Balmoral V Borealis

[2006] Vol.
LLOYD'S LAW REPORTS
QUEEN'S BENCH DIVISION

(COMMERCIAL COURT)
26 January-29 March; 25 July 2006
____________________
BALMORAL GROUP LTD
v
BOREALIS [UK] LTD
BOREALIS AS
BOREALIS A/S
[2006] EWHC 1900 (Comm)
Before Mr Justice CHRISTOPHER CLARKE
Sale of goods - Polyethylene supplied for manufacture of tanks Tanks made using polyethylene failed - Whether seller in breach of
implied terms of suitability and fitness for purpose - Whether
contracts made on seller's or buyer's terms - Whether exclusion
clauses in sale contracts reasonable - Application of English law in
absence of proof of content of foreign law - Whether contracts
constituted international supply contracts - Measure of damages Sale of Goods Act 1979, sections 14(2) and 14(3) - Unfair Contract
Terms Act 1977, sections 6, 11, 26 and 27, and schedule 2.
Balmoral manufactured storage tanks by a process known as
rotomoulding. The tanks were designed to hold oils and other liquids.
Balmoral's tanks were sold to distributors rather than direct to the
public, and mainly within the UK. The process of rotomoulding
involved the use of polyethylene.
On 18 January 1995 Borealis UK faxed a quote to Balmoral for the
supply of polyethylene. The quote stated that it was "subject to normal
terms and to current conditions of sale". Those conditions excluded
the statutory implied terms of satisfactory quality and fitness for
purpose. Invoices were sent to Balmoral with Borealis' conditions on
the back. Mr Joyce, the Managing Director of Balmoral's
rotomoulding division, reviewed the invoices but did not study them,
and he initialled them for payment. Balmoral duly made payment
without comment, query or objection. On 6 December 1995 Balmoral
faxed another order which contained a stamped reference to its own
terms and conditions: those terms provided that Borealis was to
"warrant that the Goods. . . will be of satisfactory quality and fit for
the purpose held out by the Seller or made known to the Seller in
Writing at the time the purchase order is placed". From 1999 onwards
Borealis UK became the agent for the other Borealis companies in
Norway and Denmark. The Borealis General Conditions adopted by
those companies did not exclude the implied term as to satisfactory
quality but they did exclude the implied term as to fitness for purpose.
The General Conditions also stated that any contract was to be
governed by the law of the country where Borealis was domiciled.
Between the spring of 1997 and July 2002 Balmoral purchased from
Borealis UK, and subsequently from Borealis Norway and Borealis
Denmark, large quan-
629
tities of polyethylene which had been manufactured using a polymer

known as borecene. Balmoral used borecene to manufacture many
thousands of tanks, including many thousands of oil tanks for both
industrial and domestic use, which it sold to customers in the British
Isles and abroad. Oil tanks manufactured by Balmoral using borecene
suffered a high failure rate, much higher than what was to be expected
from rotomoulded tanks. Within a short period of service tanks
produced from borecene were splitting, leading to customer
dissatisfaction, oil spillage, and claims. It was common ground that
the mode of failure was environmental stress cracking, which occurred
when the chemical environment of a material caused premature brittle
failure. The effect on Balmoral's oil tank business was disastrous.
Balmoral claimed damages of up to 50,000,000 as damages for
breach of contract, misrepresentation or negligence.
In the present proceedings the issues before the court were as
follows: (1) was Borealis in breach of the implied terms of suitable
quality under section 14(2) of the Sale of Goods Act 1979; (2) was
Borealis in breach of the implied term of fitness for purpose under
section 14(3) of the 1979 Act; (3) if Borealis was in breach, had the
contracts been made on Borealis UK's terms which excluded the
statutory conditions, or on Balmoral's terms which incorporated the
statutory conditions; (4) were Borealis UK's exclusions reasonable
under the Unfair Contract Terms Act 1977, sections 6(3) and 11, and
schedule 2; (5) did the 1977 Act apply to the contracts with Borealis
Norway and Borealis Denmark; (6) were the exclusion clauses in the
contracts with Borealis Norway and Borealis Denmark valid under the
1977 Act; and (7) what was the measure of damages?
-Held, by QBD (Comm Ct) (CHRISTOPHER CLARKE J) that the claim
would be dismissed.
(1) The goods were of satisfactory quality under section 14(2) of the
Sale of Goods Act 1979. Section 14(2) was primarily directed towards
substandard goods. The function of section 14(2) was to establish a
general standard which the goods in question were required to reach,
and not to ensure that they attained some higher standard of fitness for
a particular purpose made known to the seller. In appropriate cases the
question as to whether goods were of satisfactory quality could be
determined by considering whether they were fit for all purposes for
which goods of the kind in question were commonly supplied. For a
material that had a very wide range of possible uses, and which was to
be used and transformed by a specialist manufacturer for his own
particular purposes, that was somewhat too wide a test, particularly
when polyethylene although commonly supplied for oil tanks was not,
in respect of some grades, suitable for that purpose. The material
supplied was not defective or incorrectly manufactured. borecene was
suitable for rotomoulding generally (see paras 140 and 141);
-Jewson Ltd v Leanne Teresa Boyhan [2004] 1 Lloyd's Rep. 505,
referred to.
(2) The goods were fit for their purpose under section 14(3) of the
Sale of Goods Act 1979.
(a) Section 14(3) was applicable. All of the sales were made in the
course of Borealis' business, Borealis was well aware that Balmoral
was making
[2006] Vol. 2
QBD (Comm Ct)
LLOYD'S LAW REPORTS

Balmoral Group Ltd v Borealis
green oil tanks and that Balmoral would be buying borecene to use to
make green oil tanks in their rotomoulding machines, Borealis
indicated to Balmoral that borecene could provide a number of
significant advantages as a polymer and Balmoral in ordering
borecene reasonably relied on Borealis to supply a polymer whose
properties made it reasonably suitable for the purpose of making
green oil tanks by rotomoulding (see paras 144, 145, 146 and 150).
(b) Balmoral had failed to establish that borecene was not
reasonably suitable for the purpose of making green oil tanks by
rotomoulding in that it was incapable of being used to make
satisfactory oil tanks. The expert evidence showed that borecene was
fit for that purpose. The simpler explanation was that the tanks failed
because, partly as a result of their design, they were subject to
stresses for which the method of processing did not adequately cater.
The evidence showed that a competent rotomoulder would have been
able to produce tanks for borecene with acceptable wall thicknesses,
and others had managed to do so (see paras 296, 318 and 321).
(c) In deciding whether a product was reasonably suitable it was
necessary to consider what a reasonable purchaser of the product
could be expected to do. Balmoral was not entitled to proceed on the
basis that, on switching to what they knew to be a new generation of
polyethylene with different characteristics intended to produce better
performance (the efficacy of which for them would, as they knew,
depend on trials), they could assume that borecene required no
material change of processing parameters (or designs). Nor was it
established that radical changes were needed: the evidence was that
the alterations needed would not have been radical. It may be that
borecene called for a tighter control of the processing operation. But
that did not make it unfit for purpose (see para 323).
(3) Borealis' standard terms, first those of Borealis UK and then the
Borealis General Conditions, applied throughout (see para 386).
(a) When Balmoral first contracted to purchase polyethylene from
Borealis in December 1994 there was no common understanding
between them that the purchase was on Borealis' terms and
conditions. Balmoral had not purchased material from Borealis
before; nor had they ever signed or sent back Borealis' conditions;
nor, so far as the evidence shows, had they received a copy of those
conditions when they sent their purchase order or took delivery. In
the circumstances, Borealis was not entitled to conclude that
Balmoral had agreed to their terms (see para 357);
-McCutcheon v David Macbrayne Ltd [1964] 1 Lloyd's Rep. 16,
Kendall & Sons v Lillico & Sons [1969] 2 AC 31, Hollier v Rambler
Motors (AMC Ltd) [1972] 2 QB 71, SIAT v Tradax Overseas SA
[1978] 2 Lloyd's Rep. 470, Continental Tyre & Rubber Co Ltd v
Trunk Trailer Ltd 1987 SLT 58, Circle Freight International Ltd v
Medeast Gulf Exports Ltd [1988] 2 Lloyd's Rep. 427, Albright &
Wilson UK Ltd v Biachem Ltd [2001] 2 All ER 537, considered;
British Crane Hire Corporation Ltd v
630
Ipswich Plant Hire Ltd [1975] QB 303, distinguished.

(b) By the fax of 18 January 1995 Borealis made it plain that its
prices were quoted "subject to normal terms and to current
conditions of sale" and Balmoral had received an invoice with
Borealis' terms on the back. By putting its terms on the back of their
invoices Borealis indicated to Balmoral that, so far as Borealis were
concerned, they intended the contract to be on those terms. Those
invoices were seen and initalled on behalf of Balmoral, but they were
not studied. Balmoral thereafter purchased material at the quoted
prices with knowledge of Borealis' conditions without ever
suggesting that they were not applicable. A reasonable person in
Borealis' position would be entitled to assume, as was the fact, that
someone at Balmoral had considered whether or not to pay the
invoice and had seen the conditions on the back (see para 358).
(c) The stamp on Balmoral's order of 6 December 1995 referring to
Balmoral's own conditions was insufficient to reverse the previous
position and to signify (much less to secure agreement) that
Balmoral's terms were now to apply instead. Balmoral said nothing
about any change in terms. It did not say that Balmoral was going to
treat Borealis' quotes as no longer linked to Borealis' conditions.
Balmoral did not provide a copy of its conditions then or thereafter,
nor, apart from the stamp on the order form, make any reference
thereto. In those circumstances the reference in poor typescript at the
bottom of Balmoral's purchase orders was not reasonable notice that
Balmoral proposed to contract only on Balmoral's terms in place of
those of Borealis. A supplier in Borealis' position would be entitled
to expect that, if Balmoral was seeking to reverse the previous
position, it would make explicit reference to the fact that it was
proposing a change. A buyer in Balmoral's position would not be
entitled reasonably to assume that Balmoral had agreed to its
conditions because of the stamp that now appeared on its purchase
order or because Borealis did not comment on it (see paras 364 and
365).
(4) Although the matter was quite finely balanced, Borealis UK's
exclusions were not reasonable under the Unfair Contract Terms Act
1977 (see para 418).
(a) As to the statutory guidelines in Schedule 1 to the 1977 Act: the
parties were on an equal footing as to price but as to terms they were
not, as Borealis was only prepared to supply borecene on its own
terms; Balmoral received no specific inducement to agree to the
exclusionary provisions; and Balmoral knew that Borealis' terms
were set out on the invoices (see paras 409, 410 and 411);
-Granville Oil & Chemicals Ltd v Davis Turner & Co Ltd [2003] 2
Lloyd's Rep. 356, considered.
(b) A material consideration, albeit not one reflected in the
guidelines, was the reality of the customers' consent to the terms. As
to that, Balmoral did not pay much attention to the terms upon which
they were ordering and Borealis' terms were not up for negotiation,
but it could not be said that Balmoral's acceptance was more
apparent than real. It was
[2006] Vol. 2
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LLOYD'S LAW REPORTS

631
also material that the damage that could be suffered if the borecene
1977 Act, was of no assistance in the present case. The section said
proved unfit for its purpose was substantial, and that Borealis had
nothing about the presumption that in the absence of evidence the
substantial resources and extensive insurance cover (see paras 412,
foreign law was the same as English law (see para 435).
413 and 414).
(6) The 1977 Act did not invalidate the exclusion clauses in the
(c) It could not be said that it was reasonable for Borealis to include
contracts with Borealis Norway or Borealis Denmark.
its exclusionary terms because Balmoral did much the same in
(a) The contracts were international supply contracts and were
relation to oil tanks manufactured from borecene (see para 417);
excluded from the 1977 Act by section 26(3).
-Watford Electronics Ltd v Sanderson CFL Ltd [2001] BLR 143,
(i) The contracts were made by parties whose places of business
considered.
were in the territories of different states: section 26(3) referred to the
(d) The question was whether the terms were fair and reasonable to
principals and to to any agent, even if he incurred personal liability
be included "having regard to the circumstances which were or ought
on the contract, although Borealis UK was not in any event to be
reasonably to have been known or contemplated when the contract
regarded as having incurred personal liability (see paras 437 and
was made", a test directed in part, to potential rather than actual
439);
circumstances. The question was not whether it would be fair and
-Ocean Chemical Transport Inc v Exnor Craggs Ltd [2000] 1 Lloyd's
reasonable to allow reliance on the term in the events which have
Rep. 446, applied.
happened. When the contracts were made Borealis knew that
(ii) The statutory condition in section 26(4)(a) that the goods in
Balmoral was buying borecene for the purpose of making oil tanks
question were at the time of the conclusion of the contract in the
and that it was relying on Borealis to supply a polymer capable of
course of carriage, or were to be carried, from the territory of one
being used to make consistently satisfactory tanks. It was the
State to the territory of another, was satisfied. The contracts were
assumption of both sides that it was so capable. The supply of a
concluded when they were made, namely when the order was
product which, because of a latent defect made the manufacture of
confirmed and not on delivery, and the borecene in question was
consistently satisfactory tanks impossible would confound those
manufactured in Norway and sold by either Borealis Norway or
assumptions. In those circumstances a blanket exclusion of any
Borealis Denmark and delivered in the United Kingdom, (see paras
liability whatever was prima facie unreasonable. Requiring Balmoral
442 and 443);
to bear the entire risk of a latent defect in Borealis' product was not
-Amiri v BAE Systems [2003] 2 Lloyd's Rep. 767, referred to.
an appropriate allocation of risk. As between seller and buyer, it was
more appropriate that loss from a latent defect should be borne by
(b) Even if that was wrong, the exclusion clause in respect of
the seller (see paras 420, 421, 422 and 424);
fitness for purpose was not reasonable (see para 450).
-St Alban's City and District Council v International Computers Ltd
(7) As to damages, in addition to other losses Balmoral had
[1995] FSR 686, Britvic Soft Drinks Ltd v Messer UK [2002] 2
established a loss based on the proportion of time that staff had to
Lloyd's Rep. 368, Bacardi-Martini Beverages Ltd v Thomas Hardy
spend dealing with the problem. There might be circumstances where
Packaging Ltd [2002] 2 Lloyd's Rep. 379, applied.
the additional work necessitated by a breach of contract was
sufficiently limited in extent that the claimant could not sensibly be
(5) The Unfair Contract Terms Act 1977 applied to the contracts with
regarded as having suffered a loss because the employee in question
Borealis Norway and Borealis Denmark.
had to do it. On the figures that did not appear to be the case for the
(a) Although those contracts were governed by the laws of Norway
staff now under consideration. Similarly circumstances could be
and Denmark respectively, in the absence of any evidence from
envisaged in which the employees were so underemployed that the
Borealis that the laws of Denmark and Norway did not contain
company suffered no loss because they had to work a bit more. That
provisions equivalent to the Unfair Contract Terms Act 1977
was not shown to be the position here (see paras 492 and 493);
Balmoral was entitled to rely on the assumption that the laws of
-Euro Pools plc v Clydeside Steel Fabrications Ltd 2003 SLT 411
those countries were the same as English law. It would be artificial to
applied; Tate & Lyle Food and Distribution Ltd v GLC [1982] 1 WLR
apply the English law of contract without reference to the 1977 Act,
149, distinguished.
which formed a part of English general law, and Borealis did not
plead that the presumption was inapplicable (see paras 432 and 433);
____________________
-The Ship "Mercury Bell" v Amosin [1986] 27 DLR (4th) 641,
applied; Damberg v Damberg [2001] 52 NSWLR 492, Shaker v AlThe following cases were referred to in the judgment:
Bedrawi [2003] Ch 350, distinguished.
Albright & Wilson UK Ltd v Biachem Ltd (CA) [2001] 2 All ER
(b) Section 27 of the 1977 Act, under which a choice of a foreign
537;
law defeated the operation of the
Amiri v BAE Systems (CA) [2003] 2 Lloyd's Rep. 767;
[2006] Vol. 2
QBD (Comm Ct)
LLOYD'S LAW REPORTS

Bacardi-Martini Beverages Ltd v Thomas Hardy Packaging Ltd

(CA) [2002] 2 Lloyd's Rep. 379;
British Crane Hire Corporation Ltd v Ipswich Plant Hire Ltd
(CA) [1975] QB 303;
Britvic Soft Drinks Ltd v Messer UK (CA) [2002] 2 Lloyd's Rep.
368;
Christopher Higgins Ltd v Washington Piggeries Ltd (HL)
[1972] AC 441;
Circle Freight International Ltd v Medeast Gulf Exports Ltd
(CA) [1988] 2 Lloyd's Rep. 427;
Continental Tyre & Rubber Co Ltd v Trunk Trailer Ltd 1987 SLT
58;
Damberg v Damberg [2001] 52 NSWLR 492;
Euro Pools plc v Clydeside Steel Fabrications Ltd 2003 SLT 411;
Granville Oil & Chemicals Ltd v Davis Turner & Co Ltd (CA)
[2003] 2 Lloyd's Rep. 356;
Hollier v Rambler Motors (AMC Ltd) (CA) [1972] 2 QB 71;
Jewson Ltd v Leanne Teresa Boyhan (CA) [2004] 1 Lloyd's Rep.
505;
Kendall & Sons v Lillico & Sons (HL) [1969] 2 AC 31;
McCutcheon v David Macbrayne Ltd (HL) [1964] 1 Lloyd's Rep.
16;
Ocean Chemical Transport Inc v Exnor Craggs Ltd (CA) [2000]
1 Lloyd's Rep. 446;
Shaker v Al-Bedrawi (CA) [2003] Ch 350;
SIAT v Tradax Overseas SA [1978] 2 Lloyd's Rep. 470;
St Alban's City and District Council v International Computers
Ltd [1995] FSR 686;
Tate & Lyle Food and Distribution Ltd v GLC [1982] 1 WLR
149;
The Ship "Mercury Bell" v Amosin [1986] 27 DLR (4th) 641;
Watford Electronics Ltd v Sanderson CFL Ltd (CA) [2001] BLR
143.
____________________
Richard Mawrey QC and Ross Fentem, instructed by Moon
Beever, for the claimant; David Allen and Charles Holroyd,
instructed by Kennedys, for the defendants.
The further facts are stated in the judgment of Christopher
Clarke J.
Tuesday, 25 July 2006
____________________
632
Christopher Clarke J
JUDGMENT
Mr Justice CHRISTOPHER CLARKE:

1. This judgment is divided into the following sections:
Paragraphs
Subject matter
216
Introduction
17
The issues
18138
The history
139152
Sections 14(2) and (3) of

the Sale of Goods Act
153167
Mechanism and
characteristics of failure
168294
The expert evidence
187220
Rapra
221251
Professor Pethrick
252273
CAPCIS
274293
Professor Crawford
294332
Conclusions on fitness for

purpose
333
Misrepresentation
334392
The contractual dispute
393452
The Unfair Contract Terms

Act 1977
453573
Damages
574579
Postscript
Introduction
Balmoral
2. Balmoral Group Ltd ("Balmoral") is a privately-owned
company, registered in Scotland. It was founded in the 1970s by
Dr James Milne, its Chairman, Managing Director and
controlling shareholder. Its headquarters are in Aberdeen. In the
year to 31 March 2005 it had a turnover of over 31,000,000.
Much of its business involves supply to the oil, gas and marine
industries. It has a wide range of products, including sectional
tanks, modular buildings and pipes. The group has a transport
business. Balmoral Marine Ltd, originally an associate and now
a subsidiary company, provides specialist services for the
offshore oil industry through the hire and manufacture of items
such as navigational and buoyancy aids and wire rope. The
group has subsidiary companies in Norway, Houston and
Holland.
[2006] Vol. 2
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LLOYD'S LAW REPORTS

