light. The temperature rise which occurred as gases passed over the catalyst bed was much greater than expected. According to the P&ID drawing, gases should emerge from the catalyst chamber at 400 degrees Centigrade. In fact, the gases often emerged at a very much higher temperature.[56]In an e-mail to Mr Pym dated 7th February 2001, Mr Hanan wrote as follows:
“It looks to me that Fuji is running extremely high solvent levels - mg/m3 - per what the catalyst temperature outlet is showing from the exothermic reaction. “I have run through a short balance listed below. “It looks like they are running over 2.366 mg/m3 as VOC in their inlet stream - we had listed a maximum of 800 mg/m3 - although we did make mention as to up to 2 mg/m3 spikes - I will have to review the documentation to see what was stated in previous correspondence. “At this point in time I do not want to make an issue out of the inlet solvent level ... I would rather try to get round the problem and have the system operating without problem, and then deal with informing Paul of the problem afterwards.”
[57]Mr Hanan went on to suggest in his e-mail various ways around the problem. He said that Fuji should not be told about the problem until it had been solved. Unfortunately the problem of high temperatures in the catalyst bed was not amenable to any simple solution. Fuji's records show that gases continued to leave the catalyst chamber at far too high a temperature. On occasions, the alarm was triggered and the whole system shut down for a period.[58]In a letter to Mr Vidler dated 29th March 2001, Mr Hanan asserted that the cause of the overheating problem was a range of new inks which Fuji was using in its printing process. At the time, Fuji accepted this explanation. On 22nd May 2001, Mr Heyworth and Mr Vidler signed a Final Acceptance Certificate relating to the abatement plant. In June and July 2001, CCE carried out remedial works in an attempt to remedy the overheating problem. This entailed fitting a hot side bypass around the primary heat exchanger. This had the effect of reducing the temperature of gases entering the catalyst chamber. It is said that the modifications also reduced the concentration of VOCs after leaving the rotary concentrator.[59]Fuji duly paid for these works. Unfortunately the problem of high temperatures in the catalyst chamber continued. By September 2002, Fuji was coming to the conclusion that the real source of the problem was an error in the original design process. CCC had misinterpreted the GMS report and had underestimated the VOC loading. Mr Vidler expressed this view in an e-mail to Mr Brewer dated 27th September 2002.[60]On 6th November 2002, Mr Pym sent the following memorandum from CCC to CCE:
“Oxidiser High Temperature Shut Downs. “I had several phone calls from Paul on 4th and 5th November, very concerned about the Oxidiser/system keeps shutting down on High Catalyst Outlet Temperature Alarm. “It looks as if the problem is being caused by the ink bay hoods that have been fitted to the presses, which in turn is increasing the solvent loading to the abatement system. “Last week only the 7 colour press had hoods fitted, the catalyst outlet temperature was running around 580 deg C and peaking 600 deg C. The hot bypass damper was working and managing to control the inlet temperature between its set point [at] 315 deg C and 345 deg Centigrade. “The hot bypass damper will not completely stop the inlet temperature from rising, as part of the outlet air flow will still pass through the heat exchanger, while the rest will go out through the damper. This is because there is a very low pressure drop through the heat exchanger and the flow will take both paths. “On Monday this week, the ink bay hoods were also fitted to the 8 colour press. This is when the high catalyst outlet alarms started to shut the system down. “The 8 colour press was printing with 5 colours: 1 x Hi Tec and 4 x BASF inks (plus hoods). “The 7 colour press was printing with 5 colours: 5 x Sun inks (plus hoods). “The 9 colour press was printing with 6 colours: 6 x Sun inks (No hoods). “Under these printing conditions the catalyst outlet temperature was reaching 665 deg C while the inlet temperature was at 360 deg C giving an exotherm of over 300 deg C - probably in excess of 20 grams per nm3 solvent loading going into the oxidiser. “Paul called me in for a meeting in his office to discuss the following points: “1. He is now extremely concerned that the abatement plant cannot handle the increase in solvent loading with only some of the hoods being fitted and will obviously cause even greater problems when they are ALL fitted. “2. Paul has realised through his own calculations that the oxidiser is too small or of the wrong type. The main concern is that these hoods are now a health and safety issue and must be fitted to the presses. “3. He feels that CCC have been aware of the problem for some time now, and have done nothing to correct the situation other than getting split welds re-welded, which does not address the basic cause of the problem. “4. Paul said that Mark was looking into the possibility of finding a secondhand thermal unit to replace the catalytic oxidiser, but has not heard any more about this. “5. This is now a crunch situation, it cannot go on like this any longer. The hoods have to be fitted and the abatement plant has to work reliably without shutdowns. Paul has said that CCC have to rectify the problems as quickly as possible, if they are not prepared to resolve the situation. Fuji will find another company to modify the system and place the matter in the hands of their lawyers.”
[61]On 17th January 2003, Mr Ivan Chamulak, the Vice President of CCC, wrote to Mr Vidler as follows:
“Based upon the data taken in December and the modelling performed by Munters, we are convinced that the oxidiser is operating at [more than] 25 per cent LEL a large percentage of the time and as such could be in violation of safety standards for maximum allowable LEL input without proper oxidiser LEL alarm controls. “The oxidiser and catalyst were not designed to process the amount of VOCs currently [is] being directed to the oxidiser and the oxidiser reactor will experience premature wear and tear and will require repair and maintenance beyond standard protocol.”
[62]Mr Chamulak then set out three options. These were: (i)install an RTO to supplement the existing abatement plant; (ii) install a second catalytic oxidiser to deal with part of the exhaust gases; (iii) replace the existing system with an RTO.[63]On 12th February 2003, CCC sent to Fuji the results of an analysis by Prototech of a catalyst sample taken from Fuji's premises. This showed that the catalyst had been damaged. There is an issue as to whether or not that damage is due to overheating. On 4th May 2003 Mr Chamulak visited Fuji's premises and took another sample of catalyst. He submitted this to Prototech for analysis. In its report dated 15th July 2003, Prototech stated the following conclusions:
“The Pro-Pel GA 18 catalyst shows poor activity when compared to a fresh sample. A surface area measurement revealed that this catalyst had lost 60 per cent of its surface area. This loss is irreversible. Depending on the destruction requirements of VOCs, it may be necessary to increase the inlet temperature of the oxidiser by at least 100 degrees Fahrenheit. This is a temporary solution, and eventually, the catalyst will need to be replaced.”
[64]There is no dispute between the parties that this damage is attributable to overheating by some means or other.[65]In due course, Fuji came to the conclusion that it had a claim for damages in respect of the defective abatement plant. CCC's subsidiary company was desolved in March 2004. Accordingly, no claim could be made against that company. Fuji intimated a claim for damages against CCC in correspondence but that claim was rejected. In those circumstances, Fuji commenced the present proceedings.

Part 3. The Present Proceedings

[66]By a claim form dated 11th August 2004, issued in the Technology and Construction Court, Fuji claimed against CCC damages for negligence in design and advice concerning the VOC abatement system installed at the Gillingham premises. The pleadings on both sides have been the subject of much industry. When I refer to the Particulars of Claim, this is a reference to the Re-Re-Amended Particulars of Claim. When I refer to the Defence, this is a reference to the Re-Re-Re-Amended Defence including certain additions which I allowed on the first day of trial.[67]The Particulars of Claim sets out two separate bases of liability against CCC. These are: (i) There were collateral warranties between Fuji and CCC as follows:
“(i) If Fuji Seal contracted with CCE to carry out works in accordance with CCC's aforementioned proposals and in particular that dated 30 May 2000 this would satisfy Fuji Seals stated requirements, and “(ii) such a contract would produce a 'full turn-key installation' as referred to therein.”
CCC acted in breach of those warranties. (ii) CCC owed a duty of care in tort to Fuji:
“... to exercise a reasonable degree of skill, care and/or diligence in the design and/or determination and/or recommendation of a VOC abatement system for the Fuji Seal Plant and/or in representing to and/or advising Fuji Seal that the CC VOC System was the appropriate system for the Fuji Seal plant.”
[68]CCC acted in breach of that duty by recommending a rotary concentrator and catalytic oxidiser.[69]On the basis of these two grounds, Fuji claimed damages under four heads in paragraph 16 of the Particulars of Claim. These four heads are:(i) cost of suitable replacement VOC abatement system.(ii) overpayment caused by CCC recommending an unsuitable solution.(iii) costs incurred in maintaining the system in order to process part of Fuji Seals VOC emissions.(iv) consequential loss.[70]I should add that the claim for consequential loss was abandoned during the trial.[71]CCC in its Defence denies the existence of any contract or collateral warranties between Fuji and CCC. CCC denies that it owed any duty of care in tort to Fuji. If and insofar as any contractual or tortious duties were owed to Fuji, CCC denies the alleged breaches. CCC also pleads a number of specific points relating to damages.[72]It must be admitted that, as time passed and as the Re-Re-Amended Reply developed towards its final form, the pleadings on both sides became somewhat complex. I shall not attempt to summarise them.[73]This action has progressed efficiently through the interlocutory stages. The trial started on Monday 11th July. Mr Simon Lofthouse represents Fuji. Mr Richard Harding represents CCC. The trial, including this judgment, is lasting for a total of eight days. The trial has proceeded in accordance with an extremely sensible timetable agreed between counsel. I congratulate the solicitors and counsel on both sides for the efficient manner which this trial has been prepared and conducted.

