Were The Losses Claimed Indirect and/or Consequential? If So, Were They Covered by a Contractual Exclusion Clause

The case of McCain Foods Gb Ltd v Eco-Tec (Europe) Ltd [2011] EWHC 66, which came before Mr Recorder Acton Davis QC provides an interesting example of how the court will approach the categorisation of losses claimed as either direct or indirect and/or consequential.

Here, McCain entered into a supply and purchase agreement ("SPA") with Eco-Tec, to purchase a system which would remove hydrogen sulphide from its waste water treatment processes at its Whittlesey plant in Cambridgeshire. McCain had substantial problems in commissioning the system, and ultimately were unable to complete it. McCain chose to treat this as a repudiatory breach of the SPA, which it accepted by letter to Eco-Tec.

McCain commenced proceedings for recovery of amounts paid under the SPA and damages. The heads of loss included items such as lost revenue and additional utility costs. Eco-Tec denied liability, but also defended the claim on the basis that even if it was liable for the repudiatory breach, the SPA contained an exclusion clause which excluded liability for certain losses as follows:

"Seller will indemnify and hold McCain ... harmless from and against any and all losses, liabilities, damages and expenses whatsoever (in no event however will Seller be responsible for indirect, special, incidental and consequential damages) arising out of any breach by Seller of any commitment or other obligation contained in this Agreement ..."

On the facts, particularly McCain's expert evidence, the Judge found that the system was not up to the standard intended in the SPA which meant that McCain could not complete the commissioning. Therefore Eco-Tec had committed a repudiatory breach of contract, which McCain properly accepted.

The Issue:

Could the losses claimed be categorised as indirect, special, incidental or consequential and therefore fall within the exclusion clause?

The Decision:

The Judge held that all the heads of loss...