3. Balmoral manufactures, amongst other things, storage tanks

by a process known as rotational moulding ("rotomoulding").
Balmoral entered the rotomoulding business in 1992, when it
began to design tanks for oils and other liquids, such as water or
wastewater, which it began to manufacture towards the end of
that year.1 If used as oil tanks, they usually contain kerosene;
less often, diesel. Balmoral's designs although similar, in some
respects, to those of other tank manufacturers, are unique to it.
Balmoral's staff includes engineers, designers, and technical
support staff. Most of Balmoral's tanks are sold to distributors
(building supplies companies, heating companies and oil
suppliers) rather than direct to the public, and mainly, but not
exclusively, within the UK. There are about 10-15 distributors
who store tanks at their premises. The end-users tend to be
householders in areas without mains gas, commercial users and
farmers. Until 2004 Balmoral's tanks came with a ten year
replacement warranty subject to proof of purchase and correct
installation and use.
Rotational moulding
4. Rotational moulding works in this way. A quantity of
polyethylene in powdered form (the charge) is placed into one
of the two halves of a steel mould, which are then clamped
together. The mould, which is mounted on the arm of a
machine, is introduced into an oven and continuously rotated on
two axes at a low speed (typically 4-8 revs/min), so that all
parts of the interior surface of the mould pass through the pool.
The charge becomes tacky and then melts in the heat (of up to
around 300C), forming a molten pool. As the powder becomes
tacky it starts to stick to the mould. More powder sticks to
particles that have become tacky before. As a result a layer of
viscous, largely immobile,2 liquid forms over the entirety of the
mould. The wall thickness distribution of the melt is largely
determined at this stage. The product has, however, to remain in
the oven in order to eliminate the bubbles (trapped pockets of
gas) in the melt. After about 20 minutes the mould is removed
from the oven and cooled. At this stage crystallisation of the
melt will occur. The crystallising melt will shrink away from
the mould, the rate of crystallisation being dependent, in part,
on the rate of cooling. When the polyethylene is sufficiently
cool, the tank, as it has now become, is removed from the
mould. A very high proportion of rotomoulding production is of
tanks of one form or another.
____________________
1 The division of Balmoral Group Ltd involved in rotomoulding was called
"Mouldings", then "Tanks", then "Rotational Mouldings". Nothing turns on the
distinction.
2 There is normally little flow of the melted plastic over the surface of the
mould, only a gentle waving motion of the melted plastic as it is pulled in
different directions by gravity.
633
Pigmentation
5. Natural polyethylene is white or yellow in colour. A very
large percentage of the oil tanks in the British Isles 3 are "oil
tank green".4 The standard pigment used in almost all cases,
including by Balmoral, is a green phthalocyanine-based
pigment. There are several different brands of such pigment.
The addition of a pigment has a deleterious effect on the
properties of the natural product. Further, pigment particles
affect the way in which the polymer crystallises as it cools and
hence the crystalline structure. Some pigments, of which
phthalocyanine green is one, are nucleating agents ie they
encourage early initiation of the process of crystallisation.
6. Polymer can be mixed with a pigment in a number of
different ways. The two can be dry-blended. In this process
polyethylene in powder form is mixed with the pigment either
in a blender before being added to the mould or in the mould
itself. An alternative process is grind blending whereby polymer
pellets are mixed with pigment and the mixture is ground into a
powder. Another option is to use a masterbatch. A masterbatch
is created by taking a high concentration of pigment and grind
blending or compounding it with a base polymer. The resulting
masterbatch is then mixed either in a blender or in the mould
with virgin polymer. A further process is compounding. In this
case polyethylene powder is mixed with a pigment under heat
in an extruder. The resulting pellet is then ground to powder.
The blending process is sometimes carried out by the product
manufacturer and sometimes by a third party.
7. In broad terms the evenness of the spread and distribution of
the pigment and the homogeneity of the resulting structure are
increased, according to which option on a scale from dry
blending to compounding is selected. So is the expense. Dry
blending involves no grinding. Grind blending a masterbatch
involves grinding only a fraction of the material which will
form the charge. Compounding is the most expensive of all
because it involves an additional process. But it provides the
best method of mixing and dispersion of the pigment in the
product, and the least reduction in the properties of the base
resin.
8. Balmoral ordered its first machine, a Ferry/Rotospeed 330,
in July 1992. During 1993 Balmoral acquired three further
machines - a 430, 280 and 220. Machines 430 and 330, which
were used for the production of fuel tanks, work on a carousel
basis with a fourfold cycle of (i) loading/demoulding; (ii)
heating in the oven; (iii) pre____________________
3 Ie the United Kingdom and Eire.
4 This was not always so. In the late 1970s dark green had not become the
standard and some companies made oil tanks in black.
[2006] Vol. 2
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LLOYD'S LAW REPORTS

cooling and (iv) cooling, 5 so that at any one time there is a

mould at each of the four stages. In 2003 or 2004, when it
entered the chemical tank market, Balmoral purchased a "rockand-roll" machine in which, as its name implies, the product
being moulded is rocked back and forward about a
perpendicular axis, whilst being rotated continuously through
360. Balmoral built up their production of tanks from eight
original moulds on the 330 to a complete range of tanks with a
production of over 10,000 tanks a year, some 10 per cent of the
available market, within two or three years.
The change from ZN polymers to borecene
9. Until 1997 the polyethylene used by Balmoral had been
manufactured by manufacturers (largely other than Borealis)
using a type of catalyst known as Ziegler-Natta ("ZN"), the
names of its inventors. For the most part6 Balmoral used a
blended grade of powder supplied by DSM United Kingdom
Ltd ("DSM") comprising two Stamylex materials one of which
was a fully compounded green masterbatch and the other a
natural grade polyethylene, with a melt flow rate ("MFR") of 3.
A melt flow rate is a measurement of the melt viscosity, ie
resistance to flow, of a polymer. It is a measure of the mass in
grams extruded through a standard die in ten minutes under
standard temperature conditions (usually 190C) and with a
standard applied load (2.16 kg). 7 Viscosity decreases in inverse
proportion to melt flow: the higher the MFR number the lower
the viscosity.
10. Between the spring of 1997 and July 2002 Balmoral
purchased from one or more of the Borealis defendants large
quantities of polyethylene which had been manufactured from
polyethylene, the monomer, and hexene, the comonomer, using
a metallocene catalyst. This polymer was known as borecene. A
metallocene catalyst is one that contains organometallic
components. Balmoral purchased borecene in three grades with
different melt flow rates - MFR 3, MFR 6, and MFR 4.
Metallocenes now represent about 20 per cent of the European
and American rotomoulding market. There are now over 100
rotational moulders using borecene in the UK.
11. Balmoral used borecene to manufacture many thousands of
tanks, including many thousands of oil tanks for both industrial
and domestic use, which it sold to customers in the British Isles
and abroad. Oil tanks manufactured by Balmoral using
borecene suffered a high failure rate, much
634
higher than what was to be expected from rotomoulded tanks.

Within a short period of service tanks produced from borecene
were splitting, leading to customer dissatisfaction, oil spillage,
and claims. Such failure was particularly prevalent in certain
designs. Products manufactured from MFR 6 material showed a
much higher failure rate than those manufactured from MFR 3
or MFR 4 material.
12. It is common ground that the mode of failure was
environmental stress cracking ("ESC"). This type of failure
occurs when the chemical environment of a material, in this
case kerosene or diesel, causes premature brittle failure 8 of a
plastic material that has been subject to stresses below its yield
stress. All polyethylenes when subjected to long term stress
below their yield stress will eventually fail in a brittle manner,
although in the absence of a stress cracking agent the time that
this takes may well be measured in decades. Water, which has a
very low absorption in polyethylene compared to kerosene and
diesel, is not an appreciable stress cracking agent but kerosene
and diesel are. Other such agents are organic solvents or
detergents and even greases, gases or vapour.
13. The effect on Balmoral's oil tank business was disastrous.
Balmoral claims damages of up to 50,000,000 as damages for
breach of contract, misrepresentation or negligence.
Borealis
14. There are three defendants:
(i) Borealis (UK) Ltd;
(ii) Borealis AS; and
(iii) Borealis A/S.
Borealis A/S is a Danish company ("Borealis Denmark") and
the parent of Borealis AS, which is Norwegian ("Borealis
Norway") and of Borealis (UK) Ltd, which is incorporated in
England ("Borealis UK"). Borealis A/S is currently owned by
The International Petroleum Investment Company of Dubai,
OMV Aktiengesellschaft of Austria and Statoil ASA. The
Borealis Group, which was formed in 1994 from the merger of
Statoil of Norway and Neste Chemicals UK Ltd ("Neste"), was,
in 1997, the largest polyolefin producer in Europe and was and
is one of the largest in the world. It employs some 500 people in
research and technology and product development in specialist
technical centres. Where it is not necessary to distinguish one
company from another I shall simply refer to "Borealis".
____________________
____________________
5 At this stage the mould is cooled by fans.

6 Balmoral had originally used a Dow material - Dowlex 2430 - supplied by
Rotec Chemicals Ltd ("ICO") and did so until mid-1993 when Dow withdrew the
grade.
7 These test parameters generate a shear rate of approximately 6-10 s -1,
considerably in excess of the shear rate applicable in rotomoulding. MFR rates are
thus a poor guide to the rheology of the material in that use.
8 Ie one where the material has a sharp clean facture surface, such that the two
parts can be fitted back as in a jigsaw, as opposed to a ductile failure where there
is a gross deformation of the fractured surfaces.
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15. The parties are in dispute as to:
(i) which of the Borealis defendants was Balmoral's
contractual counterparty;
(ii) upon what terms the contracts were concluded; and
(iii) if the terms were those of Borealis, whether or not
certain exemption clauses are enforceable.
Balmoral contend that they contracted throughout with Borealis
UK. Borealis accept that until 1 January 1999 that was so. But
thereafter they contend that Balmoral contracted with
whichever Borealis company supplied the product - Borealis
Norway in the case of borecene, and Borealis Sweden in the
case of ZN material. Then from 1 January 2001 the contract was
with Borealis Denmark.
16. Balmoral contends that, if the contracts were on anybody's
standard terms and conditions, they were on those of Balmoral.
Borealis contend that all the contracts were on their terms and
conditions. These exclude any warranty of fitness for purpose
and limit recoverable damages (if the seller has not replaced the
goods) to the price of the polyethylene in question. If that be so,
Balmoral relies on the Unfair Contract Terms Act 1977 and
contends that the exclusion does not satisfy the requirement of
reasonableness.
The issues
17. Accordingly the following issues arise for decision:
(i) Was borecene not reasonably fit for the purpose of
manufacturing static oil tanks by rotomoulding?
(ii) If so, was that unfitness the cause of the multiple failures
experienced in tanks manufactured from borecene by
Borealis?
(iii) If so, did this constitute an actionable wrong entitling
Balmoral to relief, unless there was a contractual term
excluding or restricting Borealis' liability, either on the basis
that Borealis was in breach of an implied term that borecene
was reasonably fit for the purpose of manufacturing oil tanks
or on the grounds of misrepresentation?
(iv) Did any of the sale contracts contain such a term?
(v) If so, is it enforceable?
(vi) If not, to what quantum of damages is Balmoral entitled?
635
The history
18. Balmoral manufactures a substantial range of tanks in over
two dozen designs. For some of theses designs there was a
"bunded" version, with a secondary skin to ensure containment
in the event of failure of the inner skin. The designs fall into
four broad categories:
(a) Horizontal: initially these were in five sizes from 1,135
litres up to 5,000 and, mostly, available either as a single skin
or in a bunded version. As time went by the sizes available
changed;
(b) Vertical: over the years there have been about seven sizes
of single-skin vertical tanks from 1,365 to 10,000 litres with
roughly equivalent bunded versions of some of these;
(c) Slimline tanks: this was mainly one model (SL 1250)
although a smaller model was introduced in 2002;
(d) Low profile: one model only (LP 1250).
The models are designated by a prefix denoting their type (H, V,
SL, and LP) followed by the number of litres that they hold. A
"B" suffix denotes a bunded tank. The storage of oil in a tank
imposes stresses both internal and external on the tank. In order
to accommodate these stresses it is necessary, particularly in the
case of the bigger tanks, to incorporate into the design
strengthening and bracing sections such as stiffening bars and
corrugations. As a result the tanks are not simple structures or
basic shapes. They contain corners, edges and internal and
external protrusions.
19. Balmoral regards and marketed itself as at the Rolls Royce
end of the storage tank market with a reputation for quality
rather than cheapness.
20. Balmoral's tanks, when designed, were submitted to two
bodies for official certification. These were:
(i) the British Board of Agrment ("BBA"), which is the
body responsible for the issue of European Technical
Approvals for building products; and
(ii) the Oil Firing Technical Association for the Petroleum
Industry ("OFTEC"). A sub committee of OFTEC is OFCERT,
which is responsible for a certification scheme.
21. As its name implies, OFTEC is a trade association, of
which Borealis was a corporate member - the only polymer
manufacturer who was. It confers a certificate of quality. The
relevant OFTEC standard is the OFTEC Oil Equipment
Standard OFS T100 "Polyethylene Oil Storage Tanks and
Bunds for Distillate Fuels". This standard, which came into
force in 1994 and has been the subject of revision, has become
the main standard for oil storage tanks. In part this is because
many distributors are members of OFTEC, have
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greater links with them than with BBA, and want tanks that
pass the OFTEC standard. A manufacturer has to submit three
tanks of each design to an OFTEC approved test house in order
to gain Tank Type certification in an approved resin. Type
approval must then be secured if a new resin, not previously
approved, is used. Balmoral went through this process. Most of
Balmoral's range of oil tanks had obtained OFTEC approval by
1996 and did so, thereafter, with each change of material.
22. For the storage of Class C1 and C2 fuels (which include
kerosene and diesel) OFTEC specified a minimum wall
thickness of 4.5mm. That does not mean that a tank whose wall
thickness is never less than 4.5mm will automatically be fit for
purpose. What is the appropriate thickness must depend on the
particular design of the tank. At the design stage Balmoral
consulted an outside consultant called Tony Taylor, who had
designed tanks for Titan (the brand name for tanks
manufactured by Kingspan Group plc ("Kingspan"), the market
leader) and was said to have had "vast experience in product
design, including that for oil tanks". 9 He gave general guidance
that there should be a material thickness of 8mm for smaller
tanks, 10mm for medium tanks, and 12mm for larger tanks,
although in a memorandum of 28 October 1992 10 to Mr Hay Mr
Gibson, one of the design group, observed that this view had
"not been borne out by our calculations". The memorandum
gave estimates of wall thickness of 8mm in all the eight tanks
concerned save for a 5.5mm measurement for LP 275. This was
apparently based on Finite Element Analysis ("FEA"); but no
details of that have survived. 11 FEA is a computer-based method
of estimating stresses and deformation: see para 261 below.
23. OFTEC had no requirements in relation to the
environmental stress cracking resistance ("ESCR") of the
materials of which tanks are made. Prior to the events which
have given rise to these claims and those of other
manufacturers, ESCR does not appear to have been a topic of
much concern. When borecene was being developed, Borealis
carried out the then standard Bell telephone tests (to which I
refer in para 179 below); but did not until later carry out creep
rupture testing (a method of determining long term creep
resistance), since it was not the practice for raw materials
manufacturers to do so. When Borealis piloted a borecene with
an MFR of 1.9 with Tyrell Tanks (part of the business of
Kingspan) in late 1995 or
____________________
9 Hay para 14 [CW/6/37].
10 Docs 1/100. It is not clear whether these were intended as average or
minimum figures. Mr Bakewell suggested in evidence that they were average
figures (Day 5/89/21) but it seems to me more likely that they were minima,
especially if they were the result of Finite Element Analysis.
11 The documentation now available in relation to Balmoral's FEA analysis is
minimal. Neither the electronic files from the 1990s nor any hard copies of the
FEA analyses have survived.
636
early 1996, no inquiry was made by them about creep rupture

tests, and it did not occur to Borealis to carry out such tests until
later. Nor did anyone raise that subject when borecene was
launched at a conference in Vienna in October 1996.
Rotomoulders assumed that borecene would have the same or
better long term qualities as ZN material, which had proved
satisfactory, and in respect of which creep rupture tests were not
conventionally undertaken. Borealis also regarded borecene as
having better physical characteristics than its ZN material and
saw no obvious need at this stage to carry out creep rupture
testing.
First contact between Borealis and Balmoral
24. In March of 1993 Mr Bob Wood, who was then employed
by Neste and who later became Borealis UK's Sales Manager,
countersigned an internal customer credit request for credit of
1,000 in relation to an estimated supply of polyethylene to
Balmoral from Neste's Stenungsund plant. By then Mr Wood
had been to Balmoral and met Dr Milne.
25. In the second half of 1994 Mr David Cartwright, who was
then a Borealis UK sales representative, visited Balmoral in
Aberdeen where he spoke to two individuals, one of whom was
probably Mr Alexander Hay, Balmoral's Production and
Development Manager (Rotomoulding), and explained Borealis'
then product range (which did not include borecene). On 14
October 1994 a product designer at Balmoral sent a fax to Mr
Michael Shorter, who had been Neste's, and was now Borealis',
main technical advisor on rotomoulding products, in which he
said that Balmoral were currently looking for a grade of
rotationally moulded polyethylene to store polyester resin and
asked him to recommend a resistant form of polyethylene. A
manuscript notation on the fax shows that Mr Wood told Mr
Shorter not to respond.12
26. Mr Cartwright was, however, interested in doing business
with Balmoral and, having spoken with Mr Hay, he applied on
27 October 2004 for credit approval, which was granted to the
extent of 150,000.13
Balmoral's purchases from Borealis prior to borecene
The first contract
27. On 15 December 1994 Balmoral ordered 22 tonnes of a
material called NCPE 8089, two tonnes to be delivered in
December and the remaining 20
____________________
12 "Bob: Do I respond to this? They do have a cheek?!! Mick: No." The refusal
appears to have been because Mr Shorter and a Borealis salesman reckoned they
had been dismissed out of hand when providing price details on an earlier visit to
Balmoral and because Aberdeen was a long way away and expensive to go to.
13 In later years this limit was greatly increased.
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tonnes in January 1995. Balmoral's purchase order contained no

reference to any Balmoral conditions and had no conditions on
the back. No copy of the invoice or invoices has survived but I
accept Borealis' evidence that Borealis would invoice all
deliveries and that each of Borealis' invoices set out Borealis'
standard terms and conditions either on the reverse or on a
following page.14 This is consistent with the fact that all relevant
Borealis invoices that have survived do this and with the
inherent probabilities. Those terms and conditions exclude any
warranty of fitness for purpose and contain a limitation of
liability to the purchase price of the goods.
1995
28. On 18 January 1995, Ms Audrey Smith, a customer service
coordinator of Borealis, sent a fax to Mr John Forbes,
Balmoral's Group Purchasing Manager, which read:
Further to your meeting with David Cartwright, we wish to
confirm that the price of NCPE 8089 to Balmoral Group will
be fixed at 1,160 per tonne effective for deliveries from
January to June 1995 inclusive. This price is subject to off take
of one load (19,8ts) max per month, full loads only.
Prices are quoted subject to normal terms and to current
conditions of sale. Should you have any queries, please contact
us.
The meeting between Mr Cartwright and Mr Forbes had
probably taken place on 12 January.
29. In February 1995 Balmoral ordered 60 tonnes of NCPE
8089 on a call-off basis. This material was delivered over the
next few months in three tranches, although only two order
acknowledgments and no invoices have survived.
30. The terms and conditions on the back of Borealis UK's
invoices stated as follows:
APPLICATION OF THESE TERMS AND CONDITIONS
(A) Unless otherwise expressly agreed in writing by the
seller every sale of goods shall be subject to these Conditions
to the exclusion of any other terms and conditions whether
contained in any earlier set of conditions issued by the Seller
or the Seller's agents or in a form of order or any other
document issued by the Buyer or the Buyers agents or
otherwise arising whether expressly or by implication.
(B) No variation of these terms and conditions shall be
binding on the seller unless it is expressly agreed by a Director
or duly authorised representative of the seller in writing.
____________________
14 Up until 1999 these were the terms of Borealis UK. From 1999, as will
become apparent, the terms were Borealis' general conditions.
637
31. On 28 February 2005 Mr Cartwright visited Balmoral and