Part 4. The Evidence Given by Witnesses of Fact

[74]In this part I shall summarise the factual evidence which has been given at trial. In the case of each witness, I shall interweave the material parts of his written statement and his oral evidence. I shall present each witness's evidence in broadly chronological order rather than following the order in which the evidence was given. When preparing this summary, I have re-read the whole of the evidence. In order to keep this part within manageable length, I shall not attempt to recite the whole of the evidence. The fact that I do not mention a piece of evidence, certainly does not mean that I have overlooked it or failed to take it into account. I shall start with the claimant's witnesses of fact.

Philip Heyworth

[75]Mr Heyworth was employed by Fuji from September 1999 to January 2003. He was plant manager at Scimitar Close. On joining the company, Mr Heyworth was made aware of the Enforcement Notice served by Medway on 21st September 1999. He realised that this was a serious matter. Indeed, as he said in cross-examination, if Fuji did not comply, its operations might eventually be shut down.[76]Mr Heyworth was also made aware of Fuji's decision to engage ABB to install abatement plant. The documentation provided by ABB in the months following September 1999 was not satisfactory. When Paul Vidler joined Fuji in February 2000, one of his first tasks was to consider the ABB proposal and possible alternatives. It was Mr Vidler who made contact first with GMS and then with CCC.[77]Mr Hanan first visited Fuji in March 2000. He got down to work at once and made a favourable impression on Fuji. Mr Hanan produced spreadsheets relating to three possible systems, namely:(i) catalytic oxidiser;(ii) catalytic oxidiser combined with CHP;(iii) RTO. Mr Hanan explained the pros and cons of each and indicated that an RTO would have a number of disadvantages. Mr Hanan advised that the most appropriate system for Fuji's purposes was a rotary concentrator plus catalytic oxidiser. This had been the basis of ABB's proposal.[78]Mr Heyworth said in cross-examination that this is what Fuji were interested in. Fuji did not ask CCC to look at other technologies. Mr Heyworth looked at the options purely from a financial point of view. He understood that an RTO or an oxidiser, with or without CHP, could all do the technical job which was required.[79]What Mr Heyworth had to weigh up were the financial considerations. These were the initial costs, the running costs and the cost/benefit of including CHP. Mr Heyworth was concerned to have an abatement plant that would last for some time. CCC said that the catalyst had a life of 15 to 20 years. Mr Heyworth appreciated that the legal requirements might become more stringent. He therefore said that the VOC emissions should be reduced to something less than 50 mg/m3. Mr Heyworth also informed Mr Hanan that it was intended that Fuji's output would increase by 50 per cent. When pressed about this in cross-examination, Mr Heyworth said that he was not specific about how this increase would be achieved.[80]In March or April, Fuji decided in principle to proceed with CCC rather than ABB. The Japan office continued to have concerns because it favoured an RTO but eventually, with Mr Hanan's help, these concerns were allayed. Sun Chemicals, who were consulted about the matter, made little contribution to the debate. The Japan office authorised acceptance of CCC's proposal but without CHP.[81]Mr Heyworth believed that CHP would follow later but this was not a matter of much concern to him. In due course, a Letter of Intent was signed and installation proceeded. Following completion and handover, many problems with the abatement plant were encountered. Fuji employed Malcolm Pym to deal with these. Mr Heyworth was cross-examined in some detail about increases in printing speed during this period. He agreed that, from March 2001 onwards, new inks were used which enabled greater speeds to be achieved. On occasions the presses reached speeds of 140 or 150 metres per minute, but the average was well below that. For a number of technical reasons, Fuji achieved greater speeds when printing Lucozade labels than when printing other products.

Paul Vidler

[82]Mr Vidler was employed by Fuji as engineering and facilities manager from February 2000 until May 2004. It was elicited in cross-examination that Mr Vidler parted from Fuji in strained circumstances.[83]When Mr Vidler joined Fuji, he noted that the printing machines were fairly old. Their average speed was about 60 to 70 metres per minute. There was no emissions abatement equipment and this was a serious problem.[84]Mr Vidler was made aware of the Enforcement Notice and of the risk that printing operations might be closed down if Fuji did not comply with the notice. By February 2000 a decision had been made to accept ABB's proposal. In other words, Fuji was going to have a rotary concentrator and oxidiser with CHP.[85]Mr Vidler decided to obtain an up-to-date emissions report. He approached Greenbank, a specialist firm who were surveying and balancing airflows across Fuji's premises. Greenbank said that emissions testing was outside their expertise. However, they introduced Mr Vidler to both GMS and CCC. Mr Vidler arranged for GMS to do emissions testing and, as a matter of convenience, GMS did this work as subcontractor to Greenbank. Mr Vidler was present when GMS did their emissions testing. Mr Vidler did his best to ensure maximum output during the time of these tests but it was almost impossible to get all 21 printing stations operating on maximum at the same time.[86]In due course Mr Vidler met Mr Hanan of CCC. Mr Vidler gave to Mr Hanan copies of the Stanger report, the GMS report, and ABB's proposal. When Mr Vidler first approached CCC, he regarded CCC's involvement as a tactic to put pressure on ABB.[87]Mr Vidler thought that there would be insufficient time for CCC to produce a proposal since ABB had needed many months for the exercise. In the event, however, CCC said that they could produce a proposal in four weeks and they did so.[88]Mr Vidler asked CCC to produce a like-for-like proposal which could be compared with ABB's proposal. Mr Vidler also asked CCC to review ABB's proposal in order to make sure that the proposed equipment (namely a concentrator plus oxidiser) would be suitable for Fuji's operations. Mr Vidler expected to be told if the proposed equipment was inappropriate. One reason why Mr Vidler wanted this reassurance was that there had been difficulties with ABB.[89]CCC's first proposal came in dated 31st March. Mr Vidler was impressed and decided to take matters further with CCC. In discussions with Mr Hanan, Mr Vidler said that the abatement equipment should be able to cope with the maximum emissions from Fuji's plant. Mr Vidler also asked Mr Hanan to take into account the possibility of increased production and printing speed. He gave to Mr Hanan a technical document showing the maximum speeds that the presses were designed to achieve. These were about 169 or 170 metres per minute.[90]This evidence was strongly challenged in cross-examination. In response, Mr Vidler pointed out that the process air stream volume shown in CCC's proposals progressively increased. In the 31st March proposal, this was shown as 50,500 Nm3/hr. The figure increased to 60,000 in the two proposals dated 8th May. It increased to 75,000 in the proposal dated 30th May. The figure finally went down to 70,000 in the proposal dated 12th October. This was because the Japan office said that an airflow of 70,000 Nm3/hr would be sufficient. Mr Vidler said that the increased airflows shown in the various proposals after 31st March were included because Mr Vidler had informed Mr Hanan about Fuji's intention to increase speeds.[91]Having considered all of the oral evidence and the documents, I accept as accurate Mr Vidler's account of the discussions which he had with Mr Hanan concerning future increases in press speeds.[92]I now return to the narrative summary of Mr Vidler's evidence. Mr Vidler assumed that Mr Hanan had made sufficient allowance for VOC loading. He relied upon the expertise of CCC, and believed that they would have correctly interpreted the Stanger and GMS reports. The Japan office continued to favour an RTO until late June. CCC advised against installing an RTO, principally on the grounds of high operating costs (see, for example, Mr Hanan's e-mail to Mr vidler of 21st June 2000).[93]Mr Vidler was content to rely on CCC's advice but the recommendations of CCC were not in themselves sufficient to persuade the Japan office that an oxidiser plus concentrator wheel would be appropriate so Mr Vidler also obtained the views of GMS. Mr Vidler regarded GMS as independent, since at the time he was unaware that GMS would get a commission for the deal from CCC. Mr Vidler also spoke to Fuji's US office. In due course, the Japan office was persuaded by the merits of CCC's proposal and authorised the contract with CCC to go ahead but excluding the option of CHP.[94]The contract was placed with CCE for two reasons: first, CCC said they were setting up this subsidiary company in England in order to provide proper support for their contracts in England and Europe; secondly, Fuji prefered to do business with an English company. Fuji did not ask for a parent company guarantee. The project went ahead in two phases. An exhaust stack was constructed in the autumn of 2000. The installation plant was installed in November and December. Although the contract was placed with CCE, precisely the same individuals from CCC were running the project.[95]The system was tested by GMS in January 2001 and appeared to be satisfactory. The plant was being run under normal conditions but not maximum conditions. In the spring of 2001, overheating problems developed. Sometimes the abatement plant had to be shut down but this did not stop production continuing. New inks were gradually introduced during 2001 which led to increased printing speeds. The overheating problems grew steadily worse. However, CCC advised that these problems could be overcome. Accordingly, Mr Vidler was prepared to sign an Acceptance Certificate on 22nd May, and he duly did so.[96]CCE carried out remedial works in the summer of 2001 and Fuji paid for these. The plant continued to operate and it passed annual tests which satisfied Medway. Nevertheless, it can be seen from the heating records attached to Mr Vidler's statement that the overheating problems continued, and these were never resolved.[97]The hypothetical question as to what Fuji would have done, if in 2000 CCC had given different advice, was dealt with briefly. Mr Vidler said that, if CCC had recommended an RTO system, he would not have rejected their advice.