discussed future business. No mention was made of Balmoral's
(or Borealis') terms.
32. In August and November 1995 Borealis quoted prices for
three grades of material (ME 8150 - natural, ME 8153 - black,
and ME 8125 - dark green) as from 1 September 1995 and for
the first quarter of 1996 respectively.
33. On 6 December 1995 Balmoral faxed purchase order
number R745 for 500 kilos of ME 8152 - natural. The purchase
order contains in typescript on the bottom left hand corner the
words:
BALMORAL GROUP LTD
TERMS & CONDITIONS APPLY
AVAILABLE ON REQUEST
This was the first time that any reference to terms and
conditions had appeared on a Balmoral purchase order sent to
Borealis. The purchase order was expressed to be a
"Confirmation of telecom J Ball/A Smith". There is no
evidence, and it was not suggested, that there had been any
reference to any Balmoral terms in that telephone conversation
and I am sure that there was none. Nor was any reference to
Balmoral's terms raised in any discussion with Mr Cartwright
(who was home based and not a recipient of purchase orders
which went to Borealis' Wilmslow Sales Office). Had it been
raised he would have told Balmoral that Borealis would not
agree to a change from its terms of supply.
34. Both then and thereafter Balmoral's purchase orders did
not have any terms and conditions on the back of, or
accompanying, the order. Balmoral did not supply Borealis with
a copy of those conditions. Nor did Borealis ask for a copy. The
suggestion that they were relevant was first raised on the
pleadings in December 2005.
35. If Borealis had asked for Balmoral's terms and conditions
of purchase they would have discovered that they included the
following:
2.0 BASIS OF PURCHASE
2.1 The purchase order constitutes an offer by the Buyer to
purchase Goods and/or acquire the services subject to these
conditions.
2.2 These conditions shall apply to the Contract to the
exclusion of any other terms and conditions on which any
quotation has been given to the Buyer or subject to which the
order is accepted or purported to be accepted by the Seller.
2.3 The purchase order will lapse unless unconditionally
accepted by the Seller in Writing within 14 days of its date.
2.4 No variation to the purchase order or these conditions
shall be binding unless agreed in Writing between the
authorised representative of the Buyer and the Seller.
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3.0 SPECIFICATIONS
3.1 The quantity, quality and description of the Goods and
the Service shall, subject as provided in these conditions, be
as specified in the purchase order and/or in any applicable
Specification supplied by the Buyer to the Seller or agreed in
Writing by the Buyer
...
8.0 CONDITIONS AND LIABILTY
8.1 It shall be a material condition of the contract and the
Seller shall warrant that the Goods:
8.1.1 will be of merchantable quality and fit for the
purpose held out by the Seller or made known to the Seller
in Writing at the time the purchase order is placed;
8.1.2 will be free from defects in design, material and
workmanship;
8.1.3 will correspond with any relevant Specification or
sample. . ..
1996
36. On 24 January 1996 Mr Cartwright introduced Mr Mark
Caygill, his successor, to Mr Len Belsher, Balmoral's General
Manager, Moulding. The Balmoral representatives explained
the blend of ZN material that they were buying from their
current principal supplier DSM. Mr Caygill's note records that
"It was apparent that Balmoral are looking for the cheapest
possible [product] achieving acceptable' mouldings". Mr Joyce,
who was Sales & Marketing Manager of Balmoral Mouldings
from January 1994 and also acting General Manager from 1996,
after the departure of Mr Belsher, confirmed in evidence that
this was so. DSM's current "obviously very competitive" price
was 800/mt. Mr Belsher asked Borealis for prices for its
product range.
37. On 19 February 1996 Mr D E Boersch, a rotational
moulding consultant retained by Balmoral in connection with a
"plant optimisation project", faxed a message to Dr Milne about
a forthcoming meeting, in which he observed
The next topic for that planed (sic) meeting is the cooling
part of the overall cycle. You've got very fine state of the art
equipment, but the usage of all the possibilities built in is very
poor in Balmoral. Here a lot of improvement potential is
available.
38. Further purchase orders were given by Balmoral in
February (250 kilos ME 8131 - black) and August (1000 kilos
ME 8133/8089). They contained the same reference to
Balmoral's terms save that in the latter case there were added
the words "**Invoices not quoting valid order no shall
638
be returned**". Borealis' invoices continued to set out Borealis'

terms on the reverse.
39. In September 1996 Mr Robin Tanner, who had been the
General Manager of a firm of rotomoulders called Tank &
Drum Industries Ltd ("T&D") moved to Balmoral where he
became Managing Director of Balmoral Mouldings. 15 At this
time the division was in a bad financial state. It had lost over
1,000,000 in 1995 and was to lose about 800,000 in 1996. Mr
Tanner regarded saving on raw material as "essential". One
method of doing so was for Balmoral to cease purchasing
DSM's masterbatch and powder mix and, instead, to colour the
polyethylene powder itself by dry blending it with pure
pigment. For that purpose Balmoral purchased a turboblender,
which it first used in about April 1997.
40. In October 1996 DSM indicated that it was going to cease
production of the ZN material that Balmoral had been using. By
a letter of 25 October 1996 it confirmed to Balmoral that it
would maintain current price levels until 31 March 1997 but
that it would be "tight on supply" and:
that you should with some degree of urgency develop an
alternative source of supply so that you can pursue the dry
blend route with a view to reducing cost.
Borecene is launched
41. In October 1996, following various tests and trials,
Borealis launched borecene, to much interest, at a conference in
Vienna of the Association of Rotomoulders ("ARM") as a new
generation of polyethylene product for rotomoulding.
The meeting of 2 December 1996
42. Mr Tanner, whose former firm T&D had been using
Borealis ZN material ME 8154 and had trialled borecene, and
who had good relationships with Mr Shorter and Mr Andre van
Uffelt of Borealis, contacted Borealis and invited them to visit
Balmoral. This led to a meeting between Mr Tanner and those
two in October and then, on 2 December 1996, Mr Van Uffelt
and Mr Mark Caygill of Borealis visited Balmoral in order to
introduce Balmoral to borecene. They met Dr Bob Oram,
Balmoral's Group Technical Director, and Mr Tanner.
43. Mr Tanner's evidence was that borecene was presented as
an upgraded version of Borealis' ZN material or, at any rate,
that that is what he assumed. I prefer in this respect Mr
Caygill's evidence that it was described as a wholly new
material, a new generation of polyethylene, based on a new
metallocene catalyst technology. That is
____________________
15 Not long afterwards Mr Hay, the Production Manager joined T&D.
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what borecene was, and was being marketed as generally (see

the brochure referred to in para 47 below) and it seems to me
inherently likely that Mr Caygill said so.
44. As Balmoral's notes record, Balmoral was told that
borecene had a number of potential advantages over Borealis'
existing grades of polyethylene:
(a) reduced cycle time by up to 20 per cent;
(b) faster sintering16/improved flow characteristics;
(c) wider processing window. 17 Overcooking and
undercooking less critical;
(d) weight reduction between 10-15 per cent;
(e) improved mechanical properties18;
(f) mix and match of product gives optimisation of the
machine arm loading.
It was agreed between Mr Tanner and Mr Van Uffelt that
Borealis' MFR 3 ME 816719 would be the most suitable grade
for oil tanks. Mr Tanner agreed to take a trial batch of this
material for a trial in early January, at which Mr Shorter,
Borealis' engineer, was to be present to assist. The purpose of
the trial, as Mr Tanner's evidence indicated, was to see whether
borecene could be used to make satisfactory tanks and to see
what alterations had to be made to Balmoral's production
methods in order to achieve the benefits that had been indicated.
Borealis agreed to bear the cost of OFTEC certification for
Balmoral. Mr Van Uffelt agreed a price of 760 per tonne,
which he was to confirm in writing. This was based on the price
that had been agreed with Mr Tanner when he was with T&D.
1997
45. The trial batch was delivered on 13 December 1996.
Balmoral started some trials using it without Borealis personnel
taking part. By February 1997, Mr Tanner was very keen,
because of DSM's position about supply of material, on setting
____________________
16 Sintering is the process whereby individual resin particles fully coalesce with
their neighbours so that the melting polymer is laid up against the mould wall.
Lower viscosity leads to faster sintering time. Metallocenes with their narrower
molecular weight distribution had a well defined melting point which allowed for
a broader range of heating cycle times.
17 In fact as Ann Marie Fatnes, Borealis' Plant Development Engineer and one
of the engineers principally concerned with the development of borecene,
accepted, Borealis came to discover that, although overcooking and undercooking
were less critical, borecene has a narrower processing window, at any rate for
some customers who needed to slow down the rate of cooling in order to avoid
warpage.
18 Environmental stress cracking resistance is a mechanical property of a
polymer. It is, however, by no means clear that the reference was understood to be
a reference to that property. The concept was unfamiliar to Dr Oram at the time.
He was not familiar with ESC as a failure mechanism of polymers until 2002
when Rapra raised the possibility of its relevance. No one at Borealis had
mentioned this mechanism to him.
19 At this stage Borealis produced MFR 3 and MFR 6 grades.
639
up a trial of borecene with Borealis. In the event the joint test

did not take place until 10 April because Mr Shorter was not
available.
46. Mr Caygill of Borealis visited Balmoral again on 12
March 1997 when he repeated the description of the advantages
which borecene should provide that had been given in
December - with the exception of (f). He referred to a reduction
in weight of up to 20 per cent and more even wall thickness
together with reduced warpage and distortion. He told Balmoral
that there were 200 tonnes of old material of the MFR 3 grade
available in stock, which he would sell to Balmoral at 700 per
tonne. This price was later reduced to 680. Mr Tanner's note
records:
Although all the advantages quoted above are not all
applicable to Balmoral for instance we have to mould fuel
tanks to a given wall thickness 20 (item d) the remainder should
give us efficiency cost savings not to mention the price.
By in house dry colour mixing at 17 per tonne we would
have an "at machine" price of say 720 per tonne as opposed
to a current DSM price of 890 delivered a cost saving of
170. With a monthly usage of say 150 tonnes 25,000 should
go straight to our bottom line.
Borealis will look favourably on any cost associated with
testing the new material.
In conclusion the trials are the key to going forward enabling
the above advantages to be proven . . .
It is plain from that note, and from Mr Tanner's evidence, that
he had a degree of scepticism, indeed suspicion, about the
claims made on behalf of borecene.
The brochure
47. At some stage in 1997 Borealis produced a glossy
brochure entitled "Borecene polyethylene for rotational
moulding" which specified the several advantages of borecene
(reduced cycle time, warpage control, improved flow
properties/faster sintering, broader processing window,
improved mechanical properties and weight reduction
potential). Under the heading "Borealis new catalyst - the key to
success" the brochure stated that:
when developing our catalyst for rotomoulding polymers we
targeted a polyethylene with improved characteristics as
wanted by the rotomoulding industry.
It then referred to the fact that borecene polymers were:
____________________
20 A reference to the OFTEC requirements.
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characterised by a very narrow molecular weight distribution,

an even comonomer distribution and optimized rheological
properties such as low zero shear viscosity.
The brochure indicated that borecene enabled the rotomoulder
to reduce drastically the cycle time or the energy cost of the
process. Under the heading "Reduced weight" the brochure
recorded that an advantage of borecene:
because of the easy flow properties, is the possibility to
reduce the weight of the moulded article, due to the even wall
thickness control.
Under the heading "Improved mechanical properties" the
brochure recorded that:
Although the polymer has a narrow molecular weight
distribution it gives improved ESCR results when compared
with conventional polymers.
Beneath this was a bar chart in which borecene with an MFR of
3 and a density of 940 kg/m ie ME8166/721 was compared with
standard material with an MFR of 3.4 and shown to be
markedly superior in terms of time to failure.
The data sheet
48. Borealis produced a data sheet for ME 8166/7 which
showed that it had an ESCR of 4 on a scale from 0 to 5 (5 being
the best). Subsequent data sheets for borecene with MFRs of 6
and 4 also specified an ESCR of 4.
The first order for borecene
49. On 7 April 1997 an internal purchase requisition form for
the purchase of 20 tonnes of ME 8167 from Borealis was
completed by a Miss Sheena Murray in the Production
Department of Balmoral because stocks of DSM's material were
running low. Thereafter an order for 20 tonnes was placed,
probably by her,22 with Borealis over the telephone. On 9 April
1997 Borealis delivered to Balmoral 7.7 tonnes of borecene ME
8167. Borealis' invoice for that quantity, dated 9 April 1997 was
stamped as received by Balmoral on 14 April.
The joint trial on 10 April 1997
50. On 10 April 1997 the joint trial took place. Mark Caygill
and Mick Shorter were there on behalf of Borealis. Dr Kevin
Walls,23 Balmoral's Technical Manager, who had joined after Mr
Hay left, and Mr Charles Ingram, the Quality Assurance
____________________
21 ME 8166 was the pellet and ME 8167 the powder form.
22 See the Balmoral requisition form of 7 April [1354] and Balmoral's order
R2278 of 15 April 1997 [5/1353] for 20 tonnes which included in typescript the
words "Schedule all as discussed with our Sheena Murray". It was she who is
stated to be the Balmoral reference on the Borealis invoice.
23 His doctorate was in rotomoulding.
640
Manager, were the persons principally concerned on behalf of

Balmoral. These representatives of Balmoral were not clear as
to exactly what tanks had received OFTEC approval. The first
topic considered at the meeting was the OFTEC oil standard.
Mr Shorter's notes recorded that although Balmoral was
producing tanks which aimed to pass the OFTEC standard it
was very obvious:
that they did not know what the test was, if specific tanks
easily passed or failed, if they passed could they save weight,
or if they failed how they failed.
The trial started with production of specimens of a particular oil
tank (BH 3410) using DSM material and a lot of wall thickness
data was generated. Then, as the note records:
On selecting several tanks for study, the wall thicknesses
were totally different on all, but above all, they were thick at
the top and thin at the bottom - the opposite to what is
required.
In relation to the second topic - borecene - samples of the BH
3410 tank were produced with different charge weights of
borecene, and samples were made of a smaller tank - H 1590 comparing 72kgs of DSM material with 62kgs of borecene. Mr
Shorter's note records that:
The trial was not progressed further, because on studying the
tanks and trying to optimise the distribution, 24 it was clear that
the major effect/cause of a good/bad criteria, was tool
mounting and axis of rotation, etc on the machine. It was left
that Balmoral have to optimise their machine, before material
can become relevant.
Dr Walls told me the material thicknesses of the bottom of the
tank could be increased if the tool mountings on the machine
were changed, although this was not the only way of doing that.
51. As can be seen these trials related to the rotomoulding
process and not to the chemical composition or characteristics
of the material, and were incomplete. It was left that Dr Walls
was to carry out some in house studies into process and revert
to Mr Shorter when Balmoral had optimised their machine and
he was ready to re-evaluate borecene.
52. On 15 April 1997 Balmoral issued its purchase order
R2278 for 20 tonnes of borecene. The delivery of the 7,700kgs
on 9 April 1997 appears to have been treated by Balmoral as the
first delivery under this order because one of Balmoral's copies
of the order has the notation "9.4.97 - 7,700kg" written in
manuscript beneath the typed order and another has that
notation and beneath it the notation "7.5.97 - 12,300kg". Similar
notations appear on copies of the requisition form. By now the
words at
____________________
24 Ie of the polymer to make the tank wall.
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LLOYD'S LAW REPORTS

the bottom left hand corner of Balmoral's orders read:

BALMORAL GROUP LTD
TERMS & CONDITIONS APPLY A.O.R.25
TIME IS OF THE ESSENCE
**INVOICES NOT QUOTING VALID ORDER NO.
SHALL BE RETURNED**
Borecene goes into production
53. On 7 May 1997 Borealis delivered 19,800kgs of material,
of which 12,300 was attributed to purchase order R2278 of 15
April which, when added to the 7,700kgs delivered on 9 April,
produced a total of 20 tonnes: see para 52 above. The invoice of
7 May 1997 in respect of order R2278 was, however, for
19,800kgs, perhaps because 19,800kgs was a full load and the
compiler of the invoice did not realise that this order had been
the subject of two deliveries - on 9 April and 7 May. Someone
at Balmoral noted on the invoice that 20,000kg had been
ordered.
54. On 8 May 1997 Balmoral issued a purchase order for 200
tonnes to be taken on a call-off basis. This order must have been
preceded by a telephone order because it was in part satisfied by
7,500kgs of what was delivered on 7 May.
55. On 11 May 1997 Balmoral began to use borecene in the
production line and by 21 May 1997 borecene had become the
material used in the production of all of Balmoral's tank range.
From then onwards Balmoral used borecene in various different
forms almost exclusively until the middle of 2002. Balmoral
was the first oil tank manufacturer in the United Kingdom and
Ireland to use borecene in any significant quantities.
Dr Walls' trials
56. Dr Walls did not get back to Mr Shorter to re-evaluate
borecene. In the months after 10 April Mr Walls, who had
studied at Queen's University, Belfast ("QUB"), spent time
producing a set of sample tanks with lesser charge weights than
had been used for the DSM material for testing by OFTEC. In
the course of doing this he optimised processing parameters
such as rotation speed and oven and cooling settings, and
carried out localised lowering and raising of temperatures at
different parts of the mould (by shielding it 26 or applying heat to
it). He took extensive measurements by ultrasound. The
ultrasound cannot, however, produce reliable data at corners 27
and is not used for that purpose. Sporadically he cut up tanks
and
____________________
25 Available on request.
26 By attaching a steel shield to the outside of the mould.
27 If accurate measurements are to be taken the foot of the gauge has to be
placed in intimate contact with the tank surface. Because of its size this cannot be
done at internal and external corners.
641
measured the wall thicknesses.28 He was "primarily trying to get

a more even wall thickness and more material where we wanted
it overall" and was looking to avoid both unacceptable thinness
and unacceptable thick/thin changes. He managed to obtain
acceptable wall thicknesses. The tanks were passed by the
Polymer Development Centre, a testing agency in Ireland,
which acts on OFTEC's behalf.
57. In the event Balmoral decided not to reduce its charge
weights. When borecene went into production, with the charge
weights unchanged, no changes in the processing parameters
was made (save that adjustments were made to the cooking time
where necessary to make sure that it cured well 29). Whatever
optimised production parameters that had been developed by Dr
Walls in order to get the best distribution on lower charge
weights were not adopted. Balmoral's thinking at the time,
according to him, was that because they were using the same
charge weights and had been told:
that metallocene was superior to our existing material
strength-wise, so it was a no-brainer that if you keep the same
wall thickness we should be able to have the same mechanical
properties in our products.
The proposed Industrial Supply Agreement
58. Between March and May 1997 Balmoral and Borealis
contemplated entering into an overarching Industrial Supply
Agreement. In the event they never did so. The sequence of
events was as follows. On 12 March 1997 when Mr Caygill of
Borealis was introduced to Mr Forbes, Balmoral's Group
Purchasing Manager, by Mr Tanner of Balmoral, Mr Forbes had
expressed interest in coming to some sort of supply agreement
for the group covering both the rotomoulding and pipe coating
businesses. He suggested that both sides got together in April.
On 22 April (as I infer from Balmoral's letter of 15 May 1997)
Borealis sent Balmoral a set of documents constituting their
standard Industrial Supply Agreement. These included (a) the
basic supply agreement to which the other provisions were to be
exhibits; and provisions on (b) confidentiality; (c) price and
rebates; (d) consignment stock; (e) research and development;
(f) licensing. Mr Forbes passed the papers to Mr R W Byth,
Balmoral Group's solicitor.
59. Clause 3.1 of the price and rebate provisions read:
____________________
28 "It's likely that we may have cut up the odd tank along the way. . . If for
example you were making a tank and you knew it was far too thin in one area, so
you're never going to use this tank or sell it or anything, you might cut it up out of
curiosity to see what was going on in certain areas of it as well."
29 "We would tweak the cooking time": Walls 6/43/23.
[2006] Vol. 2
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LLOYD'S LAW REPORTS