Nicholas Winchcombe

[98]Mr Winchcombe formerly worked for ink manufacturers who supplied inks to Fuji. In July 2003 Mr Winchcombe joined Fuji as a shift manager. Mr Winchcombe produced a very helpful table showing how print speeds increased over the years: In 2000 the average print speed was 97 metres per minute. In 2001 the average was 104 metres per minute. In 2002 the average was 111 metres per minute. In 2003 the average was 108 metres per minute. In 2004 the average was 106 metres per minute.[99]Mr Winchcombe readily agreed in cross-examination that actual speeds at any given time may be well above or well below the average. Mr Winchcombe also produced a helpful colour chart showing how print speeds varied from week to week over the five-year period, January 2000 to December 2004.

Richard Brooks

[100]Mr Brooks has been plant manager at Fuji's Gillingham premises since June 2003. He has dealt with numerous problems concerning the abatement equipment installed by CCC. Mr Brooks produced a schedule of costs incurred or anticipated as a result of these problems. That schedule is at bundle B1, pages 160 to 161. Certain items in this schedule were abandoned during Mr Brooks's evidence-in-chief. The remaining items were numbered 1 to 33. He maintained that all of these items are attributable one way or another to the overheating problem.[101]In cross-examination, Mr Brooks abandoned item 1, which in my view is unsustainable. However, he maintained Fuji's claim to items 2 to 33. He resisted the suggestion in cross-examination that these were routine items that would have been incurred anyway. None of the testing or monitoring costs were referrable to the periodic tests which were carried out to meet the requirements of Medway. Of the £36,000 which Fuji has paid to Emission Technologies Limited, less than £10,000 is included in this schedule.[102]Mr Brooks is also dealing with the purchase of a new RTO to replace equipment installed by CCC. He vigorously rejected the suggestion that he should acquire a secondhand RTO. He pointed out that Fuji had paid over £1 million to CCC for the original equipment. He was simply not prepared to accept used equipment shipped in from an unknown source. He also vigorously rejected the suggestion that the new RTO was necessary because of plans to expand Fuji's plant. Although possible expansion had been discussed from time to time and some speculative plans had been drafted, Fuji had no current intention to expand its Gillingham plant and Fuji was most unlikely to undertake such expansion.[103]Fuji has decided to buy a new Epsilon model RTO from Megtech. Mr Brooks produced the Megtech quotation. This is dated 13th June 2005 and, excluding certain extra items, is in the sum of £600,000. Mr Brooks also produced a purchase requisition which has been sent to Megtech and which he says stands as a purchase order. Megtech have recommended this particular RTO after considering up-to-date reports on Fuji's emissions forwarded to Megtech by Mr Brooks. However, the decision to purchase was made by Mr Brooks relying on his own judgment.[104]In justification of the decision, Mr Brooks said that Fuji's first priority was to get abatement plant that works. Megtech's quotation provides for plant that can handle VOC loadings of 8 grams per cubic metre. Fuji has no need for that capacity, however, when Mr Brooks spoke to Megtech, they said that there would be no price reduction if this figure is reduced to 6 grams.[105]The new RTO will be situated in a different location from the existing abatement plant. Mr Brooks gave a number of reasons for this. One reason is that it enables the shutdown period of the abatement plant to be reduced to two weeks. Fuji have obtained a dispensation for this period. Therefore production will not be interrupted. It is for this reason that the claimants' pleaded claim for consequential loss is abandoned. In cross-examination, Mr Brooks rejected the suggestion that Fuji were being extravagant in any way. He pointed out that Fuji is re-using the existing stack and ducting.[106]Mr Brooks accepted that the existing plant will have some resale value. On the basis of his enquiries, this will not be more than £15,000.[107]Mr Brooks dismissed criticisms of the printing presses at Gillingham. They are only 15 years old. They have solid frames and are better than many new ones. Mr Brooks is doing his utmost to increase printing speeds and is always optimistic in his production plans.

Malcolm Pym

[108]Mr Pym was employed by CCE from November 2000 to April 2003. Since then he has run his own company, Emission Technologies Limited. Mr Pym has a number of years' experience in the abatement business but no qualifications apart from a City & Guilds Certificate. When Mr Pym joined CCE in November 2000, he spent a couple of days watching the abatement plant for Fuji being manufactured. He then went on holiday. He returned to work a few days before Christmas and went to Fuji's premises where the installation was nearing completion.[109]Mr Pym prepared a snagging list dated 22nd December. Item 6 on the list, which he admits is badly phrased, refers to a problem with the temperature of desorption air. Because of pressure drop, too much desorption air was being drawn through the secondary heat exchanger, and the temperature of that air was too high. This caused the whole system to cut out from time to time. Mr Pym effected a temporary repair to deal with this in early January 2001 and a permanent repair in February or March 2001. The permanent repair involved fitting an extra damper to the duct work leading from the secondary heat exchanger. In the course of his evidence, Mr Pym marked the location of this damper in manuscript on the P&ID drawing.[110]Once the problem of desorption air temperature had been overcome, this no longer caused the system to cut out from time to time. However, a new problem then emerged. The air passing over the catalyst bed was overheating. This air ought to emerge at a temperature of 400 degrees Centigrade. In fact it often emerged at 500 degrees or more. The overheating was due to the level of VOCs in the air stream being higher than that for which the plant was designed. The overheating caused the system to shut down. In order to reduce the impact of this new problem, Mr Hanan increased the temperature at which the system cut out from 425 degrees to 615 degrees. Even at this new setting, however, from time to time the system would shut down. This can be seen from the high temperature records in bundle B1/1.[111]In the summer of 2001, Mr Pym installed a hot side bypass system in order to mitigate the problem of VOC-laden air overheating. However, this was only of marginal benefit. In internal discussions with CCC, Mr Pym suggested that Mr Hanan had misinterpreted the GMS report when originally designing the abatement plant.[112]After a year, Mr Pym noted that the catalyst was degrading prematurely as a result of the excess temperatures. After leaving CCC, Mr Pym continued to maintain, test and service Fuji's abatement plant. Mr Pym did this through the medium of his company, Emissions Technologies Limited. Indeed, this work accounts for about a quarter of that company's income.[113]I now turn to the factual witnesses called on behalf of the defendant.

Randal Hanan

[114]Mr Hanan studied industrial technology at the University of Wisconsin although he did not complete the course. After leaving university, Mr Hanan worked for a number of companies in the field of air correction and VOC treatment before setting up his own company called “Gulf Coast Environmental”. Mr Hanan's reason for changing employment every couple of years or so was not because he fell out with his employers; on the contrary, he was building up experience with a view to setting up his own company in due course.[115]Mr Hanan worked for CCC between late 1999 and early 2002. His work there was split 50/50 between sales and design. Mr Hanan made a visit to England between 27th February and 3rd March 2000. Through Gordon Lewis of GMS, he was introduced to Greenbank. Mr Hanan discussed with Greenbank the prospect of Greenbank and CCC partnering in the promotion of CCC's products in the UK. Jeffrey Rossiter of Greenbank told Mr Hanan about Fuji and said that his company was completing an emissions survey at Fuji's premises.[116]On 8th March, after returning to the United States, Mr Hanan received a phone call from Mr Rossiter. Mr Rossiter said that CCC would be invited to put in a proposal for Fuji's abatement plant project. The proposal had to be completed within two or three weeks and it had to be for the technology which Fuji had selected. This comprised a rotary concentrator, a catalytic oxidiser and CHP generating plant. Mr Rossiter said that, if Mr Hanan did not quote what Fuji wanted, then Fuji would not deal with him.[117]Mr Hanan was sent an extract from ABB's proposal and was asked to prepare a like-for-like quotation. This document indicated a VOC flow of 85 kilograms per hour and a flow of air from the printer dryers of 48,000 Nm3/hr. Mr Hanan designed for a VOC loading of 2 to 2.5 grams per cubic metre as instructed by Mike Tooke of GMS. After allowing for a safety factor, this became 3 grams per cubic metre. Mr Hanan understood that the concentration ratio taken by ABB was 4:1.[118]During March, Mr Hanan received various communications from Greenbank and GMS. These included a sheet of paper headed “Solvent Systems Being Used at Fuji”, dated November 1998. Mr Hanan duly prepared the proposal of 31st March on the basis of information and instructions which he had received. The proposal was for rotary concentrator and catalytic converter. Mr Hanan was asked in cross-examination about the following sentence in that proposal:
“After a thorough application review of your process and conditions, we have determined that a zeolite rotary concentrator system with a catalytic oxidiser provides the best balance between required operational conditions, initial capital costs and annual operational costs.”
[119]Mr Hanan said that, as at 31st March, no such thorough review had been carried out. This sentence was mere sales talk. Mr Hanan did not see the GMS report before preparing that initial proposal. There was some inconsistency in the oral evidence as to when the GMS report reached Mr Hanan. At first, Mr Hanan said that he did not see the GMS report until 90 or 100 days after the initial proposal, but later Mr Hanan was clear that he had received the report before 8th May. I think that Mr Hanan's later evidence must be right on this point.[120]Mr Hanan admits that when he did receive that report he misinterpreted it. He thought that the weights shown in the various summaries of test results were VOC levels. That was wrong. As can be seen from a closer reading of the report, these were carbon levels. Accordingly, the figures still had to be converted into solvent levels. Mr Hanan candidly admits that in 2000 he did not understand the proper use of conversion factors and response factors as set out in boxes 3, 4 and 5 of attachment 5 to the claimant's opening note.[121]On the pleadings and the witness statements, there is an issue as to whether the Stanger report was supplied to CCC in early 2000. However, in cross-examination, Mr Hanan readily agreed that he received the Stanger report at an early stage.[122]On 24th April, Mr Hanan sent a letter to Mr Vidler from which I have quoted in Part 2 above. As Mr Hanan said succinctly in his witness statement, this letter:
“... included a large volume of technical and project-related information and a turn-key summary project scope for the abatement plant.”
[123]Mr Hanan returned to the UK on 30th April and remained until 17th May. During this period, he was based in Rochester and made numerous visits to Fuji's premises. He worked long hours on the project. On 8th May, Mr Hanan produced CCC's second proposal to Fuji. This bore the reference 238A. The proposal was for a rotary concentrator with CHP. Fuji said that Japan may want to omit the CHP. So Mr Hanan hastily prepared Proposal 238, Rev 1, which separated out the CHP. Mr Hanan brought this round to Fuji's premises on the evening of 8th May.[124]Mr Hanan's designs always include generous factors of safety. In respect of VOC loadings, it is Mr Hanan's practice to add on a margin of 50 or 75 per cent. Mr Hanan included factors of safety for all elements of the abatement plant which he specified in the various proposals of May 2000. Mr Hanan prepared the design of Fuji's abatement plant on the basis of a “worst case scenario”. This phrase was used in discussion with Fuji.[125]Mr Hanan recalls discussion about Fuji's need to increase printing speed. Mr Vidler, Mr Heyworth and Mr Tierie wanted to do this either because of instructions from Japan or else on their own initiative. However, Mr Hanan was also told that the printing presses were old, Mr Vidler had difficulty in getting spare parts, the operatives were set in their ways.[126]Despite these difficulties, Mr Hanan knew that Fuji was attempting to increase press speeds. This matter was discussed, for example, at the meeting on 17th May.[127]In the various proposals which Mr Hanan produced in May, the opening words of section 2 read as follows:
“After a thorough application and site review of the Fuji Seal's process and conditions, we have determined ...”
[128]The words “and site review” are an addition which did not feature in the March proposal. By May 2000, Mr Hanan had indeed carried out the thorough application and site review of the Fuji Seal's process and conditions described in that sentence. Mr Hanan had carefully considered the maintenance and running costs of the various pieces of equipment.[129]The second, third and fourth paragraphs of section 2 (quoted in Part 2 of this judgment) were included in order to persuade the Japanese office that CCC was an appropriate company to deal with.[130]On 30th May, Mr Hanan prepared CCC's third proposal. In this proposal the process stream volume was increased to 75,000 Nm3/hr. The size of the rotary concentrator was adjusted accordingly, although this does not appear in the proposal owing to a typographical error. The principles of the design remained the same in this proposal as in the earlier ones.[131]During June, Mr Hanan provided information and material to Fuji in order to persuade the Japan office to accept CCC's proposal. Mr Hanan understood that Fuji Japan was keen on having an RTO whereas Fuji Europe was not. On 21st June, Mr Hanan sent to Mr Vidler the comparison document which I have summarised in Part 2 above. In this document Mr Vidler took an average VOC loading of 0.8 grams per cubic metre and a maximum VOC loading of 1.5 grams per cubic metre. This marked a substantial reduction from the figures which Mr Hanan had been using at an earlier stage.[132]In his oral evidence, Mr Hanan gave two different explanations for using these lower figures. On Day 3 he said he derived these figures from the GMS report. He arrived at these figures because he misinterpreted the report. On Day 4, Mr Hanan said that he was given these figures by Fuji after Fuji had taken advice. On this issue, I believe that Mr Hanan's evidence on Day 3 was correct and that his evidence on Day 4 was mistaken.[133]At some point in the design process, the rotary concentrator changed from being two wheels to one wheel with increased depth. The manufacturer's brochure indicated that this wheel was designed for a VOC loading of 0.8 grams per normal cubic metre with peaks of 2 grams per normal cubic metre.[134]Mr Hanan's account of events during the second half of 2000 is consistent with the documents and does not require repetition in this judgment. As Mr Hanan says in his witness statement, the document headed “Final Pricing and Proposal” dated 12th October reflected parameters that had been used in earlier documents and in discussions over the previous months.[135]In January 2001, emissions testing by GMS established that the plant was working well. Everyone was pleased with the outcome.[136]On 6th February, Mr Hanan learnt that there had been a shutdown because of high temperature at the outlet of the catalytic oxidiser. He considered that this might be due to high levels of VOC loadings. In order to prevent shutdowns, Mr Hanan substantially raised the setting of the alarm at the outlet of the oxidiser. In Mr Hanan's view, the figure of 400 degrees, which was recorded on the P&ID drawing, was an incidental figure; it could be adjusted upwards without adverse effect.[137]By April, Mr Hanan concluded that, from his calculations, something in the system was not making sense. Nevertheless Mr Hanan took the view that high temperatures at the oxidiser outlet were not a problem or a defect.[138]Mr Hanan left CCC on good terms in early 2002, therefore he did not see the memo which Mr Pym sent in later that year about the continuing problem of high temperature shutdowns.[139]Overall CCC did a good job for Fuji. In the period after installation, CCC devoted considerable time and effort over and above their contractual obligations in order to help Fuji remain operational.