The parties agree to comply to Borealis' payment terms and

general terms and conditions of sale for each country where
sale takes place.
60. Clause 4 of the basic supply agreement provided that:
4.1. The Customer shall be obliged to examine the products
and to test them properly immediately on receipt, and if
defects are ascertained, Borealis shall be notified in writing
immediately. Borealis shall make replacement delivery of
goods ascertained to be defective and the Customer shall have
no other remedy against Borealis.
4.2. Borealis shall not be responsible for the applicability and
suitability of the products and shall only be liable for damages
due to product liability in accordance with the provisions in
the General Terms and Conditions for Borealis attached as
Exhibit 3 to this agreement.
61. The Consignment Stock Agreement provided, by clause
11, for the incorporation of the standard terms and conditions of
the seller unless otherwise specifically stipulated in the contract.
62. On 14 May Mr Byth, responding to a note from Mr
Forbes, returned to him the Borealis drafts with a number of
comments. In relation to the price and rebate provisions he said:
I see your comments and agree them. Have we actually seen
the general terms and conditions of sale referred to in 3.1? We
certainly need to do so if they are to be picked up in this way.
63. In relation to the supply agreement he said, inter alia:
Article 4.1
Are we expected to test every batch or just how practical is
the first sentence of 4.1? Delete the words "and the customer
shall have no other remedy against Borealis".
Have we thought about adding a warranty requirement? At
the very least I think we should ask them to add a new article
in the following terms: "Borealis warrants that the products
shall be delivered in first-class condition and conform to
specification. Borealis further warrant the products shall be of
first-class quality and fit for the purpose for which they are
purchased." I would regard this as being a reasonable warranty
to request and stop short of my normally more aggressive
position on such matters, knowing that we need to try to get
this agreement without too much hassle. If all else fails, I
guess we would have them at common law if they provided us
with defective material. I am surprised to see that there is no
exclusion of consequential losses here and that can only work
in our favour so we should not raise the point.
642
64. On 15 May Mr Forbes of Balmoral wrote to Mr Caygill at

Borealis with comments and amendments for consideration. In
respect of the price and rebate provisions he required to see a
copy of Borealis' payment terms and general terms. He also
sought the deletion of the words "and the customer shall have
no other remedy against Borealis" in clause 4.1. He asked for
the warranty that Mr Byth had suggested.
65. As is apparent from the letter of 15 May Mr Forbes had not
seen Borealis' terms. There is no record that they were ever sent
to him by Borealis. They were, however, on the back of every
invoice, which Mr Joyce, who became Balmoral Tanks'
Managing Director from August 1997 (replacing Mr Tanner),
would initial. Borealis knew that Balmoral were in receipt of
those invoices. They did not know that Mr Joyce initialled
them, although they could legitimately make the correct
assumption that someone looked at them and passed them for
payment.
66. Borealis' copy of the letter of 15 May has the manuscript
annotations of Mr Robert Wood of Borealis, to whom the letter
had been passed by Mr Caygill. He amended the warranty so as
to read "Borealis warrants that the products are according to
given agreed spec". Thereafter the negotiations ground to a halt,
although, when on 17 December 1997 Mr Caygill wrote to Mr
Forbes to confirm an agreement that had been reached, subject
to conditions, for Borealis to give a month's notice of
withdrawal of supply of raw materials, he headed the letter "Re:
Industrial Supply Agreement - Notice of Withdrawal".
67. No suggestion was made by Balmoral in the
communications about an Industrial Supply Agreement that
Balmoral's terms already applied.
68. What happened thereafter was that the parties met
regularly to negotiate prices and volumes to be supplied and
over what period those prices would apply (whether six
monthly or quarterly).
Balmoral's use of borecene
69. Polyethylene is produced in either pellet or powdered
form. The relevant Borealis product codes are as follows:
Pellet form
Powder form
MFR
ME 8166
ME 8167
ME 8160/RM
8402
ME 8161/RM
8403
RM 7402
RM 7403
70. Balmoral purchased a variety of types of borecene from

Borealis which was mixed with
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LLOYD'S LAW REPORTS

pigment in different ways. In broad terms the borecene

material30 purchased from Borealis and the accompanying
pigment was as follows:
Dates
(Appro
x)
Borecene
MFR
Pigment/
method
of
blending
MayDecem
ber
1997
ME 8167
(powder)
Pure
27,746
phthaloc
yanine
pigment
dry
blended
with
virgin
polymer
in
Balmoral
's
turboblen
der in a
99.75 per
cent
polymer/
0.25 per
cent
pigment
ratio
(approx).
Novem
ber
1997
April
1999
ME 8167
(powder)
Green
Included
tecroblen in above
d31
masterbat
ch made
up by
ICO32
and
added to
the
mould by
Balmoral
without
premixing in
a ratio of
about 85
per cent
polymer/
15 per
cent
masterbat
ch.
April
1999 to
January
2000
ME 8166
(pellet)
Borealis
supply
polymer
in pellet
Estimate
d oil tank
sales
10,816
643
differential cooling across the wall thickness of the polymer, 34

and blooming, where white patches appear on the outer surface
of the tank. Blooming is caused by microscopic surface tearing
of the polymer on the outer section of the tank, when the
polyethylene crystallises and tears away from the tool surface,
leaving a residue of microscopic pieces of still soft polymer on
the mould. It is extremely common in the case of dark
materials, whether metallocene or ZN, and is usually dealt with
by flaming, ie applying heat to the surface of the tank, so as to
produce an even appearance. Warping is not uncommon.
Neither of these phenomena form any part of Balmoral's present
claim against Borealis. 35 Balmoral relies on them because it
raised a claim against Borealis for which Borealis paid it
compensation without referring to, or seeking to rely on, its
terms and conditions. The two problems appear in the end to
have been resolved, even if not completely, although it is not
entirely clear to me what it was that did so.
72. On 14 August 1997 David Cartwright and Anders Sandaas
of Borealis visited Balmoral to discuss Balmoral's problems
with "pre-release" (where the product comes away from the
mould earlier than it should and, therefore, warps) and
blooming. Prior to then Mr Shorter had advised Balmoral to
change from a solvent to a water-based release agent in order to
reduce blooming. A release agent is a coating applied to the
metal mould to assist release. A water-based agent would lead
to a slower release and, therefore, allow the plastic moulding to
stay in contact with the mould wall for as long as possible.
Parting of the moulding from the mould wall reduces the
control of cooling. Balmoral had changed their pre-release
agent, which had reduced the risk of blooming but increased the
amount of pre-release and consequent warpage. Mr Sandaas,
who questioned the need to change pre-release agent, suggested
that the blooming effect might be eliminated and warpage
reduced if the cooling cycle was slowed down and the rate of
crystallisation thus reduced. This did not produce an
improvement in blooming although it helped somewhat with
warpage. Mr Sandaas suggested the use of a non nucleating
pigment,36 dispersal of the pigment through the material in a
different manner, and working with ICO to find the best
combination of pigment percentage, pigment formulation, resin
density, resin crystallisation temperature and processing
conditions. A nucleating pigment is one that tends to initiate
crystallisation, so that crystallisation will take place at a higher
temperature. This
____________________
34 The material nearest the mould cools before the parts further away; and parts
of the mould of different thicknesses will cool at different rates.
35 I do not, therefore, intend to try to determine which of the several mooted
causes is responsible.
36 He recommended Chromium Oxide Green (C.I.P.G. 17) or Cobalt Green
(C.I.P.G. 50) or, if necessary, phthalocyanine blue.
form
which
ICO
grind
blend
with a
tecrothen
e33
green
masterbat
ch in a
75/25 per
cent
ratio. The
masterbat
ch was
melt
compoun
ded by
ICO.
January
2000 to
Decem
ber
2001
ME 8160
RM 8402
(pellet)
Grind
23,500
blending
by ICO
with a
3:1 ratio
of
polymer
to
tecrothen
e
masterbat
ch.
Decem
ber
2001M
arch
2002
RM 7402
(pellet)
TPLB
7402.
borecene
fully
compoun
ded by
ICO.
5,400
April
2002Jul
y 2002
RM 7402
(pellet)
PLP 363.
Grind
blending
by ICO.
Included
in above.
Warping and blooming

71. During 1997 and 1998 Balmoral experienced problems
with warping, where the shape of the tank distorts during the
cooling process, usually due to
____________________
30 During this period there was some limited use of ZN materials (i) between
March and June 1999 (material, probably Samsung ZN based, bought from ICO);
(ii) between late August 2000 and early May 2001 (Matrix material); and (iii) in
May 2002 (BP Rigidex material bought from ICO). Estimated oil tank production
from (i) is 1,384. Material (ii) was used for non-oil tanks until in December 2001
a limited number of oil tanks were made with the residue.
31 A tecroblend masterbatch is one where the masterbatch is ground to a finer
particle size than the base resin; the finer particles melt more quickly and
preferentially adhere to the mould wall thus causing the green pigment to migrate
to the exterior of the tank, so that less of the masterbatch is needed for colouring
the outside of the product. The masterbatch was a combination (compounded) of
ME 8166 resin, delivered to ICO, and pigment.
32 The trading name of Rotec Chemicals Ltd. There are other companies in the
same group but nothing turns on the distinction between them. One such company
was Wedco Technology UK Ltd in Gainsborough, Lincs.
33 In a tecrothene masterbatch the masterbatch has the same particle size as the
base resin and is relatively uniformly distributed throughout the wall thickness.
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LLOYD'S LAW REPORTS

may cause stresses over the structure or lead to embrittlement of

an otherwise ductile material.
73. On 27 August Mr Joyce complained strongly to Borealis
that Balmoral was being used as a guinea pig. 37 A further fax of
complaint followed on 9 September. On 15 September 1997 Mr
Sandaas of Borealis provided Balmoral with a long report. He
again recommended the use of a non-nucleating pigment. He
recommended demoulding earlier38 and reverting to a solventbased release agent. This led to the use of the tecroblend
masterbatch referred to in para 70 above.
74. Borealis, in the persons of Mr Bob Wood and Mr Shorter,
visited Balmoral at the end of September. On 29 September Mr
Joyce supplied Borealis with the costings associated with
obtaining approval for Balmoral's range of products (55,280),
said that scrapped material associated with eliminating
problems had cost in excess of 18,000, to which was to be
added loss of business and market positioning, together with the
cost of flaming all products to deal with blooming.
75. In September 1997 Borealis delivered a batch of material R 00107 - which was faulty, having an MFR of either 2.16 or
2.6, and which, Balmoral claimed, led to a three day loss of
output.
76. After various visits and correspondence Balmoral's claims
were eventually settled. On February 10 1998 Mr Wood wrote
saying:
As we have not received from Balmoral a sample of the
green blended material ME 8167, batch R 000107, for
technical analysis, we have decided to settle the claim on a
commercial basis.
The letter proposed a payment of 85,000 to cover (i)
OFTEC/BBA testing costs - 25,000; (ii) three days lost
production on account of batch R 00107 - 45,000; and (iii)
credit for returned material 15,000 (Mr Joyce described this as
relating to warpage and blooming). On 20 February Balmoral's
offer was increased to 90,000 by increasing item (ii) to
50,000. The claim was settled at that sum, credited against
future purchases. Neither Borealis nor Balmoral said anything
in the course of the negotiations about anybody's standard
terms.
77. Further product claims were settled in a similar way. In
August 1999 Borealis supplied ICO with an allegedly defective
batch of material which caused variable wall thickness in the
product. Balmoral blamed ICO. ICO blamed Borealis. Borealis
could find nothing wrong with the retained sample of powder
and complained that Balmoral
____________________
37 In fact borecene had been trialled by T&D in South Wales and by a company
in Germany and was being used by Clarehill and Kingspan and elsewhere in
Europe.
38 Demoulding too early can lead to warpage if the material is too hot; but it can
help in relation to warpage if it is not.
644
had not notified them of the problem in sufficient time to allow

them to investigate and had retained no samples for testing. The
dispute was settled in April 2000 with a three way split in
respect of the claim of 17,880.
78. In 2001 Balmoral received a defective batch of borecene
due to the presence of the wrong form of stearate, as a result of
which numerous tanks had to be pre-released from the moulds
and scrapped. Borealis, through its insurers, agreed to pay
170,000 by way of damages together with a credit note for the
value of the material supplied. The claim for loss of profits on
lost sales was left open because of a potential overlap with this
action. Again neither party relied on any standard terms.
The change to MFR 6
79. In late 1998 Borealis introduced Balmoral to the new
grade of borecene with an MFR of 6 (for which Balmoral later
secured OFTEC approval39). On 16 November 1998 Mr
Halvorsen and Mr Wood of Borealis visited Balmoral. It was
probably then that Mr Halvorsen handed Balmoral Borealis'
Processing Guide.
80. According to Mr Macleod40 of Balmoral's note, the
Borealis representatives told Balmoral that Borealis had
developed a new grade (ME 8161) with an MFR of 6, to
alleviate problems with powder flow and hopefully "blooming",
and that this higher melt flow material would improve material
distribution within the mould, and hence the overall wall
thickness of the products,41 and could improve cycle time by up
to 30 per cent. All other physical properties were the same as
MFR 3. Mr Wood recalled this being said, as it probably was,
by reference to provisional data sheets. The data sheets in
bundle 32 show that, with the exception of the MFR, the
physical properties were said to be the same. The ESCR figure
in those data sheets was 4. In fact the ESCR of MFR 6 was less
than the ESCR of MFR 3, albeit within the same No 4 category
used by Borealis.
81. A series of tests were carried out trialling three different
materials on the H 1590 tool: (i) Pegasus B 408, (ii) Borealis
ME 8155 (both of which are ZN materials) and (iii) Borealis
ME 8161 ie borecene with MFR 6. The same moulding
parameters were applied to the three materials. The rotation
ratio was 4:1. Blooming appeared on the surface of all three
products, more prominently on ME 8161. Wall thickness
measurements were taken from spots on the walls of the
stiffening ribs. The ME 8161 material gave the lowest thickness
(on
____________________
39 The Polymer Development Centre allowed a limited range of tanks to be
tested on the basis that if those passed the others would pass as well.
40 Who did not give evidence.
41 I take this to mean, as Mr Wood indicated was the sense of what was said,
that the overall evenness of wall thickness would be improved.
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LLOYD'S LAW REPORTS

average) for all sections measured. Borealis explained that

material with a higher melt flow required higher rotational
speeds than normal in order to distribute product more evenly
throughout the product because at low speed more material
would be left in pockets and flow away from peak areas
because of the product's low viscosity.
82. Further trials took place on the mould for the SL 1250 and
LP 1250 tanks, because the H 1590 tank mould had sustained
some damage, and products using ME 8167 (ie borecene MFR
3) were also made. Rotation speeds were increased from 4:1 to
7:1. The results showed an all round improvement in wall
thickness of approximately 1mm using the ME 8161 (MFR 6)
compared with the ME 8167 (MFR 3). These results followed
and may reasonably be attributed to a change in rotation speed,
as Borealis had recommended.
83. The conclusions drawn from the test included the
following:
(a) the Borealis standard [ZN] grade (ME 8155) required
longer cycle times than the current ME 8167 (MFR 3)
material;
(b) reduced cycle times with ME 8161 (MFR 6) compared
with ME 8167 (MFR 3) were possible but not to the levels
stated;
(c) the ME 8161 (MFR 6) material resulted in improved
material distribution (on average);
(d) higher rotational speeds were required when moulding
with ME 8161; and
(e) reducing the cooling time did not remove surface
whitening which was still a major problem.
Borealis agreed to carry out trials using a particular pigment
and two different release agents to see if blooming still
occurred; and to analyse samples of flamed and bloomed
polyethylene. Borealis suggested that there should be trials
using a Rotolog system (which is a means of measuring,
amongst other things, the internal air temperature within the
mould and the moulded product).42 Mr Halvorsen agreed to
return at a later date and perform trials using his own Rotolog.
84. Professor Crawford points out that, although the fault
addressed was blooming and not wall thickness distribution,
these results show (a) that different wall thickness distributions
were obtained for each plastic when the same moulding
conditions were used in the same mould and (b) that, if the
manufacturing conditions were altered then the wall thickness
distributions could be changed.
85. On this and subsequent visits in February 1999, February
and March 2000, and November
____________________
42 At an earlier stage Balmoral had been advised by outside consultants that the
Rotolog was expensive, inflexible and unreliable and not ready for routine shop
floor use: Hay para 22. In recent times Balmoral have purchased such technology.
645
2001 Mr Halvorsen observed what he regarded, and describes

in his statement as, inappropriate processing practices by
Borealis operatives such as (a) failing to make proper use of the
appropriate release agent by following the instructions on the
can; (b) removing tanks whose upper parts had stuck suspended
in the mould with a "crowbar"; (c) reheating the outside of the
tank mould in order to melt the plastic and so loosen it 43; (d)
want of familiarity with the Borealis processing guide; and (e) a
lack of interest on the part of some Balmoral staff in solving
problems. He also found that Balmoral operatives would, whilst
he was there, try to follow what he was explaining and seek to
optimise the machine settings so as to avoid warpage, but, when
he returned, he would find that much of what he had explained
had been sidelined and old practices restored. He explained to
Balmoral operators that if borecene was processed in the same
way as ZN it would not achieve the distribution that was
necessary so that issues such as temperature, speed and ratio of
rotation, and the cooling cycle were very important, detailed
discussion of which was not particularly welcome to Balmoral
machine operators.
86. In at least one of these criticisms Mr Halvorsen was
mistaken. What he described as a "crowbar" was in fact a form
of paddle often used by rotomoulders for removing tanks from
moulds. Mr Halvorsen did not, as it turns out, intend to refer to
a crowbar in the generally accepted sense of the term, but the
instrument that he saw was not one with which he was familiar.
The generality of this evidence renders detailed refutation or
assessment difficult. But I found Mr Halvorsen, who left
Borealis in 2005 and now works for a Borealis distributor, a
reliable witness, and I regard his general criticism as probably
well founded. Mr Wood's evidence was of the same tenor.
87. On 3 December 1998 Mr Halvorsen sent a fax to Mr
Taylor and Mr Macleod at Balmoral recording the result of the
trials in November and expressing the following conclusions:
Conclusions
We see potential for time reduction, approx 30 per cent.
The blooming we have more to look into. I think this is a
combination between the pigment and the release agent. I have
tried the same release agent here in Norway, and I cannot see
any blooming. For this kind of release agent, it is very
important to add it properly.
You have to follow the instructions on the can.
88. Further tests were carried out on 16 February 1999 at
Balmoral with a Rotolog. These showed
____________________
43 On one occasion when the tank was probably scrapped.
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that if MFR 6 material was used there could be a 31 per cent