Ivan Chamulak

[140]Mr Chamulak has 28 years' experience of air pollution control. He has been employed by CCC since February 2002 as Vice-President for Industrial Products. Soon after joining CCC, Mr Chamulak was informed about the increased overheating of Fuji's catalytic oxidiser. In May 2002, Mr Chamulak visited Fuji's premises and talked to the staff. Mr Vidler said that Fuji intended to operate the presses at speeds of 100 to 120 metres per minute. Mr Chamulak advised that Fuji should only operate the presses at conditions which were safe for the abatement system.[141]In November 2002, VOC loadings in the region of 6 grams per normal cubic metre were measured in emissions from Fuji's presses. These measurements were not taken by Mr Chamulak. On 17th January, Mr Chamulak wrote to Fuji setting out three options for consideration. On 30th January 2003, Mr Chamulak sent a proposal to Fuji for the installation of a new RTO system. Mr Chamulak quoted a price of 724,000 euros. This quotation was not accepted. Tests carried out in April 2003 indicated that, under normal operating conditions, Fuji's abatement plant complied with the emissions limits set out in Guidance Note PG6/17.[142]In May 2003, Mr Chamulak visited Fuji's premises. He took a sample of catalyst from the bottom of the oxidiser. Prototech analysed the sample and found that the catalyst had suffered some damage. Mr Chamulak took the view that Fuji's abatement system was in good condition, considering that it had been operated for two years well outside the original design criteria.

Mark Ruff

[143]Mr Ruff is an experienced and well-qualified project and plant engineer. Mr Ruff's father was one of the founders of CCC in the 1950s. Since 1994, Mr Ruff has been the President and Chief Executive Officer of CCC. He takes well-justified pride in the achievements of the company. CCC is a world leader in all metal catalysts for air correction applications and in VOC abatement systems.[144]CCC's engineering team, who were involved in the Fuji project during 2000 and 2001, included the following personnel: Doug Hesser, the senior abatement project manager and engineer. He is a mechanical engineer with a Bachelor of Science degree. He has 15 years of abatement experience. Stacy Larson, the senior designer. He has a Bachelor of Science degree from the University of Michigan in mechanical design, and five years of abatement dust collection and dryer experience, including employment with various companies. Gerry Brewer, the technical director for industrial engineering. His qualifications are from the Lawrence Institute of Technology. He has 45 years' experience of air correction applications, abatement catalysts and industrial systems process engineering. Rick Corcoran, the service manager, who has 12 years of technical service. John Robinson who has a Bachelor of Science degree and is a chemical engineer. He has 12 years of catalyst and applications evaluation of emission sources.[145]Mr Hanan, who played a prominent role in the project had joined CCC more recently than the other staff, namely in November 1999. However, he also had vast experience.[146]Mr Ruff takes all business situations seriously. He takes this claim seriously.[147]Let me now stand back for a moment and look at the factual evidence in the round. Although on paper there are many issues of fact between the parties, these greatly diminished when the oral evidence was given. I formed the view that all of the witnesses were honest and trying to help the court. Where occasionally the evidence conflicts, this arises from differences of recollection.[148]Mr Hanan is in an embarrassing position. He is the CCC employee who played the largest role in a project which has clearly had an unfortunate outcome. Nevertheless, Mr Hanan gave his evidence candidly and openly. In cross-examination he fairly accepted that he had misinterpreted the GMS report. That, of course, was not an admission of negligence. Whether or not the error was negligent, is a separate question for the court to determine.

Part 5. What Contractual or Tortious Duties Were Owed by CCC to Fuji?

[149]Fuji contends that there was a collateral warranty given by CCC to Fuji on the principle stated in Shanklin Pier v DetelProducts [1951] 2 KB 854. The nature of Fuji's case is neatly summarised in paragraphs 230 and 232 of the claimants' opening note as follows:
“Fuji Seal contends that in circumstances where the design was undertaken by CCC who then recommended that the contract for performance of the relevant obligations should be with CCE (albeit the explanation given at the time was CCC was in essence just a vehicle for Fuji Seals payments: see paragraph 36 of Paul Vidler's statement at [B1/268]), a situation materially analogous in Shanklin Pier arises ... Indeed, Fuji Seal's facts are stronger than those in Shanklin Pier because the nature of the warranty was the very production by CCC of the design that CCE was going to implement.”
[150]In his closing speech, Mr Lofthouse for Fuji placed particular emphasis on the fourth paragraph of section 2 in CCC's proposals dated 8th and 30th May 2000.[151]In evaluating this argument, it is necessary to look with care at the principles upon which the decision in Shanklin Pier is based. The facts of Shanklin Pier are as follows: The plaintiffs were the owners of a pier at Shanklin which had fallen into disrepair during the Second World War. The plaintiffs entered into a contract with contractors to have the necessary repairs effected and to have the whole pier repainted with two coats of bitumastic or bituminous paint. Under the contract, the claimants did, however, retain the right to vary the specification.[152]A director of the defendant company, Detel Products Limited, went to Shanklin with the object of obtaining for his company a contract for the supply of materials for repainting, the pier. He saw the managing director and later he also saw the plaintiff's architect. He told them that certain paint manufactured by the defendants known as DMU would be suitable for the work. He produced a pamphlet and so forth. He told the architect that the paint was not subject to creep and suggested that two coats should be used on the pier as a protective coat and promised it should have a life of at least seven to 10 years.[153]The director of the plaintiff company and the architect were persuaded by what the representative from Detel Products said, and the plaintiffs exercised their right to vary the specification so that there was substituted in the specification a requirement for two coats of DMU. That paint was duly bought by the contractors and applied by the contractors to the pier on the Isle of Wight.[154]Unfortunately there were problems with the paint and it did not perform as anticipated.[155]The plaintiffs made a claim against a Detel Products on the following basis. It was said that in consideration of the plaintiffs specifying that the contractors should use DMU for repainting the pier, the defendants warranted that DMU would be suitable for repainting the pier and would give a surface impervious to dampness, would prevent corrosion and the creeping of rust and would have a life of 7 to 10 years.[156]At page 856 Mr

Justice McNair said this:

“In the result, I am satisfied that, if a direct contract of purchase and sale of the DMU had then been made between the plaintiffs and the defendants, the correct conclusion on the facts would have been that the defendants gave the plaintiffs the warranties substantially in the form alleged in the statement of claim. In reaching this conclusion, I adopt the principles stated by Holt CJ, in Crosse v Gardner and Medina v Stoughton that an affirmation at the time of sale is a warranty, provided it appear on evidence to have been so intended. “Counsel for the defendants submitted that in law a warranty could give rise to no enforceable cause of action except between the same parties as the parties to the main contract in relation to which the warranty was given. In principle this submission seems to me to be unsound. If, as is elementary, the consideration for the warranty in the usual case is the entering into of the main contract in relation to which the warranty is given, I see no reason why there may not be an enforceable warranty between A and B supported by the consideration that B should cause C to enter into a contract with A or that B should do some other act for the benefit of A.”
[157]An important feature of this case was that the building contractors were at arm's length from the plaintiffs. It was the building contractors who needed to purchase the paint. All that the plaintiffs could do was to control the specification. The present case is different. CCC and CCE were not at arm's length. CCE was a subsidiary company. It would have been perfectly possible for Fuji and CCC to contract directly with one another if that was what they wanted to do, but neither company wished to adopt that course. Fuji wished to contract with an English company rather than an American company. CCC wished to run its European operations through a subsidiary company. CCC's contractual rights and remedies in respect of quality and fitness for purpose of the abatement plant would be regulated by the contract between Fuji and CCE. The extent of those rights and remedies would be a matter for commercial negotiation. If Fuji had any fears that CCC would not stand behind its subsidiary company, Fuji could quite easily have asked for a parent company guarantee. It is difficult to see any proper basis upon which CCC could or would have refused to give a parent company guarantee. However, Fuji did not request this. Fuji, for its own business reasons, was content to rely upon its contract with a subsidiary company.[158]In my view, this situation is a far cry from that prevailing in Shanklin Pier. It is not appropriate for this court to supplement the contractual arrangements which experienced and well-advised commercial parties choose to make. Fuji and CCC chose not to enter into any direct contract. In my judgment, no form of collateral warranty between those two companies can be read into or derived from the pre-contract documents.[159]I turn now to the alleged duty of care in tort.[160]Fuji contend that CCC owed a duty of care to Fuji on the basis set out by Lord Goff in Henderson v Merrett [1995] 2 A.C. 145 at pages 180-181. In other words, it is said that CCC assumed responsibility towards Fuji. Here, in my judgment, Fuji are on firmer ground. I accept Mr Vidler's evidence that he did not simply ask CCC to quote on a like-for-like basis to ABB's proposal. He also asked CCC to review that proposal. In successive quotations and also in correspondence, for example the letter dated 24th April 2000, CCC took it upon themselves to give specific advice to Fuji concerning what abatement equipment would be suitable for Fuji's premises. The opening sentence of section 2 of each of CCC's proposals is crystal clear in this regard.[161]There came a time when the concentration of VOCs which CCC allowed for in its design was substantially reduced. This substantial reduction was made by Mr Hanan on the basis of his reading of the GMS report. See my summary of Mr Hanan's evidence in part 4 above. It is clear to me, both from the documents and from the oral evidence, that an assessment of the appropriate VOC loading was made by CCC. CCC decided to take a basic figure of 800 grams per cubic metre with an additional allowance for peaks.[162]The next matter to consider is whether CCC's duty was in any way limited to what could be derived from the GMS report or whether it was CCC's duty to consider all the material available to it when giving advice. In my view, it was CCC's duty to consider all the available material, including in particular the Stanger report. I reach this conclusion for four reasons:(i) Although two years old, the Stanger report was plainly relevant to the task in hand. Stanger did their survey at a time when Fuji had the same printing machinery in operation.(ii) Mr Vidler asked Mr Hanan to look at both the GMS report and the Stanger report (see Day 2, page 89).(iii) Mr Rafflenbeul (the defendant's expert witness) said in cross-examination that he would expect someone in that position to look at both reports or at least to tell the client if he was going to disregard one of the reports.(iv) Mr Hanan said that he took account of all reports, including the Stanger report, when preparing the proposal dated 30th May.[163]Let me now draw the threads together. For the reasons stated above, I am satisfied that, during the spring and summer of 2000, CCC owed to Fuji the duty of care pleaded in paragraph 14 of the Points of Claim. In discharging that duty of care and tendering advice to Fuji, it was CCC's duty to take into account all the material provided to it.