reduction in cycle times and that careful selection of a release
agent with optimum cycle times and a reduced cooling rate
could reduce the blooming effect or might eliminate it. Fast
cooling causes the product to pluck itself away from the surface
of the mould resulting in blooming. A reduction in cycle time of
21 per cent was also experienced in relation to MFR 3 material.
Mr Halvorsen's record of the meeting recorded that the most
important thing was that the customer had to be interested in
solving the problems, and described the trials as badly arranged,
and the Production Manager as seemingly not interested in what
was going on
89. In May 1999 Borealis agreed to supply four tonnes of
MFR 6 material free of charge to enable Balmoral to obtain
OFTEC and other approvals. In June 1999, Balmoral requested
two tonnes of MFR 6 for product trials. In July Borealis agreed
to supply ten tonnes of ME 8160 free of charge to cover the cost
of OFTEC testing. In August Balmoral told Borealis that it
needed 19 tonnes free supply in order to cover WRC, OFTEC
and BBA testing costs, and Borealis agreed that it would meet
the cost of re-approving Borealis MFR 6 grade by supplying
material free of charge. By August 1999 Borealis had told
Balmoral that it was going to cease production of MFR 3 and
would only be supplying MFR 6 in future. In December 1999
Borealis ceased to supply Balmoral with MFR 3 and began
supplying MFR 6.
The borecene processing guide
90. The borecene processing guide indicated that borecene
would need an increase in oven temperature and rotation speed
and an optimisation of rotation ratio in order to achieve the
desired even wall thickness. It observed:
Optimising of processing conditions for borecene is very
dependent on type of rotomoulding machine used, machine
settings, mould, mould material etc. Therefore only these
general guidelines are given. If more detailed advice are (sic)
requested contact your Borealis Technical Service
representative.
It also contained the following statements in a section headed
"Colouring of borecene":
When changing from a conventional material to a borecene,
the same pigments can be used in the same quantity . . .
It is recommended that the quality of the borecene product is
initially monitored to ensure correct pigmentation. Details
regarding pigments can be supplied by the pigment
manufacturer.
This general statement was based, according to Miss Fatnes, on
some testing especially for impact
646
properties, on some pigments for specific customers and on the

experience that Borealis' technical service people had in the
market. Borealis had not done testing specific to the oil market.
I do not regard it as established that Borealis had made the same
claim in respect of pigmentation when originally introducing
borecene to Balmoral. At the same time Borealis had not
indicated that Balmoral would or might have to change its
pigment.
New invoicing arrangements for 1999
91. In November 1998 Mr Wood of Borealis sent to Mr Joyce
of Balmoral a letter on Borealis UK paper with an enclosed
packet. The letter informed him that Borealis was "preparing to
implement some important changes in our business practices in
order to service you better". The letter indicated that the packet
contained information about the following:
- News and details about Borealis' plans to establish a Shared
Service Centre for financial administration.
- Information about the introduction of the euro into Borealis
business practices.
- An update on how Borealis was preparing for the Year 2000
challenge.
92. The enclosed packet included a circular letter which read
as follows:
Dear Business Partner
Re: Shared Service Centre & Direct Invoicing
Continuously striving to be a top performer in our processes
to serve customers in the most original way, Borealis has
decided to establish a Shared Service Centre (SSC) for
managing the transaction processing of a major part of our
financial administration. The new concept will go into effect
on January 1 1999.
The SSC will be located in Woluwe, Belgium under the legal
umbrella of the existing Borealis Coordination Center (BCC).
We are convinced that by centralising financial tasks,
Borealis' personnel will be able to focus even more on core
activities like production, logistics and sales and thus respond
faster to your needs.
For the same reasons Borealis has decided to optimise its
current invoicing process. This means that there will be a
change from the re-invoicing principle through the local sales
company to direct invoicing by the delivering production unit.
Settlements, however, will be done via the local BCC account
as described in the attachment. As before, all the specific
payment instructions will continue to be featured on our
invoices.
[2006] Vol. 2
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LLOYD'S LAW REPORTS

...
Because of the integration of PCD 44 and the direct invoicing
from our production units in different countries, we recognise
the need for harmonising our General Terms and Conditions of
Sale, You will find the revised document attached. Irrespective
of the source of delivery, you will deal with a commercial
partner who applies unified conditions with respect to
commercial, insurance and legal maters. We are confident that
you will find the harmonised terms to be even more customer
oriented and simplified.
If you have any questions or require further information,
please do not hesitate to contact (name and contact
information of your local credit controller45). Thank you
93. A further letter dated November 1998 contained the
following paragraph:
Borealis sales invoices dated 01.01.99 and onwards are
factored to Borealis Coordination N.V., which will be the sole
legal beneficiary of all collections.
We kindly request you to follow the payment instructions on
our sales invoices and quote invoice numbers as reference in
all payments and enquiries.
In order to provide you with continuous and further improved
services we recommend and promote standard bank transfers
as the primary payment method.
94. One of the attachments read, so far as relevant, as follows
Borealis Coordination Center N.V.

Bank Transfers
Currency
Bank
Address
Account
number
GBP
Citibank
N.A.
London,
U.K.
8543992
Country
UK
Cheques and remittance advices with full sales invoice

numbers to be mailed to:
Borealis Coordination Center N.V.
c/o Citibank European Lockbox Service
P.O. Box 17663
London SE1 4ZT
U.K.
95. Also attached was the following:
Your contact for settlements and payment related
enquiries:
Mail: Borealis Coordination Center N.V.
____________________
44 An Austrian producer recently acquired by Borealis.
45 The version that has survived is a draft. The relevant contact information
would have been specified for the particular customer.
647
Fin. Service Center

Woluwegarden, 2nd floor
Woluwedal 26
B-1932 Sint-Stevens-Woluwe
Belgium
Telephone: + 32-2-715 3600
Fax: + 32-2-715 0459
E-mail: Fin.ServiceCentre@BOREALISGROUP.COM
Commercial issues:
Borealis U.K. Ltd
Telephone: + 44 1625 54 7300
Fax: + 44 1625 54 7301
96. There was also attached (a) a form of acknowledgement of
receipt, which Balmoral did not return, (b) Borealis' General
Terms and Conditions, and (c) letters about Borealis and (i) the
euro and (ii) Year 2000 compliance. The General Terms begin
with the following preamble:
These General Terms and Conditions of Sale. . . together with
the order confirmation shall in so far as no other agreement
regulating the issue has been concluded in writing apply to all
products. . . sold by the Borealis entity given in the front page
(in the following "Borealis").
No sample front page of an invoice was included.
97. Mr Joyce expressed some concern to Mr Wood (either on
the telephone or face-to-face) as to whether the changes would
mean increased cost to Balmoral in some way.
98. On 11 December 1998 Mr Wood wrote to Mr Joyce, again
on Borealis UK paper. The letter was in a standard form sent to
many Borealis customers. It included the following:
Dear Allan
Re: Shared Service Centre
Our recent mailing on the euro into our business practices
(sic), the Year 2000 challenge and the establishment of a
Shared Service Centre (SSC), have raised, especially for the
latter, some concerns and remarks from your side.
With the creation of a SSC, it is definitely not our aim to
transfer costs, currently paid by Borealis, to you. Our customer
service is always our first priority and we would therefore like
to clarify the points of concern raised.
*Central invoicing: Your local Borealis Sales Office will
print and dispatch the invoices in the name of the supplying
Borealis plant and continue to offer assistance on any issues
relating to payments. Invoicing from different sites instead of
invoicing through one local sales company necessitates your
maintaining different supplier files. The creation of one bank
account reference
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LLOYD'S LAW REPORTS

for all the Borealis sites, will, however, soften the additional
administrative effort. The planned second stage of the project
will enable central invoicing, independent of local Sales
Offices, thereby reducing the temporary complexity
introduced by the first phase, and establishing one invoicing
and collecting entity.
...
We hope that this letter answers your questions and concerns,
if you require any additional information, please do not
hesitate to contact us.
Invoices from January 1999
99. Up until the end of 1998 Borealis' invoices contained no
reference to any company other than Borealis UK. They were
headed "Borealis" and contained at the base Borealis UK's
name, address, telephone and fax numbers, company and VAT
registration numbers, bank account details and other
information.
100. In respect of deliveries from January 1999 onwards the
format of the Borealis invoices was changed in the following
respects:
(a) at the base of the invoice on the left hand side there was
printed under the words "INVOICED BY", the address and the
company and VAT registration (but not banking) details of
either Borealis AB (of Sweden) or Borealis AS of Norway;
and
(b) Borealis' General Terms and Conditions of Sale were
printed on the reverse instead of those of Borealis UK. These
contained the preamble set out at para 96 above. Immediately
above the words "INVOICED BY" appeared the words "All
sales are exclusively governed by Borealis General Sales
Terms and Conditions of Sales printed on the reverse side".
(c) on the right hand side, until the invoice dated 29 April
1999, under the words "SALES OFFICE" there appeared the
name, address, company registration number and other details
of Borealis UK46; thereafter the words "Commercial Agent"
replaced "SALES OFFICE".
The invoices now had a second page which reads as follows:
This document has been endorsed to Borealis Coordination
Center, Woluwedal 26, 1932 St Stevens Woluwe, Belgium and
is solely payable via
____________________
46 The use of the expression "Sales Office" instead of "Commercial Agent"
appears to have been the result of an error in programming the software. In
addition at one stage the software caused the expression "Sales Office" to be on
the Balmoral copy and the words "Commercial Agent" on the Borealis copy - the
latter being generated at a later stage than the former.
648
Bank transfer to the account 8543992 at Citibank London. . .

for beneficiary Borealis Coordination Center.
Cheque: Mail cheque to be sent to Borealis Coordination
Center N.V., c/o Citibank European Lockbox Serv., PO Box
17663, SE1 4ZT London, Great Britain.
Remittance advices are to be sent to Borealis Coordination
Center, Woluwedal 26, 1932 St Stevens Woluwe, Belgium or
faxed to + 32 2 715 0459.
The invoices of Borealis Sweden all described Sweden as the
country of origin and place of dispatch. On the second page of
some of the early ones were the words "Our VAT number in
Sweden: SE556078663301" but no VAT was charged on the
invoices. These invoices were in respect of ZN material (ME
8154).
In the case of the invoices of Borealis Norway (being all the
borecene invoices) VAT was charged in those cases where the
place of dispatch was named on page 2 of the invoice as Great
Britain, in which case the second page gave "Our VAT no in
Great Britain: GB61152386", which was Borealis UK's VAT
number. Where the place of despatch was some other country in
the European Union no VAT was charged and page 2 gave "Our
VAT No" in the country of origin eg, Germany or the
Netherlands.
101. From January 1999 onwards a number of changes took
place in the way in which Balmoral ordered material from
Borealis and paid for it. After the first few orders Balmoral
ceased to address its orders to Borealis UK and, instead,
addressed them to Borealis Coordination NV but continued to
send them to Borealis UK.47 Balmoral ceased making payment
to Borealis UK and made payment, by cheques in sterling, to
Citibank in London into Borealis Coordination Center's
"lockbox" account. VAT was only charged on invoices in which
the "Place of Dispatch" specified in the invoice was Great
Britain.
102. Prior to January 1999 producing companies such as
Borealis Norway and Borealis Sweden 48 had charged local
Borealis sales companies, such as Borealis UK, for all
deliveries to the territory of the local company, the product
manufactured being sold by the producer to those local
companies. After that sale Borealis UK would "re-invoice" their
customer, to whom without mark-up they on sold. This
arrangement meant that the local sales companies had separate
balance sheets and separate administrative and accounting
departments. Borealis came to regard this as less efficient than
it could be.
____________________
47 Eg 10/3218-9.
48 Borealis had some six or seven production companies across Europe.
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103. From the beginning of 1999 the Borealis companies

ceased to sell to the local sales company and, so far as they
were concerned, sold products to the customers themselves.
Borealis Coordination Centre NV, a Belgian company
("Borealis Belgium"), purchased the receivables from the
production company and collected them, 49 as well as
performing various accounting functions for the production
companies. The invoices were generated over night in the UK
Office in batches by the producing unit (by computer link) and
then sent out by Borealis UK. The numbers of staff in the local
sales companies decreased so as to consist only of sales
managers and customer service representatives, administration
being transferred to Borealis Belgium or the production unit.
Rebate for 2000
104. On 14 February 2000 Mr Wood of Borealis, who had had
discussions on the rebate to be extended to Balmoral if the
volume of material ordered by it exceeded a certain level, sent
to Mr Joyce a copy of a written agreement, signed by Mr
Webster on behalf of Borealis Denmark representing all its
subsidiaries, headed "Bonus Agreement 2000", with a request
that Mr Joyce sign and take a copy of it and return the original.
The agreement covered deliveries for the year 2000. It provided
that, if during 2000 Balmoral ordered 2,000 tonnes or more of
rotational moulding resin in that year, Borealis would pay a
rebate of 20 per tonne on the entirety of the quantity ordered.
Clause 5 provided:
The parties agree to comply to Borealis payment terms and
general conditions of sale.
No copy of the letter signed by Mr Joyce has survived. 50 But Mr
Joyce told me that it was his usual practice to return documents
presented to him for signature and, although he did not recall
signing it, did not really dispute that he probably did. In the
light of that evidence and the fact (a) that it would be in the
interests of both parties to have the agreement signed, and (b)
that a similar agreement was signed on behalf of Balmoral in
2001, I think the likelihood is that Mr Joyce did sign and return
it. Balmoral ordered more than 2,000 mt in 2000 and was paid
the agreed rebate.
Changes in 2001
105. On 3 November 2000 Mr Wood of Borealis sent to Mr
Joyce of Balmoral a letter describing a
____________________
49 Once the monies were collected they were allocated to the accounts of the
production companies in Borealis' internal accounting system. Borealis Belgium
operated a cash pool at the bank in London.
50 The closure of Borealis UK's office and its subsequent move has caused a
quantity of documentation to be destroyed or lost.
649
further change of practice. It included the following:

Borealis is committed to continuously improving Borealis'
customer service. This is why we are establishing a single
invoicing entity. Effective January 1 2001, all material
delivered by Borealis, irrespective of production site, will be
invoiced from Borealis A/S, the Danish parent company.
. . . In the future you will deal with only one supplier.
Our commercial, day-to-day contact is not affected by this
change in invoicing . . .
This letter had attached to it a package of documents of which
only a draft version has survived. One of those documents
informed Balmoral that
the general sales terms were unchanged and a copy of them
was attached. A draft of that letter, which Balmoral may well
never have seen, indicated that invoicing was to be based on
DDP (Delivery Duty Paid) sales terms as a result of which
Borealis Denmark would be the importer of the goods in the
country of sale, and that invoicing would include local VAT in
all EU countries save three. So far as Borealis was concerned,
the seller was Borealis Denmark. The arrangement whereby
the producing company receivables were factored to Borealis
Belgium ceased. The local sales companies continued to
operate as agents receiving a commission. Borealis Belgium
was appointed by Borealis Denmark as an administrative agent
to provide collection, cash management and accounting
services. Borealis Denmark purchased the product from the
producing companies.
106. In January 2001 the first three Borealis invoices
contained underneath details of the total sum due the following:
Exporter: Borealis AS, Ronningen
This document is solely payable to Borealis A/S, Lyngby
Hovedgade 96, DK-2800 Kongens Lyngby, Denmark via
Banktransfer to the account 40092550 at ABN AMRO
(London) (swift code ABNAGB2L) for beneficiary Borealis
A/S.
Cheque: Cheque to be sent to Borealis A/S, Hovedgade 96,
DK-2800 Kongens Lyngby, Denmark.
Remittance advices are to be sent to our Borealis
Coordination Center, Woluwedal 26, B-1932 St StevensWoluwe Belgium or faxed to + 32 2 715 0459.
The goods were described in the bottom left hand corner as
invoiced by Borealis Denmark and Borealis UK was described
in the bottom right hand corner as Commercial Agent.
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107. From invoice 9800006198 of 5 January 2001 the words

on the invoice after the price were
EXPORTER-BOREALIS AS 9 (N-3960 STATHELLE
NORWAY)
Borealis A/S
C/o Borealis UK
Borealis House
Water Lane Wilmslow
SK9 5AR Cheshire
United Kingdom
VAT no GB732914044
From 26 February 2001 the words "EXPORTER-BOREALIS
AS 9 (N-3960 STATHELLE NORWAY)" were omitted.
108. Every Borealis invoice consisted of three pages. The
General Terms and Conditions of Sale, which were not
changed, were set out in full on the face of the third page.
109. From 1 January 2001 the invoices were no longer printed
in England or posted by Borealis UK. They were despatched
from Denmark by courier. Balmoral did not immediately start
making payment to the Amro account; and had to be reminded
to do so in October 2001.
Rebate for 2001
110. On 17 January 2001 Mr Joyce and Mr Forbes met with
Mr Wood and agreed rebate terms for 2001 of 20 per mt on all
tonnage purchased if 2,000 mt or more were ordered, and 30 if
2,500 mt or more were ordered. A typed rebate agreement for
2001 in the same form as the 2000 agreement, save for the
change of year, and dated 17 January 2001, had been prepared
on or before that day. On that day Mr Wood amended the typed
agreement in manuscript so as to provide, in addition, for a 30
rebate if 2,500 mt or more was ordered. Mr Wood initialled and
dated that amendment. Mr Forbes signed the amended
document. He did not date his signature in manuscript but he
signed immediately below the date of 17 January. I infer that he
did so on that day. On 14 February Mr Wood faxed through to
Mr Joyce and Mr Forbes a note, dated 12 February 2001,
confirming, inter alia, these rebate terms, together with a fully
typed up rebate agreement for 2001, signed by Mr Webster on
behalf of Borealis. In an e-mail sent to Mr Joyce on 12
February, to which the fax was an attachment, Mr Wood had
indicated that he would be sending the fax, signed, when he was
back in the office "together with the rebate forms for your
signature". There is no evidence that the fully typed up
agreement was ever signed by Balmoral.
650
Tank failures
111. Towards the end of 2001 Balmoral came to realise that oil
tanks manufactured with borecene were failing (by cracking) at
an alarming rate. In an internal memorandum of 2 November
2001 Mr Woolley of Balmoral highlighted "a worrying trend in
the number of tanks cracking since the introduction of
[borecene]", and that the number of complaints in respect of
two of the tanks (H 2500 and SL 1250) was "worryingly high,
more so when considering the young age of many of those
failing". The latter included tanks made from MFR 6 borecene
to which Balmoral had only recently changed. Borealis'
immediate reaction, as expressed in an e-mail from Mr
Halvorsen of 14 November, was that the reason for the cracks
was that the material was:
mixed with a nucleating pigment creating differences
between the particles - so called transcrystallinity51 - creating
stress and weak points in the product.
He recommended either changing to a non-nucleating pigment
or, preferably, to producing tanks only from compounded green
material.
112. Balmoral had had failures of tanks when it used ZN
materials. The underlying failure rate over a ten year period was
2.96 per cent of tanks manufactured. The rate of failure with
borecene was much higher.
The meetings of 22 and 29 November 2001
113. On 22 November 2001 a meeting took place between
Balmoral personnel and Mr Halvorsen at which he suggested
that the cause of failure might be the combination of a grind
blend mix together with a nucleating pigment, causing stress
points due to the formation of transcrystallinity, a concept that,
according to Balmoral's note of the meeting, he "could not fully
explain".
114. On 29 November 2001 a meeting took place between
representatives of Balmoral, Borealis and ICO, the pigment
suppliers/incorporators, at which Borealis claimed that no other
tank manufacturer using borecene had experienced cracking
problems except for one very small one. Whether or not that
was true at the time, it has become apparent that Borealis has
received claims from most British tank manufacturers of any
size. At this meeting Borealis advised Balmoral that they should
move to a further version of borecene, with an MFR of 4, and
that it should be fully compounded with the pigment. Balmoral
followed this advice and on 17 December 2001 began
production with fully compounded
____________________
51 A particular morphology of the crystal structure: illustrated by the thin border
around the dark pigment in figure 3.25c of CAPCIS' first report: see para 270.
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MFR 4 material, which, by arrangement with ICO, whose