Part 6. The Principal Issues Between The Expert Witnesses

[164]Two expert witnesses have given evidence at this trial, Dr Colin Leci for the claimant, and Mr Rolf Rafflenbeul for the defendant. Both experts are highly qualified and have long experience of air pollution control. Mr Rafflenbeul has much greater experience specifically on air pollution control in the context of printing works.[165]The expert reports and their appendices occupy four substantial ring-files. Learned papers and articles abound. There are many pages of calculations to engage the reader. I have read the expert material with interest and admiration. Nevertheless, in preparing this part of the judgment, it is necessary to exercise some self-denial. I shall focus only on those issues between the experts which are important for the resolution of this litigation. (i). What concentration of VOCs was revealed by the GMS survey?[166]Dr Leci concludes in his first report that, properly interpreted, the GMS survey results demonstrate a VOC concentration of 4.231 grams per cubic metre in the emissions from Fuji's presses. See paragraph 6.3.4, the supporting calculations at pages 51 to 53 of appendix 1 and the spreadsheets which Dr Leci produced during cross-examination.[167]Mr Rafflenbeul concludes in his first report that the GMS survey, properly interpreted, shows a mass flow of 85 kilograms of VOCs per hour. (See paragraph 5.3.8 and the supporting calculations at appendix 29). In order to convert 85 kilograms per hour into grams per cubic metre, one divides by the process stream volume. In the GMS survey, that is 55,206 Nm3/hr. Thus, in Mr Rafflenbeul's view, the resulting concentration is 1.536 grams per cubic metre (see appendix 23 to Mr Rafflenbeul's first report).[168]On this issue, Mr Rafflenbeul's view has prevailed. Mr Harding demonstrated by skilful cross-examination that Dr Leci's calculations must be in error, and in due course Dr Leci conceded this.[169]In conclusion, it is established that at the time of the GMS survey on 24th March 2000 the concentration of VOCs in those emissions from Fuji's printing presses which GMS measured was 1.5 grams per cubic metre. (ii). Was it reasonable for CCC to interpret the GMS report as recording 0.8 grams of VOCs as solvents per cubic metre?[170]Dr Leci's answer to this question is, no. Mr Rafflenbeul's answer is, yes.[171]In cross-examination, Dr Leci accepted that, if one just looks at the summary pages in the GMS report, it seems that GMS are giving figures for VOC as solvent. Nevertheless, Dr Leci pointed out that, if one looks at the full printouts of test results, it can be seen that GMS are reporting figures for VOCs as carbon. Therefore, these figures need to be adjusted using the appropriate response factor. By this means, one can calculate the weight of VOCs as solvents. Full printouts of the test results are included in the GMS report for each of the three colour lines. These printouts appear close to the summary pages.[172]Mr Rafflenbeul, on the other hand, considers that it was reasonable for CCC to take the figures on the summary pages at face value and not to appreciate that these were figures for carbon. Both in his reports and in cross-examination, Mr Rafflenbeul stressed that CCC is a supplier of abatement equipment, not a designer.[173]On this issue I prefer the view of Dr Leci. CCC were not only specialist suppliers of abatement equipment, they also recommended appropriate equipment from a wide range of choices. They designed the configuration of that equipment and they prepared the P&ID drawings. CCC needed to possess a high degree of technical skill and understanding in the field of abatement technology. Reading and understanding the precise significance of emissions reports was, and indeed is, a basic part of CCC's work.[174]In my view, it should have been perfectly apparent to CCC that the figures in the GMS report related to carbon. This was clear from the heading of column 6 on all of the pages of test results included in the GMS report. CCC were not skim-reading the GMS report; they were studying it for a serious purpose, namely identifying suitable abatement plant for Fuji's premises. CCC placed heavy reliance upon the GMS report in much of the advice which CCC gave to Fuji. See, for example, the comparison document which Mr Hanan sent to Mr Vidler on 21st June 2000 (referred to in Part 2 above).[175]A specialist company such as CCC ought to have understood how to convert carbon figures to solvent figures. I am reinforced in my view that Mr Hanan ought to have spotted that the figures in the GMS report related to carbon by the answers which Mr Hanan gave in cross-examination when this point was put to him. He was unable to offer any good reason for overlooking the point.[176]In conclusion, I hold that it was not reasonable for CCC to interpret the GMS report as recording 0.8 grams of VOCs as solvents per cubic metre. (iii). How much heat is generated by VOCs passing over the catalyst bed?[177]When preheated desorption air passes over the catalyst bed, the VOCs are burnt and further heat is generated. The whole object of the exercise is, of course, the combustion of VOCs. The temperature rise is an incidental consequence. The heat which is generated by the combustion of VOCs is directly related to the concentration of VOCs in the desorption air. This heat can be calculated. The term “delta T” denotes the temperature rise which is caused by each gram of solvent contained in one cubic metre of desorption air. This figure has been calculated by the experts.[178]Mr Rafflenbeul's calculations are to be found at appendix 36 to his first report and at attachment 3 to his second report. He concludes that the delta T of “solvent 2” is 19.7 degrees. I should add that solvent 2 is one of the mixtures of VOCs identified in the GMS report. Dr Leci's calculations are in the appendix to his supplemental report. Dr Leci has done a back-calculation from certain data provided by Prototech. These calculations indicate a delta T of 22.7 degrees.[179]Both sets of calculations have been the subject of scrutiny during cross-examination, and no fault has been found in either. It seems to me that the explanation for the difference between Dr Leci's figure and Mr Rafflenbeul's figure lies in the different methods which the two experts have used. Both methods will give an approximate indication; neither will achieve perfect accuracy. In my view, the best estimate of delta T lies midway between the two calculated figures, namely 21 degrees. It should be noted that 21 degrees is the delta T which has been identified by Megtech.[180]One consequence which flows from delta T, whichever figure is taken, is that overheating in the catalyst chamber is inevitable. The P&ID drawing prepared by CCC envisages a temperature rise in the catalyst chamber of 55 degrees. The inlet temperature is 345 degrees, and the specified outlet temperature is 400 degrees. It can readily be seen that, if VOC loadings of the level indicated in the GMS report pass through the system, a much greater temperature rise than that will occur. Let me take, for example, a concentration of 1.5 grams of VOCs per cubic metre. Disregarding any arguments about the effectiveness of the Munters wheel, and assuming a concentration ratio of 8, once those VOCs have passed into the desorption air, the concentration will be 12 grams per cubic metre. 12 times 21 degrees equals 252 degrees. Accordingly, such air entering the catalyst bed at 345 degrees will leave at 597 degrees.[181]Thus, it can be seen that the exhaust air from Fuji's premises has always been likely to generate much greater heat in the catalyst chamber than was allowed for in the P&ID drawing and indeed in CCC's design. It should also be noted that the heat increase, which is bound to occur in the catalyst chamber, is substantially greater than that allowed for by Prototech when they were specifying the appropriate catalyst for use in Fuji's abatement plant. It will be recalled that Prototech were instructed to design on the basis of an exotherm of 50 degrees Centigrade. (iv). What VOC loading should CCC have designed for?[182]The relevant factors which CCC should have considered are the following:(a) The GMS report indicated a loading of 1.5 grams per cubic metre. The peaks would obviously be significantly higher. Also, the figure of 1.5 grams had a margin of error of 10 per cent.(b) As both Dr Leci and Mr Rafflenbeul agree, at the time of GMS's tests, there were significant fugitive emissions. If these were captured by the abatement plant (as was desirable), this would significantly increase the VOC loading.(c) At the time of GMS's tests, four ink trays were disconnected from the exhaust system. At first, in cross-examination, Mr Rafflenbeul was inclined to dismiss this. Subsequently, however, he conceded that this would have caused GMS to underestimate the quantity of VOCs.(d) Fuji had made plain their intention substantially to increase press speeds. Whatever Mr Hanan may have thought about the antiquity of Fuji's presses, he was not entitled to disregard that stated policy of his customer. Furthermore, according to Mr Rafflenbeul's evidence (which I accept on this point), there is a direct and linear relationship between press speed and emission of VOCs. See paragraph 2.16.1 of Mr Rafflenbeul's second report and his cross-examination on the afternoon of Day 6.(e) The Stanger report of 1998 indicated a concentration of 3.6 grams per cubic metre. Although initially this figure was disputed, both experts had accepted it by the end of cross-examination. It is now common ground that the Stanger report was provided to CCC.(f) Mr Rafflenbeul stated in cross-examination that it is appropriate to design plant for a VOC loading which is somewhere between the average figure and the peak figure.[183]Weighing up all these factors, I come to the conclusion that CCC should have recommended abatement plant on the basis of a VOC loading of 3.5 grams per cubic metre. (v). Was the abatement equipment which CCC recommended to Fuji appropriate?[184]The abatement equipment which CCC recommended essentially comprised a rotary concentrator and catalytic oxidiser. CCC always made it clear that CHP was an optional item which might be purchased later or might be omitted altogether. CCC never advised Fuji that CHP was an essential element of the system. The rotary concentrator and catalytic oxidiser which CCC recommended were described in the proposals of May 2000. The proposed layout of that plant and more details of the specification are apparent from the P&ID drawing which CCC prepared in July 2000. I am told that other versions of that drawing contained the same information in the box headed “Design Data” at the top left-hand corner as appears in the P&ID drawing prepared on 31st July 2000. This is the drawing which has been referred to throughout the trial.[185]Mr Rafflenbeul considers that, on the information available at the time, CCC's recommendations were reasonable. See Mr Rafflenbeul's first report. Dr Leci takes the opposite view. In my view, on the basis of the information then available, the abatement plant which CCC recommended was unsuitable for four reasons:(i) The system as a whole was designed for far too low a VOC loading, namely 0.8 grams per cubic metre on average and 1.5 grams per cubic metre at peaks.(ii) Substantial overheating in the catalyst chamber was inevitable. The catalyst was likely to be damaged in consequence. It will be recalled from Part 2 of this judgment that Prototech designed the catalyst for an exotherm of only 50 degrees.(iii) According to the manufacturer's data, the Munters wheel was designed for a VOC concentration of 0.8 grams per cubic metre at a flow rate of 70,000 normal cubic metres per hour. The Munters data also indicates that the required removal efficiency would be achieved if the peaks of VOC loadings were 2 grams per normal cubic metre of air. In actual fact, the concentration of VOCs, both in regular use and at peaks, was likely substantially to exceed the design basis adopted by Munters. I accept Mr Rafflenbeul's evidence that the Munters wheel probably performed better than indicated in the manufacturer's data. No doubt there was a factor of safety. Nevertheless, for the actual VOC loadings which sometimes pass through the system, the Munters wheel is likely to be inadequate.(iv) More fundamentally, the whole concept of a rotary concentrator and catalytic converter was inappropriate. A rotary concentrator and catalytic converter are suitable equipment for plant which generates only low levels of VOCs. Given the levels of VOC loadings which ought to have been identified (as mentioned earlier in this judgment), the appropriate abatement equipment was an RTO. See paragraph 3.5.5 of Mr Rafflenbeul's first report and the chart prepared by Dr Moretti which both experts have appended to their respective reports.

Part 7. Liability

[186]The first question to consider is whether CCC was in breach of the duty of care owed to Fuji. For the reasons set out earlier in this judgment, I hold that CCC was in breach of its duty of care owed to Fuji in the following respects:(i) CCC misread the GMS report and concluded that the normal VOC loading was only 800 mg/m3.(ii) CCC recommended an abatement system which was manifestly inadequate for Fuji's needs. The specified temperature in the catalyst chamber was bound to be substantially exceeded. The Munters wheel was not designed to be capable of adsorbing sufficient VOCs during periods of high usage. The system as a whole could not cope with the likely VOC loading.(iii) CCC failed to recommend appropriate abatement plant, namely an RTO.[187]The next issue to address is reliance. Mr Harding, on behalf of the defendant, contends that Fuji did not place reliance on any advice given by CCC. The final decision was made by the Japan office. It can be seen from the cross-examination of Mr Heyworth and Mr Vidler that the Japan office was not going to be swayed by what the supplier had to say. The Japan office sought and obtained independent advice from GMS on the matter.[188]In answer to this point, Mr Lofthouse, for the claimant, submitted that Fuji Seal Europe Limited, the claimant company, was very much influenced by CCC. It was Fuji Seal Europe Limited which entered the contract with CCE. The role of the Japan office was separate. The situation in this case was the not uncommon situation in which the approval of a holding company is required for a particular course of action.[189]Mr Lofthouse also relies on the decision of the Court of Appeal in Edgington v Fitzmaurice (1855) 29 Ch. D. 459 to make the point that reliance on the defendant need not be total or exclusive. In my judgment, Mr Lofthouse's submissions on this issue are correct. The advice of CCC was a major factor in Fuji's decision to purchase the recommended abatement plant from CCE. There were also other factors which influenced that decision. These were the advice of Fuji's sister company in the USA (which had had adverse experience of an RTO) and the advice of GMS, which was forwarded to the Japan office.[190]This matter can be looked at another way. If CCC had not given the clear and firm advice which it did give, I do not believe that Fuji would have gone ahead with its purchase from CCE.[191]Let me now move on from reliance to causation.[192]There are two main issues to consider here:(i) What would Fuji have done if in spring and summer 2000 it had received correct advice from CCC?(ii) Is CCC's breach of the duty of care the cause of the problems which Fuji has experienced post installation?[193]So far as the first issue is concerned, in my view, if CCC had given proper advice in the spring and summer of 2000, Fuji would have purchased an RTO. I reach this conclusion for two reasons:(i) Mr Vidler said in evidence that if CCC had recommended an RTO system, he would not have rejected that advice.(ii) It is inherently probable that Fuji would have bought an RTO, if CCC had recommended that. CCC was a specialist supplier which commanded Fuji's confidence. If Fuji had recommended an RTO, that advice would have chimed with what Fuji's head office in Japan wanted to hear. Also, the capital cost of an RTO was substantially less than the capital cost of a concentrator and catalytic oxidiser. Capital outlay was a major factor in Fuji's deliberations.[194]I turn to the second main issue on causation, namely, what was the cause of the overheating problems at Fuji's premises since February 2001? The precise nature of these problems and how often they led to shutdown has been debated during the trial. Mr Rafflenbeul, who has recently seen chart recorders from Fuji's premises, believes that shutdowns were not frequent and they were often caused by washing. These points came up late in the day. They have not been put in cross-examination. I am not persuaded by them. I am satisfied on the totality of the evidence that overheating has been a continual problem since February 2001 and that a significant number of shutdowns has occurred. I am also satisfied on the evidence that overheating has caused premature damage to the catalyst. I reach this conclusion having regard to the reports of tests on the catalyst in early 2003 and then in the summer of 2003. I also have regard to the conditions for which the catalyst was designed, as well as the very substantial temperatures to which it has been subjected during use since the beginning of 2001.[195]What, then, is the cause of these problems? CCC contend that the cause is a change in Fuji's operations at Gillingham. Fuji use new inks, the presses run faster, the VOC load is, on occasions, substantially higher than CCC could have anticipated in 2000.[196]I reject this argument for three reasons:(i) The average press speeds have increased since 2000 but not to any great degree. See the summary of Mr Winchcombe's evidence in part 4 above.(ii) It is quite true that actual printing speeds will depart substantially from the average, as Mr Winchcombe conceded in cross-examination. There will be peaks and there will be troughs. On the other hand, this has always been the case both before and after the year 2000. See, for example, the graphs contained in the Stanger report of 1998.(iii) Fuji specifically informed CCC of the intention to increase press speeds and asked CCC to take this into account in its design. See the summary of the evidence of Mr Heyworth, Mr Vidler and Mr Hanan in Part 4 above. See also the minutes of the meeting on 17th May 2000.[197]In my view, the cause of the overheating problems, the catalyst damage and the periodic shutdowns is that which Fuji alleges. The abatement plant installed in 2000 was unsuitable and incapable of handling the VOC loadings which would sometimes come from Fuji's processes. Of course there have not been problems all the time. On occasions the abatement plant has worked satisfactorily and has yielded satisfactory test results. Nevertheless, it is now common ground that remedial action is necessary and that what Fuji now needs is an RTO.[198]In my judgment, this situation has arisen because of CCC's breach of duty as identified above.[199]There is one final matter which I must address in relation to causation. This is Mr Harding's argument that any RTO installed in 2000 would be inadequate now. Therefore, the argument runs, the need to purchase a new RTO would arise in any event. It has not been caused by CCC's breach of duty.[200]I have come to the conclusion that this argument is unsound for three reasons:(i) The principal basis of RTO design is volume rather than VOC concentration. See Dr Leci's evidence on Day 4, and at Day 5, pages 77 to 78.(ii) Fuji required abatement plant that would take a substantial volume of exhaust gas, namely 70,000 Nm3/hr. Therefore, that is the capacity of RTO which Fuji would have acquired in 2000.(iii) if the concentration of VOCs increases beyond that for which a particular RTO is designed, it is not necessary to scrap the RTO. The matter can be simply remedied by installing a hot side bypass. See Dr Leci's evidence at Day 5, page 78. It should also be recalled that an RTO is a piece of equipment which is specifically intended to cater for higher levels of VOC loading.[201]Let me now draw the threads together. For the reasons set out above, Fuji succeeds on the issues of breach of duty, reliance and causation. Accordingly, in relation to its claim in tort (but not its claim in contract), Fuji succeeds on the issue of liability.