David Howarth was at the meeting, they obtained for the same
overall price as a grind blended product. By January 2002
Balmoral was experiencing difficulties with MFR 4.
115. In November 2001 Balmoral approached Rapra
Technology Ltd ("Rapra") for advice. It gave definite
instructions to them in March 2002 and one of their
representatives gave evidence at the hearing.
116. By February 2002, if not before, Balmoral had become
thoroughly dissatisfied with what they regarded as Borealis'
lack of any sense of the urgency or of the importance of the
problem that Balmoral faced; and regarded Borealis as bound to
underwrite the cost of complaints caused by the failure of tanks
made by borecene in the ten year warranty period. Balmoral
decided to switch from borecene for all non-vertical tanks and
to raise a claim against Borealis for tank failures. At a meeting
between Balmoral and Borealis on 29 February Mr Halvorsen
suggested that the cracking might be attributable to problems of
"sharp geometry", the application of the release agent or
aggressive demoulding.
Rebate for 2002
117. On 12 March 2002 at a meeting at which Messrs Joyce,
Forbes, Wood and Halvorsen were present, the parties agreed to
continue the 2001 rebate agreement into 2002.
118. Balmoral implemented a change back to grind blend in
April 2002 (at Borealis' suggestion) in order to deal with a
tendency of the material to stick in the moulds. But problems
continued and Balmoral ceased to use borecene altogether on 29
July 2002. Thereafter the polymer that they used was, largely,
compounded BP Rigidex HD 4330 until October 2003 and then
Dowlex NG 2432,52 both ZN materials with MFRs of 3 and 3.5.
119. On 23 April 2002 Mr Shorter, who, having been an
employee of both Borealis and ICO,53 had then set himself up as
a consultant, attended Balmoral's premises to express a view on
Balmoral's production methods and to draw up materials
requirements specifications for future material purchases. This
turned out to be a bad day to call because only the day before
Balmoral's Production Manager, Alan Taylor, had died in a
house fire, and Mr Shorter looked round without his assistance.
During the course of his visit he talked to a machine
____________________
52 Supplied by Dow Chemical Company Ltd.
53 By whom he was made redundant in February 2002.
651
operator and had a meeting with the Group Technical

Department.
120. On 30 April Mr Shorter e-mailed to Balmoral a series of
comments which he asked them not to take as points of
criticism but on the basis that an independent pair of eyes might
see things which Balmoral could not, recognising that Mr
Taylor would have been on to some of his points. His report
included the following:
Process parameters. These are set by experience and some go
back to Alex Haigh (sic) days. Rotation requirements is (sic)
"a black art", No set procedures for part manufacture. Some
parts are generated with 2 oven temperatures, some with 1.
Precooling and cooling operation is not optimised. It would
appear also that some operators "modify" the process
parameters to suit their requirements.
...
Mould design and installation. Nearly all moulds are
mounted very close to the arm! This will have effect on
temperature distribution around the mould, and hence wall
thickness variation . . .
...
Moulding quality - get feeling that operators dont (sic) take
ownership for the quality that they generate.
QA studies. No equipment to check incoming resin or
powder, or moulding parameters.54
121. Balmoral was surprised by Mr Shorter's report which did
not appear to it to be consistent with how Mr Shorter had
portrayed the situation when at ICO. Mr Woolley's evidence
was that the products were mounted on the arms as per the
machine design with the base of the tanks connected to the
"plate". The way of mounting was not changed and the only
place where heat could have been minimised by virtue of the
shielding effect of the arm mounting would be the bases, and
there was no problem around the base. 55 After another visit Mr
Shorter was not further engaged, not least because he appeared
to be able to offer no useful advice on the cracking issue as he
had no experience of cracked tanks.
122. I recognise that Mr Halvorsen and Mr Shorter will have
had a different viewpoint to that of Balmoral. Nevertheless the
fact that both of them were critical of Balmoral's processing
practices in the way in which they were gives some indication
that Balmoral was not optimising its practices nor applying
them uniformly.
____________________
54 This may be a reference to the absence of a Rotolog.
55 cp the position observed at the 10 April 1997 trial: see para 50.
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123. On 14 August 2002 Balmoral withdrew its SL 1250 (old

style),56 H 1135, H 1590 and H 2500 designs, save for bunded
versions of the 1135 and 1590. These tanks were superceded by
the SL 1000, SL 1250 (new style), H 1500 and H 2000. 57 The
inner tanks of the horizontal range and of the new SL 1250 tank
had been redesigned in order to accommodate pumps, gauges
and ancillary equipment so that the bunded version could take
fuel dispensed by a pump rather than by gravity. Balmoral also
introduced a new single skin vertical tank - the V 1800. The H
5000 design had been withdrawn in 2001.
More tank failures
124. As time went by Balmoral came to realise what a
disastrous position it was in. Complaints of cracking tanks
continued to rise. Distributors began to express worry and
concern. The suitability of plastic tanks to hold oil was called
into question. Legal proceedings were begun against Balmoral
in Belgium and France. Because some of the cracked tanks
produced oil spillages the Environment Agency became
involved, Balmoral's problems became public knowledge. The
Irish Rotational Moulders Association formally asked for an
explanation of the nature and extent of the problem and what
was being done about it.
125. A number of meetings took place between Balmoral and
Borealis in late 2001 and 2002. The tenor of Borealis' response
to Balmoral's complaints was that the failure of the tanks was or
might be attributable to a number of factors, eg poor processing
or incorrect pigmentation, the unifying characteristic of which
was that none of them was Borealis' responsibility.
126. On 20 January 2003 a detailed technical meeting took
place between Balmoral and Borealis. Borealis refuted any
suggestion that borecene was not fit for its purpose and
suggested a number of key contributors to failure other than
borecene (wall thickness distribution, use of grind blended
pigmentation, defective demoulding procedures, and design that
was a trigger for cracking).
127. In a letter of 4 February 2003 Mr Joyce claimed that
borecene was:
intrinsically not "fit for purpose" when considering the
design, manufacturing and application of the finished product.
At every stage Borealis have had full knowledge of the
intended use of the material purchased by Balmoral and
____________________
56 The "old style" SL 1250 was a tank that dated back to the 1990s. It had a
tendency, in a small percentage of cases, to bulge below the horizontal "bumper
bar". It could thereafter split at the bulge point. It was redesigned in 1997 to add
a lower rib to each side of the central section and then in 1999 to extend the rib
all the way round the tank.
57 The new SL 1250 and H 2000 have a more rounded shape than their
predecessors and may, therefore, have fewer stress concentration sites.
652
have actively recommended its use. Borealis cannot therefore

escape responsibility for the cracking problem and its
consequences.
128. On 13 February 2003 Borealis responded to the letter
saying that they were taking the issue very seriously indeed, and
were working urgently to obtain a technical determination of
the cause at the earliest possible moment. The letter expressed
the view that until the cause of the problem was identified it
was premature to discuss a commercial settlement. Further tests
were proposed and it was asserted that Borealis could not be
held responsible for any
final moulded part defects arising from a coloured powder,
the specification of which we have no control over. As such,
Balmoral's involvement of ICO in investigating the issue is
again requested.
No mention was made by either side of any applicable terms
and conditions. On 21 February 2003 Balmoral's group solicitor
informed Borealis that the sum involved was so considerable
that Balmoral would, in the absence of a settlement, have to
litigate and had engaged London solicitors.
129. During 2003 and 2004 the number of failures increased.
The figures for failures in 2005 are less than those for 2004 but
there is an issue between the parties as to whether or not this is
a temporary lull. In mid 2003 Balmoral set up a Customer
Services Department to deal with calls from the public and to
organise tank change outs (such change outs being described as
"emergency", in contrast to the "planned" change outs which
took place from autumn 2003 for tanks made from borecene
MFR 6). Prior to then complaints had been dealt with in the
Sales Department, initially by one individual working on a part
time basis. When a complaint is deemed to have been resolved
the relevant file is closed and passed to the "Archive"
department. This department was set up in late 2003 to collate
information on individual complaint files, beginning with files
where the complaint was closed. The Accounts Department was
trawled for evidence of the specific costs for individual
complaints. Staff in the Archive Department compiled a
summary of cost information in relation to complaints on a
sheet, and key data was input into an "Emergency Spreadsheet",
which has formed the basis for assessing the cost of tank
failures.
The scale of the failure
130. The first report from CAPCIS, Borealis' experts,
summarised data provided by Balmoral revealing that between
October 1997 and July 2002 approximately 54,000 oil tanks
were manufactured.
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LLOYD'S LAW REPORTS

The total numbers of tanks manufactured from borecene (and

ZN) were approximately as follows:
MFR 3
26,700
MFR 6
19,150
MFR 4
3,800
ZN
3,700
No of
Tanks
Produce
d
Total
Percenta
productio ge failure
n to 31
March
2005
Total
Percenta
productio ge failure
n to 31
per grade
Decembe
r 2005
MFR 3
6,438
8.8 per
cent
6,433
11.4 per
cent
MFR 6
3,721
39.1 per
cent
3,721
45.5 per
cent
MFR 4
1,023
9.5 per
cent
1,023
15.8 per
cent
ICO
14
28.6 per
cent
14
34.7 per
cent
SL
1250
131. During that period failure statistics in respect of the six

most produced tanks, out of about 27 designs, constituting 82
per cent of production, were as follows:
Tank
Design
Tank
and
polyme
r type
653
Failures
as
percenta
ge of
total
manufac
ture
No of
tanks
that
have not
failed
Nonfailures
as
percenta
ge of
manufac
ture
4-3940
SL
1250
10,272
22
8,012
78
H 2500
9,307
25.6
6,938
74.33
H 2500
LP
1250
7,700
3.04
7,266
96.96
MFR 3
4,157
16.1 per
cent
4,154
20.4 per
cent
H 1590
6,839
8.5
6,248
91.5
MFR 6
2,840
2,840
V 1365
5,454
1.72
5,360
90.28
35.9 per
cent
43.8 per
cent
H 1135
5,207
3.21
5,040
96.79
MFR 4
734
15.1 per
cent
734
21.5 per
cent
ICO
82
17 per
cent
82
33.4 per
cent
MFR 3
4,714
1.1 per
cent
4,710
1.4 per
cent
MFR 6
2,682
6.2 per
cent
2,682
7.4 per
cent
MFR 4
822
1.2 per
cent
822
1.5 per
cent
MFR 6
2,425
8.5 per
cent
2,423
10.3 per
cent
MFR 4
1,442
22.5 per
cent
1,442
29.4 per
cent
407
4.4 per
cent
407
7.8 per
cent
132. The number of failures for the SL 1250 and H 2500 tanks
is significantly higher than for the other major tanks designs.
The third report of Miss Sally Hassell, Balmoral's forensic
accountant, reveals (para 2.3) that the SL 1250 and H 2500
account for almost two-thirds of tank failures to date, although
they are only 30 per cent of production. The failures were
particularly high in respect of tanks manufactured in 2000 and
2001, when MFR 6 borecene was being used. Of the H 2500
tanks manufactured in ZN material 131 of those manufactured
in 1995 failed and 117 of those manufactured in 1996 - on
average 8.2 per cent of production (appendix 1).
133. Updated figures were produced during the course of the
trial by Miss Sally Hassell and Mr Flemming Jensen, the expert
for Borealis. Miss Hassell's figures are to 31 March 2005 and
Mr Jensen's to 31 December 2005. Both experts had to make
assumptions in relation to certain tanks because certain
information was either unavailable or wrong. Their approaches
to estimation employed different methodologies. Each agrees
that their respective methodologies are both acceptable and that
the results produced are reasonably accurate.
134. The resulting figures for the production of tanks from
borecene during the period 1997 to 2002 are:
(ZN)
4-3940
(ZN)
LP
1250
H 1580
& 1590
MFR 3
V 1365
MFR 3
4,204
1.3 per
cent
4,201
1.6 per
cent
MFR 6
1,618
1.7 per
cent
1,618
2.5 per
cent
MFR 4
361
1.1 per
cent
361
1.5 per
cent
MFR 3
3,117
2.4 per
cent
3,115
2.7 per
cent
MFR 6
2,008
3.1 per
cent
2,008
5.1 per
cent
MFR 4
476
1.3 per
cent
476
1.5 per
cent
MFR 3
254
35.4 per
cent
264
40.8 per
cent
Stamyle
x (ZN)
58
19.0 per
cent
57
20.6 per
cent
H 1135
H 5000
The figures for ICO 4-3040 (in respect of SL 1250 and H 2500)
and Stamylex (in respect of H 5000) were not the only ZN
materials used during the period. They are included in order to
show the high rates of failure in some designs in some ZN
materials.
135. During 2000 there had been what was described by Mr
Joyce as an investigation into the horizontal range. That review
appears from a subsequent document to have included the
conclusion:
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LLOYD'S LAW REPORTS

that the higher incidence of failures of horizontal tanks was

mainly attributable to high cyclic loading at the edges where
there are stress concentrations that are caused by tight radii
and disruption of the continuity of the ribs. Thinning at the
internal edges was also more prevalent with tight radii. The
thickness checks that we normally carry out with the ultrasonic
do not identify thinning at the edges. The FEA that we have
carried out have been on simplified models that do not
properly represent the edges.58
This conclusion is consistent with the contents of a
memorandum from Mr Macleod of 3 September 1998 in
relation to six returned H 2500 bund inner tanks that were
leaking where the bumper bar meets the lower ribs on the
corner of the tank. He postulated as likely causes the following:
High stress points due to the tank design ie tight radii, where
cracking would eventually occur due to the loadings placed on
the tank.
Overcooking of the product which would make the material
brittle hence reducing the physical properties of the tank.
The corner areas being underthick.
The suppliers' material not complying with their data sheet.
He regarded the last as unlikely.
136. The most up to date failure rates for borecene are Mr
Jensen's 31 December 2005 figures. These reveal that, out of
total production of 72,214 tanks in the years 1997 to 2002,
2,668 tanks made of MFR 3, 4,330 tanks made of MFR 6, and
408 tanks made of MFR 4 had failed. The percentage failures,
and the percentage failure in respect of all materials, were as
follows:
Material
Percentage of
total production
Percentage of
production of
the relevant
material grade
MFR 3
3.7 per cent
7.7 per cent
MFR 6
6.0 per cent
20 per cent
MFR 4
0.6 per cent
6.7 per cent
All materials
10.5 per cent
137. In their supplemental report CAPCIS presented a further

analysis of failure data which showed, amongst other things,
that in respect of tanks manufactured in the period from
October 1997 to July 2002 in the six most produced tanks
designs and the H 5000 tank:
____________________
58 Docs 18/5923.
654
Material grades
(i) All material grades had suffered cracking failures;
(ii) MFR 6 borecene had the highest failure rate - around 15
per cent of all tanks;
(iii) ZN material 4-3940 had the second highest failure rate 10 per cent;
(iv) The other four materials (MFR 3 and 4 borecene and two
ZN material) had failure rates of between two per cent and
four per cent;
Designs
(v) The greatest failure rate per design was for the H 2500
(<25 per cent) and SL 1250 (around 22 per cent) tanks, and, to
a lesser extent, the H 1590 design (8.5 per cent), in respect of
all materials59;
(vi) The V 1365 and H 1135 designs had consistently low;
sometimes zero failure rates in all materials;
(vii) The H 5000 tank had a failure rate of eight per cent
when made from ZN material and 14 per cent and 25 per cent
when made from MFR 3 and MFR 6.
The scale of total production of borecene
138. Between June 1999 and December 2004 approximately
200,000 tonnes of borecene grades were supplied to some 400
companies worldwide, of which RM 8402/3 - the MFR 6
material - accounted for about 49,000 tonnes. borecene has been
used for many different applications. Metallocenes occupy
about 25 per cent of the American and European markets and
are used successfully by over 100 rotomoulders in UK.
Balmoral's claims
139. The essence of Balmoral's claim is that borecene was not
fit for the purpose of making standard green oil tanks and that
as a result of this unfitness Balmoral's borecene-made tanks
failed in alarming quantities. Balmoral's claim extends, on the
pleadings, to a claim that borecene was not of satisfactory
quality but, as Balmoral's final submissions implicitly
recognise, if Balmoral have a valid claim it is likely to be one
on the former basis.
Satisfactory quality
140. Section 14(2) of the Sale of Goods Act 1979 is primarily
directed towards substandard goods. Although there is an
overlap between sections 14(2) and (3) the function of 14(2) is
to establish a general standard which the goods in question are
required to reach, and not to ensure that they attain some higher
standard of fitness for a particular
____________________
59 Ignoring the SL 1250 ZN 4-3940 combination where no tanks were made.
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LLOYD'S LAW REPORTS

purpose made known to the seller. In appropriate cases the

question as to whether goods are of satisfactory quality may be
determined by considering whether they are fit for all purposes
for which goods of the kind in question are commonly supplied:
section 14(2B)(a); Jewson Ltd v Leanne Teresa Boyhan [2004]
1 Lloyd's Rep. 505.60 For a material that has a very wide range
of possible uses, and which is to be used and transformed by a
specialist manufacturer for his own particular purposes, that
seems to me somewhat too wide a test, particularly when
polyethylene although commonly supplied for oil tanks is not,
in respect of some grades, suitable for that purpose.
141. In my judgment Balmoral have not established that
borecene was of unsatisfactory quality. The material supplied
was not defective or incorrectly manufactured. borecene was
suitable for rotomoulding generally. The question is whether it
was suitable for the particular purpose of constructing above
ground static tanks to be used for storing oil over long periods.
That is something that falls within the reach of section 14(3).
Fitness for purpose
142. A buyer will, in the absence of any terms of exclusion or
restriction, have a good claim for breach of an implied warranty
of fitness for purpose if:
(a) the sales to him were in the course of a business;
(b) he has made known to the seller, expressly or by
implication, the particular purpose for which he was buying
the goods;
(c) he relied, wholly or partly, on the seller's skill and
judgment and it was not unreasonable of him to do so;
(d) the goods supplied are not reasonably fit for that purpose
because of a defect lying within the sphere of expertise of the
seller upon which the buyer relied61; and
(e) that unfitness is the cause of his loss.
In respect of (c) the burden is on the seller to show that the
buyer did not rely on his skill and judgment, or that it was
unreasonable of him to do so.
143. I turn, therefore to consider whether, on the assumption
that no exclusionary terms are applicable, there was an implied
warranty of fitness for purpose.
144. All the sales were made in the course of Borealis'
business.
____________________
60 In that case the boilers purchased were satisfactory as boilers even though
they produced much lower Standard Assessments Procedure (SAP) home energy
ratings in the flats in which they were installed than had been the case with the
previous oil fired boiler.
61 Christopher Higgins Ltd v Washington Piggeries Ltd [1972] AC 441.
655
145. Borealis was well aware from the start of its dealings
with Balmoral that Balmoral was making green oil tanks with a
ZN polymer and a phthalocyanine green pigment by
rotomoulding. Borealis introduced borecene to Balmoral as a
possible substitute polymer. Balmoral made known to Borealis,
insofar as that was necessary, that they would be buying
borecene to use to make green oil tanks in their rotomoulding
machines.
146. Borealis indicated to Balmoral that borecene could
provide a number of significant advantages as a polymer,
including reduced cycle time; warpage control; improved flow
properties; a broader processing window 62; improved
mechanical properties and the potential to reduce charge
weights due to even wall thickness control - all these are
enumerated in the Borealis brochure. What was said by
Borealis' representatives is reflected by what is said in the
brochure.
147. MRF 6 was put forward in the meeting of 16 November
1998 on the basis that it would improve material distribution
within the mould and hence the overall wall thickness of the
product, that it could improve cycle time by up to 39 per cent,
and that all its other physical properties were the same as MFR
3.
148. Borealis were the makers of borecene, and therefore in
the best position to know its intrinsic properties, both chemical
and mechanical. They had, as their literature made clear, a
sizeable research and technology department. The intrinsic
properties of borecene were within their sphere of expertise.
They were also well equipped to perform a range of
standardised tests on samples of their products, and customers
would be entitled to assume that when Borealis' literature set
out the results of those tests it did so accurately.
149. Borealis had the facility to make and did make relatively
simple rotomouldings, usually in the shape of small boxes, with
conventional moulding equipment.63 This enabled them to make
several copies of a standard product for testing purposes. (QUB
did the same.) Mr Halvorsen carried out extensive rotomoulding
trials of borecene, experimenting with changes of temperatures,
ratios, machine settings etc. The boxes were then sent to the
laboratory for testing of mechanical properties. But Borealis
were not professional rotomoulders, let alone conversant with
the particular way in which Balmoral designed, manufactured
and tested oil tanks. That was within Balmoral's sphere of
expertise.
150. In those circumstances Balmoral, in ordering borecene,
reasonably relied on Borealis to
____________________
62 Meaning that there would be a less narrow timeframe below and above which
there could be problems of "undercooking" or "overcooking".
63 For borecene a Rotospeed shuttle machine - much smaller than Balmoral's
machines, but with a similar arm system.
[2006] Vol. 2
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LLOYD'S LAW REPORTS

supply a polymer whose properties made it reasonably suitable

for the purpose of making green oil tanks by rotomoulding, in
the sense that it was capable of being used to make consistently
satisfactory tanks. By "satisfactory" I mean tanks which would
last as for a reasonable minimum period of time in ordinary use.
The ten-year period covered by Balmoral's warranty (and that
of many other tank manufacturers) is a suitable measure. 64
151. Borealis would not have fulfilled that obligation if
borecene's properties were such that, whatever reasonable 65
adjustment was made to Balmoral's processing parameters,
including grade of pigment and method of pigment
incorporation, satisfactory green oil tanks could not be made
despite an adequate design of tank. Nor would Borealis have
fulfilled its obligation if the possibility of a need for an
adjustment of processing parameters would not have occurred
to a competent rotomoulder, or if such a rotomoulder would not
be able to discover by reasonable endeavours what change of
parameter was needed.
152. But Balmoral could not reasonably rely on Borealis in
respect of design or rotomoulding both of which were within its
sphere of expertise. As to the former, it is the job of the
rotomoulder to design his tanks. A polyethylene supplier is not
responsible for failings in design. As to the latter, a competent
rotomoulder would realise that all raw material products are
different, that a new product may perform in ways that differ
from the way in which products that he has previously used
have performed, and may react differently to the same pigments
and methods of pigment incorporation as he has used before, as
well as to different ones. One of the reasons why raw material
suppliers supply samples of their products free of charge before
purchases begin is in order to enable manufacturers to gauge the
suitability of the supplier's material for the particular purpose
for which they intend to use it, ie by using their own moulds,
pigments, blending methods, and processing parameters. This
happened in the case of MFR 3 and MFR 6.
The mechanism and characteristics of failure
153. Fuel oils, and, in particular, kerosene are environmental
stress cracking agents. This means that tanks filled with such
oils are prone, over time, to crack at stress points, even though
subject to stress levels lower than those at which they would be
expected to fail. In the end all polyethylenes subject to long
term stress below their yield stress will fail in a brittle manner.
In the presence of an
____________________
64 I note that in 1996 Borealis themselves recognised the need to estimate long
term properties to "aprox (sic) 10 years": 4/911.
65 In one sense, unless the design is grossly inadequate, an adjustment can
always be made to prevent ESC failure, eg by making the tank walls extremely
thick.
656
ESC agent they will fail sooner. ESC comes about because the
ESC agent plasticises and, thereby, softens the material.
Softening, in the presence of stress, causes crazes (small voids)
to develop in the amorphous phase of the material. In time these
develop into cracks on the outside of the tanks. 66 Once the
cracks reach a critical length, catastrophic brittle failure occurs.
Kerosene is a weak ESC agent so that failure, if it occurs, may
not happen for 10-20 years or more.
154. Water and other bulk liquids are denser, and therefore
heavier, than oil, and thus exert greater load stress than
kerosene. But water, and other bulk liquids, are not ESC agents
to any appreciable extent.
155. Balmoral sold borecene to other manufacturers who have
had problems with cracking tanks. In several cases, including
DESO Engineering Ltd ("DESO") in Great Britain, and Carbery
Plastics Ltd ("Carbery"), Kingspan and Clarehill Plastics Ltd
("Clarehill"), whose claim is small, in Eire, they seek to hold
Borealis responsible.67 Between them these companies
constitute a very large proportion of the oil tank manufacturing
industry in the British Isles, which takes a sizeable proportion
of the annual European tonnage of polyethylene for making oil
tanks (12,429 out of 20,367 tonnes for 2001).
156. It is common ground that the relevant Balmoral oil tanks
have failed because of ESC. Broadly speaking the tanks have
failed, irrespective of material, at particular locations specific to
each model where the stress68 is high compared with other areas
of the tanks. For the horizontal tanks the tendency is for the
cracking to occur on the top of the central bumper bar near
where the vertical corrugations start. The great majority of the
SL 1250 failures consist of vertical cracks at the lower part of
the side face: see figure 3.1. of CAPCIS' first report, where
there is what was termed a "step" where one half of the mould
meets the other. Other, less frequent, areas of failure are around
the holes through the tank and at the central base of the long
side of the tank. Vertical tanks, whose failure rates are a small
percentage of production, tend to fail towards the base of the
tanks around the "mouse hole" or on the top of the tank around
the lifting eye.
157. In the case of the two tanks with the highest degree of
failure (H 2500 and SL 1250) FEA analysis, carried out by a
firm called Wilde FEA
____________________
66 Figure 13 in Mr Clements' first report is a good example.
67 There have also been complaints by a company called Fuel Energy Services
Ltd ("FES"), otherwise known as "Tuffa Tanks", against ICO in respect of
increased failures from the use of a borecene material bought from them, and a
claim against Matrix Polymers in respect of a metallocene material.
68 The stress at any given point is a function of fill level, tank design, wall
thickness, wall thickness distribution and any residual stresses present in the tank.
[2006] Vol. 2
QBD (Comm Ct)
LLOYD'S LAW REPORTS

Ltd, shows that high stress regions coincide with the primary
points of failure. The failures, which CAPCIS also observed in
tanks that they examined, are usually associated with changes in
section (such as an internal corner) producing stress
concentration and, usually, a change in wall section thickness,
or where localised thinning concentrates stress. Thus there are
high stress concentrations in the areas where thinning is most
likely. This does not mean that the point of failure is always at
the thinnest point in the area. Failure is a function of stress.
Stress at point A may be insufficient to lead to failure; whereas
a greater stress at point B will do so, even though the material is
thicker at point B than at point A.
158. Rapra's first report expressed the opinion that:
. . . the poor ESC performance, coupled with the fact that
borecenes are at higher stresses due to wall thinning generate
performance failures.
The tenor of the Rapra reports was that in all but the simplest
structures products made with borecene would inevitably
display wall thickness variations.
159. There was some somewhat unsatisfactory evidence to the
effect that Balmoral tanks had also failed in thick sections
where there was no localised thinning. Dr Oram of Balmoral
gave evidence in re-examination to the effect that the "norm of
wall thicknesses where cracks had occurred" was 5.5-6mm. He
had not in fact taken, or witnessed the taking, of these
measurements but was reporting on data from Rapra which has
not been identified or produced. Those figures are, however, not
inconsistent with some of the CAPCIS measurements of
sections of the tanks they examined. The wall thickness at the
point of cracking identified in figures 3.4-3.19 to their first
report varies from 4.64 to 7.42mm in respect of borecene.
Those figures do not however address the question of thickness
variations in the area surrounding the cracks.
160. Mr Clements of Rapra indicated in his oral evidence that
there had been failure where there was no change in wall
thickness and where the failure occurred in a thick section.
When challenged he referred (a) to a DESO tank where the
sample made had failed on the top in thick section, (b) to
vertical tanks (unspecified), (c) to his understanding that
Carbery tanks had, to CAPCIS' knowledge, 69 failed on the roof
section, (d) to slimline tanks of other manufacturers failing in
thick section, and (e) that he had seen a vertical Balmoral tank
fail in thick section at the bottom of the outlet port. But he
accepted that he had never referred CAPCIS to Balmoral tanks
failing in thick
____________________
69 Dr Clemens of CAPCIS accepted that he had seen slimline tanks at Carbery
with cracks on the top, where the hole opened up and he thought that there was a
similar problem at Kingspan.
657
section, nor discussed it with them, and that the tanks examined
by CAPCIS were treated as representative by all concerned.
161. Dr Wright of CAPCIS, when he came to gave evidence,
accepted that two of the measurements of the tanks of which he
took samples - namely the "(a)" measurements for tanks V 3655
and V 2600 - were measurements recording wall thickness
sections around cracks in the tank top. In the former case the
site of the crack has a thickness of 5.64 (see figure 3.7) and the
minimum/maximum thickness ratio of the sample was
7.78:5.36. In the latter case (see figure 3.9) the thickness at the
site of the crack is not specified and the min/max range is
10.52:4.95.
162. In the light of that evidence I do not accept that
Balmoral's borecene made tanks failed to any material extent in
areas where there was no significant wall thickness variation.
163. Variation of wall thickness is graphically illustrated by
the photograph at page 37 of Mr Clements' first report. This
photograph shows sections of a H 1590 tank manufactured
from:
(i) BP's ZN MFR 3;
(ii) borecene MFR 4; and
(iii) borecene MFR 6 material;
each section being placed on top of the other. It shows, in
respect of these three materials, reduction in thickness at
internal, and increase in thickness at external, corners. 70 The
molten polymer has flowed away from the internal corner,
reducing its wall thickness, towards the external corner, whose
thickness has increased. Mr Clements noted that in the H 1590
tanks the subject of his figure 9 the metallocenes all exhibited
higher stresses than the BP due to reduced wall thickness on the
internal corners and that these higher stresses had a "dramatic"
influence on the lifetime of the tanks. The relative
measurements at the point of highest recorded stress in respect
of tanks strain gauged by Mr Clements (see para 193) were as
follows:
Material
Internal
corner
(mm)
External
corner
(mm)
Ratio
BP 4330
(ZN)
7.80
11.54
1:1.50
ME 8166
(MF 3)
6.07
12.50
1:2.05
RM 7402
(MF 4)
7.46
13.36
1:1.80
RM 8402
(MF 6)
6.45
15.20
1:2.36
____________________
____________________
70 Consistently with this CAPCIS found that the extremes of wall thickness on
the tanks they examined were located at a change in section - the thickest part
being usually at external and the thinnest at internal corners: 3.10.
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164. It is practically impossible to rotomould a tank without

any wall thickness variation. The skill of the rotomoulder is to
reduce the variation to an acceptable level. Substantial wall
thickness variations are prejudicial to the integrity of the
product for two reasons. Firstly, thinning of one area will mean
that that area is more stressed than it would be if it was thicker
because of the reduced cross-sectional area. The flexural
stiffness of a structure is proportional to the cube of its
thickness. So, doubling a wall thickness will increase flexural
stiffness by a factor of 8 (2). Secondly, a difference in wall
thickness will concentrate stress in the thinner portion,
particularly if there is a change from thick to thin to thick. 71
165. Balmoral contend that the reason for the massive increase
in failure of oil tanks is that borecene is fundamentally
unsuitable for the manufacture of green oil tanks in that:
(a) it has very poor Environmental Stress Cracking
Resistance ("ESCR");
(b) its rheological properties are such that it is not practicable
to use it to rotomould tanks so as to achieve an even wall
thickness all over the tank so as to render the tanks safe and
reliable. In essence it flows too readily as a result of which,
particularly in the area of internal protrusions, there is an
unacceptable wall thickness variation.
166. Borealis contend that borecene does not have either of
those defects and that the reason why so many tanks have failed
is because Balmoral failed appropriately to design, manufacture
and test tanks made with borecene, as a result of which there
were, in some tanks, inadequate wall thicknesses and/or
excessive wall thickness variation at points of high stress at
which failure occurred. In relation to "design" Borealis do not
suggest that the general shape of the tanks had to be different;
rather that the tanks should have been redesigned so as to
reduce stresses at critical points, eg by the elimination of sharp
corners or rapid changes of section, and by optimising
processing parameters. In particular designs, such as the SL
1250 and H 2500, which showed much greater failure rates than
others, stress was concentrated in areas of the tank where the
design meant that wall thickness variation was likely. Balmoral,
they say, failed to ensure that their rotomoulding process would
secure a sufficient wall thickness and a sufficiently even wall
thickness distribution, particularly in areas of high stress. The
combination of a design that concentrated stress and promoted
wall thickness variation in certain areas and a manufacturing
process that led to wall thickness variations in those areas
caused the tanks to fail.
____________________
71 This is common ground: see Pethrick 18/34/7 - 35/11-13.
658
167. Borealis also draw attention to the fact that, when

Balmoral and others were using ZN material there was an
average failure rate of about three per cent - a figure described
by Balmoral as "commercially acceptable"; but, they suggest,
unacceptably high for a product with no redundancy. In this
Borealis is, in my view, correct. Given the potentially
catastrophic consequences of an oil leak, an accepted failure
rate of three in 100 is too much.
Expert evidence
168. The expert witnesses called by the parties in respect of
this dispute were the following:
A. For Balmoral
1. Mr Andrew Clements
Mr Clements is a Principal Plastics Consultant at Rapra,
which is one of the foremost plastic testing and research
bodies in the United Kingdom. It was until privatisation an
official government body and has been in existence for over
50 years. Mr Clements is a Chartered Engineer and has a
master's degree in Polymer Science and Technology. He has
wide experience of plastic failure claims.
2. Professor Richard Pethrick
Professor Pethrick has been the Professor of Chemistry at
the University of Strathclyde for over 20 years.
B. For Borealis
1. Dr Adrian Wright
Dr Wright is a Principal Engineer, employed by CAPCIS,
which is a corrosion, materials and environmental
consultancy, established in 1973 and born out of the
Corrosion and Protection Centre in the University of
Manchester Institute of Science and Technology. He has a
BSc in Materials Science and Chemistry and a PhD in
Corrosion Science. He specialises in, amongst other things,
materials failure investigations and causation studies.
2. Dr Mark Clemens
Dr Clemens is a Senior Consultant of CAPCIS specialising
in polymer technology. He has a BSC in Polymer Science
and Technology and a PhD in Polymer Physics.
3. Professor Crawford
Professor Crawford is a former Professor of Engineering
Materials at QUB.
My impression of the expert evidence
169. The expert evidence in this case is voluminous and
complex and I have not always found it easy to see the wood for
the trees. This has, on
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LLOYD'S LAW REPORTS

occasion, been because of the confusing manner in which some

of the material was presented.
The claimants' experts
170. Mr Clements' first report was considerably less clear than
it might have been. It, also, failed to refer to what he had
written in another report in a different action which was highly
significant. Borealis categorised this omission as misleading. I
do not believe that Mr Clements was intending to mislead me
but, as will become apparent, I think that there are justified
criticisms to be made of the contents of his reports, which
contain omissions and errors, usually to the detriment of
borecene.
171. Professor Pethrick is a recognised authority on the
chemistry of plastics. His reports were clear and well written.
At the beginning of his evidence he introduced for the first time
certain diagrams, avowedly for the purpose of exposition. These
included a new point, namely the significance for ESCR
purposes of a polymer having a value greater than "Mc". This
criterion had not featured in his earlier reports (and thus took
Borealis by surprise). Its relevance in determining the issues
before me appeared to me increasingly questionable. I found
some of his oral evidence difficult to follow, a circumstance not
assisted by his introduction of points (eg on Mc and the
criticality of viscoelasticity) not foreshadowed in his reports.
The defendants' experts
172. Dr Adrian Wright wrote only a small part of the CAPCIS
report, much of it a gathering together of material derived from
others. He is not a polymer scientist, nor an expert in tank
design, rotomoulding, or statistical analysis nor a practitioner in
FEA. Balmoral, although not objecting to his giving evidence,
invited me to reject his evidence completely on the basis that he
had no relevant expertise. I regard his evidence as at the
borderline of admissibility. But, since none of my conclusions,
with one exception, rely on an acceptance of his evidence the
question of rejecting it need not arise. The exception lies in the
significance of the pattern of failure, where his view (held also
by Dr Clemens and Professor Crawford) is one which I would
have reached in any event. Were it necessary for me to
determine the question of admissibility I would have ruled his
evidence admissible on the ground that he had relevant
expertise as an examiner of material failures and their causes.
173. Dr Mark Clemens is a polymer physicist/technologist. He
is neither a chemist nor an expert on the chemical architecture
of polymers. I found him a reliable and straightforward witness.
174. Professor Crawford is a world authority on rotomoulding.
He was for 15 years Professor of
659
Engineering Materials at QUB, where he established the