Part 8. Quantum of Damages

[202]Fuji's final claim for damages is set out in a Re-Amended Schedule of Damage which Mr Lofthouse produced yesterday at the start of closing speeches. The three heads of damage claimed are:(i) overpayment in 2000;(ii) costs incurred in maintaining the original plant since 2000;(iii) costs of acquiring a suitable replacement abatement system.[203]I have set out these three heads of damage in chronological order, rather than the order in which they are pleaded.[204]The first question to consider is whether these heads of damage are properly recoverable in law. The starting point for such consideration is the House of Lords decision in Banque Bruxelles Lambert SA v Eagle Star Insurance Co Ltd [1997] 1AC, 191. Applying the principles in that case (as Mr Harding correctly pointed out), the court must first determine whether Fuji's claim is for negligent information or negligent advice. In my judgment, Fuji's claim falls into the latter category, namely negligent advice. The court must then consider whether Fuji's losses fall within the scope of the duty which has been breached. In my judgment, the three heads of loss set out in the Re-Amended Schedule of Damage do fall within the scope of that duty. Accordingly, those heads of damage are, in principle, recoverable.[205]I will now address those three heads in turn: (i). Overpayment in 2000[206]There is no dispute that CCC paid £1,019,200 to CCE for the abatement plant which was supplied and installed in 2000. I have previously held that CCC ought to have recommended an RTO. The question arises: what would have been the cost of that hypothetical RTO?[207]This is addressed by Mr Brooks in paragraph 7 of his witness statement where he asserts that it would have cost £670,000 to purchase a suitable RTO five years ago. The evidence in support of this assertion is somewhat thin, namely an e-mail from Don Reed, Fuji's former expert witness. On the other hand, this evidence has not been undermined in cross-examination. CCC has not called its own evidence to rebut paragraph 7 of Mr Brooks's statement. Furthermore, the figure which Mr Brooks quotes is not out of line with other figures which I have seen in the bundle for suitable RTOs. For all these reasons, I accept paragraph 7 of Mr Brooks' witness statement.[208]In the result, I assess damages under the first head at £349,200 which is the revised sum claimed in the Re-Amended Schedule of Damage. (ii). Costs incurred in maintaining the original plant since 2000[209]The sum previously claimed under this head was £134,000. However, a number of items in this schedule were abandoned during the trial. Also, the VAT element has been stripped out. This head of claim is now quantified at £54,282.06.[210]Mr Richard Brooks is the claimants' witness who was called to prove the surviving items in this schedule. There is no dispute that the individual costs are reasonable. Subject to one exception, I am satisfied that all of these costs were incurred and that they arise from the inherent unsuitability of the abatement plant for the function which it is performing at Fuji's premises.[211]The one exception is this. I think it more likely than not that the item in the schedule dated 15th March 2002 relates to routine testing required to satisfy Medway. Therefore, this head of claim must be reduced by £5,000. It should also be noted that the last four items in the schedule, strictly speaking, relate to the third head of damage rather than this head but no harm is done, as the items are recoverable.[212]I therefore assess damages under the second head in the sum of £49,282. (iii). Costs of acquiring a suitable replacement abatement system[213]I have summarised Mr Brooks's evidence on this matter in Part 4 above. I accept his evidence that Fuji is not planning to expand its operations at Gillingham. I also consider that Fuji are acting reasonably in seeking to acquire new abatement plant rather than secondhand plant. On the basis of CCC's advice in 2000, Fuji was led to believe that it was acquiring reliable abatement plant with a life expectancy of 15 to 20 years. It is perfectly reasonable that Fuji should now seek to put itself back into that position.[214]For broadly similar reasons, I consider that Fuji are acting reasonably in not adopting the remedial course proposed by Mr Rafflenbeul. Mr Rafflenbeul proposes in section 7 of his first report that Fuji should keep the existing abatement plant but supplement it with a new RTO at a cost of approximately £300,000.[215]In my view, this would create an unsatisfactory situation. Fuji would have two different types of abatement plant, one of which has already suffered damage through five years' use at high VOC loadings and excessive temperatures. Such a solution does not, in my judgment, put Fuji back into the position it would have been in if the breach of duty had not occurred.[216]There has been considerable debate as to whether the Megtech quotation (dated 13th June 2005) which Fuji has accepted is a reasonable one. This quotation is for an Epsilon RTO at a cost of £600,000. Mr Rafflenbeul criticises several features of this quotation. He also says that the price is far too high.[217]The question which I have to address is whether Fuji is acting reasonably in purchasing the Epsilon RTO proposed by Megtech. I have no doubt that Fuji is acting reasonably. This abatement system provides a sensible solution to Fuji's problems. The cost is not out of line with other quotations which have been put in evidence. Indeed, the cost is £70,000 less than the cost of the notional RTO for which Fuji is giving credit in its first head of claim.[218]I therefore conclude that £600,000 is the proper figure to take for the cost of replacement abatement plant.[219]It is common ground that Fuji must give credit for the value of the current abatement plant which it will no longer need. Mr Brooks gave evidence of his enquiries which suggested that Fuji will not be able to sell the plant for more than £15,000. Mr Rafflenbeul takes a more optimistic view. He believes that the existing plant could be sold for between £100,000 and £150,000.[220]Having listened to the cross-examination of Mr Brooks and Mr Rafflenbeul on this issue, and having looked at the relevant documents (including the correspondence entered into by Mr Brooks seeking a purchase price for this plant) I have to make an assessment of what sale price Fuji is likely to achieve for the abatement plant which it is discarding. I bear in mind the age of the equipment and the treatment to which it has been subjected over the last five years. Doing the best I can on the material before me, I assess the current resale value of that abatement plant as £30,000. Accordingly, the measure of damages under head (iii) is £600,000 less £30,000, namely £570,000.[221]Let me now draw the threads together. I assess damages under the three heads of claims as follows: Head (i), £349,200; Head (ii), £49,282; Head (iii), £570,000.[222]The total of these three sums is £968,482. I assess damages in that sum.[223]Before parting with this case, I wish to express the view that the outcome of this case should not tarnish the reputation of CCC, which has achieved high standards in the 50 years of its existence. It seems to me that the mishaps which arose on the Fuji project are far from typical of the service which CCC normally provides to its clients. Those mishaps seem to me to arise from the particular circumstances of this case and from the fact that this was CCC's first venture into a separate continent.[224]For the reasons set out above, Fuji succeeds in its claim and is entitled to recover damages in the sum of £968,482.

Cited in 2 later judgments