Rotational Moulding Research Centre, and then Professor of
Mechanical Engineering at the University of Auckland, New
Zealand, where he established research activity in rotational
moulding. He was then Pro-Vice Chancellor of QUB, and is
presently Vice Chancellor of the University of Waikato. I found
him a straightforward and impressive witness.
175. I was invited to treat Professor Crawford's evidence with
caution on account of the fact that, when he was at QUB, his
department had a PhD student whose three year research project
into the rotational moulding of metallocene polyethylenes,
under his supervision, was sponsored by Borealis under a
contract which showed that Borealis had an interest in using the
fruits of her research towards marketing borecene as a superior
material for rotomoulding in comparison with ZN material. The
work did not include testing for ESCR. 72 QUB also had research
contracts from most of the major material suppliers, machinery
manufacturers, mould manufacturers and moulders.
176. I do not regard Professor Crawford's evidence as
compromised by that link, especially in circumstances where he
has not had any contact with Borealis for some six or seven
years, has done far more research on ZN material than this sole
project on borecene, and has carried out research projects for
several rotomoulders. I do, however, take into account the fact
that Professor Crawford has not seen Balmoral's practices in
action nor do his criticisms amount to any specific suggestion
as to how any specific design or production method should have
been altered in order to secure a satisfactory result.
ESCR
Chemical characteristics of borecene
177. Compared with ZN borecene has a narrower molecular
weight distribution,73 and a more regular chain architecture. ZN
materials are much more irregular. They have a wider
distribution of short, medium and long chains, and those chains
have a wider range and distribution of side branches. A small
percentage of the chains are short and highly branched. The
majority are of medium length and there is a small percentage
of long chains. By contrast metallocenes have a more regular
structure with a high percentage of chains of similar length
____________________
72 When he was at QUB Professor Crawford had never examined, or been asked
to examine, ESCR, in any project. The primary mechanical property he looked at
in rotomoulding grades was impact strength, a property seen to be the most
discriminating between good and bad moulding conditions.
73 A figure in which the molecular weight is plotted on the x axis and the
proportion of molecules on the y axis will, thus, have a thinner and higher peak in
the case of borecene and a flatter and somewhat lower peak in the case of ZN,
although the position of the peaks of the material will depend on their individual
characteristics.
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LLOYD'S LAW REPORTS

but with a few short or long chains. They have a more even
pattern of side branches on the chains, with a small number of
chains having a low amount of side branches. The side chains
tend to collect, in the case of ZN material more on the shorter
chains; metallocenes have proportionately more side chain
branches on the longer chains.74
Borealis' testing for ESCR
178. During the course of developing borecene Borealis
carried out tests for ESCR on borecene (of various MFRs) and
their own conventional ZN material - ME 8154. This had been
Borealis' standard rotomoulding grade prior to the introduction
of borecene and was used in the UK for the production of green
oil tanks by at least two manufacturers - T&D75 and Clarehill.
The Bell Telephone test
179. In the Bell Telephone test ("BTT") 76 ten notched samples
of a standard thickness are bent into a holder which is then
immersed into a cracking agent, usually Igepal, a form of
detergent, at 100 per cent or 10 per cent solution, at 50C. The
time to failure of 50 per cent of the samples is plotted. Despite
its widespread use, the test is not very satisfactory for a number
of reasons including the following: (i) the stress to which the
samples are exposed is usually in excess of the sample's yield
stress and does not therefore reflect reality; (ii) the individual
times to failure of the ten samples often vary very greatly, by as
much as a factor of between ten and 100; (iii) results taken at
different centres vary very widely. The Bell Telephone test is
very sensitive to minor changes eg, in how you make the notch,
how you bend the sample into its holder, and temperature
control.
The ARM CTL test
180. As a result of the deficiencies of the Bell Telephone test,
the Association of Rotomoulders ("ARM") introduced a
Constant Tensile Load ("CTL") test. This is a form of creep
rupture test, in which a notched sample, in the shape of a dog
bone is suspended vertically with a weight attached to the
bottom. The time to failure of the specimen is then monitored.
In the ARM CTL test the specimen is immersed in 10 per cent
Igepal at 30C. Borealis used CTL tests for pipe applications,
but it was not in 1996 an established test of theirs for
rotomoulding. Accordingly all their ESC tests before the
____________________
74 Short chain branches on the shorter chains have little or no effect on resisting
slow crack growth: see "The critical molecular weight for resisting low crack
growth in a polyethylene", Liu, Ishikawa and Brown, Journal of Polymer Science
Part B; Polymer Plastics, volume 34, 1809, 1812.
75 It is likely that this was the grade that T&D used when Mr Tanner was
employed by the company and to which he refers in para 14 of his witness
statement.
76 So called because the Bell Telephone Co invented it.
660
launch of borecene were BTT tests, the then market standard.

They only became able to do the ARM CTL test on borecene
for rotomoulding in about 1997.
The results
181. Borealis' tests, so far as presently relevant, 77 were carried
out on unpigmented polymer. The following table gives the
average of many results derived by Borealis from Bell
Telephone tests together with the results of ARM CTL tests78:
Units
ME
8154
ME
8166/7
RM
8402/3
RM
7402/3
MFR
g cm-3
3.5
BTT
(100
per
cent
Igepal
)
Hours
44
150
No
result
availab
le
("NRA
")
NRA
BTT
(10
per
cent
Igepal
)
Hours
12
51
27
53
ARM
CTL
(10
per
cent
Igepal
)
Hours
60
290
120
NRA
182. As can be seen all the borecenes produced results better

than those for ME 8154, Borealis' ZN polymer. ME 8154 had a
butane comonomer, which, all other things being equal, might
be expected to have results lower than for a ZN with a hexene
comonomer. As I have said, when quoting a rating for ESCR in
their data sheets Borealis used a scale of 1 to 5 (5 being at the
top). The reason why Borealis used such a rating rather than a
figure in hours was because their tests were often carried out at
any one of three different sites, in Norway, Sweden and
Belgium. The absolute values as between those sites varied very
considerably, making comparisons between those results and
the results obtained at other testing places on other materials
inapposite.
183. There was some contradiction in the evidence as to
whether ME 8154 had been rated as having an ESCR of 3 or 4.
In her second statement, paras 12-14, Miss Fatnes says that ME
8154 had been assigned a rating of 4 before she assumed
responsibility for the development of borecene and thought it
appropriate to put borecene with 940 density in the same
category but did not think it was
____________________
77 Borealis did some testing on black material that they supplied to others.
78 During earlier BTT testing in 100 per cent Igepal in 1995 and 1996 various
development grades of borecenes had held their own with the ZN material with
which they were compared: see the results of test runs PEH 222, 228, 233 and 237
at pages 3/771; 4/1210 and 4/12221, summarised at paras 2.79-2.93 of CAPCIS'
first report.
3 Ie the United Kingdom and Eire.
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LLOYD'S LAW REPORTS

significantly better so as to increase the rating to 5. 79 In her third

statement she corrected that and said that ME 8154 had a rating
of 3, as she confirmed, no doubt correctly, in cross examination.
This is consistent with her first statement, para 114, as
amplified in her third statement, where she said that a material
which survived between 50 and 200 hours, in the 100 per cent
Igepal test, would be a 4. In due course the 100 per cent test
was phased out in favour of a test using the 10 per cent solution,
which is a more aggressive ESC agent.
184. Borealis also undertook a direct comparison between ME
8161, ie borecene MFR 6, and Dowlex NG 2432, a ZN grade
with an MFR of 3.8 which is used for rotomoulding green oil
tanks. The samples were immersed in 10 per cent Antarox
(similar to Igepal) and produced similar BTT results, the figures
being 21 and 25 hours respectively. Creep rupture testing data
on borecene for up to 1,000 hours in air was generated at
various temperatures and stresses and the borecenes were
shown to be more creep resistant than Borealis ZN
rotomoulding grades.
185. Borealis regarded any further long term testing 80 as the
responsibility of the product manufacturer. So do CAPCIS.
Borealis informed Balmoral (see the letter of Reidat Anderssen
of 20 July 1997) that they had not studied the effect of
petroleum and fuel oil on long term creep data. Borealis did not
carry out any ESCR testing on samples in kerosene.81
Understanding of ESCR
186. Somewhat surprisingly neither the BBA nor the OFTEC
standards make any reference to ESCR, and it does not seem to
have been something that Balmoral had in mind until a very late
stage. Dr Oram's evidence was that the first time that he had
heard of a creep rupture failure mechanism was in 2002 when
Rapra mentioned it as a possibility describing it as "a mode of
failure after long term service well recognised in the polymer
manufacturing industry". In the light of that evidence it seems
to me unlikely that Balmoral had it in mind at the time when the
tanks were designed.
Rapra testing
187. Rapra carried out creep rupture testing (with the dog bone
specimens held in a clamp and subjected to a constant load) of
samples of borecene
____________________
79 In January 1998 Miss Fatnes agreed with some of her colleagues that blow
moulding products should be rated for ESCR in hours, provided the appropriate
method of testing for such products was defined and harmonised and enough
results were available. The impetus for this had come from customers in that
market.
80 Such as testing for over 1,000 hours in kerosene.
81 There is an OFTEC test for resistance against oil, which they performed, but
this is not an ESCR test.
661
made tanks. Since, in practice, tanks will fail over a period of

years, some means must be found to make an earlier assessment
of their propensity to brittle failure. Creep rupture testing at
elevated temperatures is a means of evaluating that propensity.
In the case of MFR 3 borecene the samples were taken from a
failed H 1590 tank. In the case of MFR 6 and MFR 4 tanks the
samples were taken from unused H 1590 tanks.
188. Creep rupture tests can be carried out in different
mediums such as (i) Air; (ii) Igepal; (iii) kerosene; and (iv)
diesel, and at different temperatures. Testing in air at ambient
temperature is of limited significance, unless carried out over a
very extended period. Testing in Igepal at an elevated
temperature was a recognised method of providing a rapid
qualitative assessment of susceptibility to ESC. Testing in
kerosene and diesel at elevated temperatures is another method
that allows a quantitative prediction of service life in the actual
environment in which the Balmoral tanks were to be used.
Testing at elevated temperatures simulates the effect of time.
The results at those temperatures have then to be converted to
results at ambient temperatures by applying a "time-temperature
superposition", ie a method of calculation which will convert
results at one temperature to results at another. The results have
a considerable degree of variability. Mr Clements indicated that
at any particular stress level a +/- shift in time of 0.25 of a
decade was typical: in other words if failure occurred at 1,000
seconds in one sample82 another sample might fail at between
750 and 2,000 seconds. CAPCIS agreed that this was valid as a
general indication of the degree of scatter in the testing.
189. Paragraphs 73-75 of Mr Clements' first report read as
follows:
73 Specimens were. . . tested at 60, 70 and 80C after
saturation in kerosene, at 80C in diesel and at 60C in air at
various stress levels in order to generate a time to failure vs
stress applied curve. The point at which the specimen failed in
a brittle manner was also recorded.
74 Additionally creep rupture curves in Igepal. . .were
generated for MFR 4 borecene. . . MFR 6 borecene. . . and the
Z-N grades of BP. . . and DOW at 60C. This was undertaken
to accelerate the cracking behaviour with a view to ranking the
materials with respect to their ability to cope with ESC.
75 The technique of time-temperature superposition was then
applied to generate a derived master curve at ambient (20C)
in accordance with EN 1788 and ISO 9080.
____________________
82 There is usually only one sample at each test condition variable: eg stress
cracking environment, temperature and stress.
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190. The results of that testing are contained in a number of

figures in which the time to failure in seconds (on a logarithmic
scale) forms the x axis and the applied stress (in Mpas) the y
axis. The figures are as follows:
(a) Figure 6, which relates to specimens in 10 per cent Igepal
at 60C, plots the results in respect of MFR 6 borecene (RM
8402), MFR 3 borecene (ME 8166), Dow 3.8 and BP 4330,
the latter two being ZN materials. From the plotted data four
curves have been created. These show that the order of failure
is, broadly speaking, (i) MFR 6, (ii) MFR 3, (iii) Dow, and (iv)
BP. I doubt, however, whether much reliance can be placed on
the ranking of the last three in the light of the inherent scatter
of the data. Mr Clements' report states that the data indicates
that borecene MFR 3 would be expected to survive about three
to four times longer than MFR 6; Dow material would be
expected to survive about three times longer than MFR 3 and
about nine times longer than MFR 6; and the BP material
about 16 times longer than MFR 6.
(b) Figure 5 relates to specimens at 20C in Soaked
Kerosene. The material compared was Dow 3.8, borecene
MFR 6 (RM 8402) and borecene MFR 4 (RM 7402). 83 Three
master curves were created which showed that the order of
failure was MFR 6, MFR 4 and Dow. Mr Clements' comment
was that borecene MFR 4 would be expected to survive about
three times longer than MFR 6 and the Dow material about 12
times longer than MFR 6 and four times longer than MFR 4.
(c) Figure 7 plotted the result of testing Dow 3.8. and
borecene MFR 6 in unsoaked diesel and kerosene at 80C, and
showed that failure occurred first in kerosene. Samples lasted
about one and a half times longer in diesel.
191. Paragraph 116 of the report stated:
Creep rupture curves for each material examined at 60, 70
and 80C saturated in kerosene together with 60C Igepal and
master curves at 20C are contained in appendix 1 of this
report.
Appendix 1 contains nothing of the kind. It contains results of
tank strain gauging. Appendix 3 does contain creep rupture
curves for MFR 6, MFR 4 and BP at 60, 70 and 80C in
unsoaked kerosene, ie material which has not, prior to the
commencement of the test, been soaked to equilibrium in
kerosene. It contains no data for MFR 3.
192. The potential significance of this muddle is this. Firstly,
para 73 referred to specimens tested at 60, 70 and 80C after
saturation in kerosene. The data from those tests was not
annexed. What was
____________________
83 The figure is stated to include data on BP Rigidex but does not.
662
annexed was data at those temperatures from unsoaked

specimens, although appendix 3 did not state whether the
kerosene was soaked or unsoaked. The ordinary reader would,
however, assume that the data in the appendix supported the
curve in the text.84 In their supplemental report CAPCIS
commented that they had been unsure whether the data used to
construct the master curve was indeed that in appendix 3.
Secondly, figure 5 which shows master curves of time to failure
at 20C, ie at ambient temperature, is an extrapolation from the
raw soaked kerosene data at elevated temperatures. That made it
particularly important that there should be sufficient testing (at
different temperatures and stress levels) in order to provide a
sound basis for extrapolation. If the values taken before
extrapolation are invalid or unrepresentative the error will be
magnified in the extrapolation and produce an inaccurate master
curve. Thirdly, there is a dispute as to whether or not soaked
data is a reliable guide.
Strain gauge testing
193. Mr Clements identified, by strain gauging, the stress
levels at what he described as the primary failure sites on a set
of H 1590 tanks made in each of the borecene grades and the
BP and Dow ZN grades. Four gauges were placed two above
and two below (so that there were two gauges on each side) the
horizontal rib section traversing the tank. The tanks were filled
at the industry standard fill rate of 400 litres per minute. Tensile
specimens were cut from the tanks and tested at 50mm/min to
derive a stress/strain ratio. Strains derived from the gauge 85
were used to calculate stresses and a graph of stress against
capacity derived.86 Figure 9 of his report gives the following
stresses at full capacity at gauge location 187:
MFR 6 5.07 Mpa
MFR 4 4.76 Mpa
BP (ZN) 4.49 Mpa
And appendix 1 contains the following data:
MFR 3 1.95 Mpa
which was a significantly lower figure than that recorded for the
BP material. Working on the assumption that the tank would on
average be two
____________________
84 Even though the data in the appendix included data about BP but not about
Dow.
85 He did not use a rosette strain gauge, which measures strains in more than
one direction. Professor Crawford thought that this omission was highly likely to
give a wrong measurement of strain.
86 By discovering what stress is required to produce what strain you can work
backwards to find out what strain implies what stress.
87 These are not the highest recorded stresses at full capacity for each tank.
Those stresses were (a) MFR 6-6.9 Mpa at gauge location 4; (b) MFR 4-8.3 Mpa
at location 2; (c) BP-5.9 Mpa at location 4; and (d) MFR 3-7.5 Mpa at location 4.
These figures are puzzling since locations 2 and 4 were on the underside of the
tanks when most of the cracking was on the top of the rib section.
[2006] Vol. 2
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LLOYD'S LAW REPORTS

thirds full with an average stress of 2.5 Mpa, and taking the
figure 5 master curve, which plots time to failure against
applied stress, Mr Clements calculated the expected lifetimes of
the H 1590 tank at the gauge 1 position stresses as follows:
Material
Lifetime at 2.5 Mpa
Borecene MFR 6
1.25 years
Borecene MFR 4
3 years 2 months
Borecene MFR 3
6.3 years
DOW
16 years
BP
10.2 years
194. He regarded the 10 per cent Igepal results (figure 6) as

providing a qualitative confirmation of that result. In the light of
what he understood (erroneously) to be data on the failure rates
for all borecene made tanks and the results of the H 1590
testing he expressed the opinion (a) that all tanks made from
MFR 6 would fail before the end of ten years from production,
(b) that it was highly likely, in the case of tanks made with
MFR 4 that a high percentage would fail within that period, and
(c) in the case of tanks made with MFR 3, it was likely that a
further number of tanks produced would fail within that period.
But he made clear in his evidence that he no longer held that
view in relation to the MFR 6 tanks, although it would apply to
some designs of tank, and only held the views expressed in
relation to the MFR 4 and MFR 3 material in respect of some
designs.
195. I view these extrapolations with great scepticism. On the
footing of the table in para 193 all the MFR 6, MFR 4, and
MFR 3 tanks would now have failed and they have not. Part of
the reason why the extrapolations are flawed may be because
the strain gauging is unreliable. Or the assumption of two thirds
use may be unreliable, although figure 9 indicates that at 1,000
litres (ie about two thirds full for a tank of 1,590 litres) the
stress is near to zero, so that the real life stress could not be less.
As will become apparent hereafter, there are more deep-seated
objections to figure 5.
196. Mr Clements also expressed the view:
(a) that processing parameters were of no significance;
rotation ratios would be optimised during the development
stage of a new mould and, once that had been done, "the
rotation ratio is fixed for that design of tank irrespective of
grade of material subsequently processed". Rotational speed, if
already adequate would not need to be changed with any
change of material. No change of either parameter would have
achieved
663
the thickness distribution observed in Balmoral's ZN tanks;

(b) that the morphology of the pigmented polymer may have
contributed to accelerated failures, but it was an insignificant
factor compared to poor ESC resistance and inadequate
rheological properties. He accepted that there was a wellknown ranking of pigmentation methods in order of their
contribution to durability: (a) full compounding (b) grind
blending with masterbatch; (c) dry mix. But there was no
reason to suppose that grind blending as opposed to
compounding was in any way critical;
(c) that Balmoral's designs were similar to those of other
manufacturers. Local thinning would be reduced or eliminated
by a radically different product (eg a sphere). But this was not
a practical option nor was there any reason why any
manufacturer should change his product design to
accommodate the unheralded inefficiencies of a raw material.
The soaked/unsoaked controversy
197. As stated in para 191 above, the data contained in
appendix 3 to Rapra's first report is derived from specimens of
material that have not been soaked in anything prior to the
commencement of the test ("unsoaked data"). The data which
underpins figure 5 is derived from samples that had been
soaked in kerosene to equilibrium prior to the commencement
of the test ("soaked data"). In a letter dated 3 February 2006 Mr
Clements invited CAPCIS to accept that "unsoaked samples
give unrealistic and potentially prejudicial data (and if not, why
not)?"
198. This view was not expressed in either of his reports and
took CAPCIS by surprise. In the light of that letter, and other
matters, Borealis sought to introduce, and on 20 February 2006
I allowed to be introduced, two reports that Rapra (including Mr
Clements) had filed on behalf of DESO in their claim against
ICO Polymers,88 to which Borealis had been a Part 20
defendant. The first report had already been filed. The
supplementary report, which Balmoral invited me to allow to be
introduced if the first one was to go in, was signed by Mr
Clements on that day.
199. In his first report in the DESO action Mr Clements had
relied on testing on unsoaked data 89 which showed that in
kerosene and diesel MFR 3 had outperformed Dowlex MFR 3.8
and borecene MFR 6. The latter two were relatively comparable
with the Dow material being slightly better in
____________________
88 The claim form at 24/7922 says that the claim is for a value not exceeding
100,000 but the claim for loss of profit on future sales alone was for 150,311.
89 Derived from testing samples cut from rotomoulded test cubes produced
under agreed conditions from material supplied by ICO.
[2006] Vol. 2
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kerosene. In diesel borecene MFR 6 was better at high stresses

(above about 4.5 Mpa) and Dow better at lower stresses. Mr
Clements had however pointed out that the rate of
permeability90 for borecene was substantially lower than that of
the Dow material and that this would influence the creep
rupture performance of thick samples in favour of borecene. In
his second report in that action he said that the creep rupture
curves in his first report "may have been influenced by the fact
that lower permeation rates in the borecene material meant that
the relative ranking of the materials was favoured towards the
borecene".
200. Mr Clements did not at any time prior to the production
of the DESO report in this action reveal that he had relied on a
large quantity of unsoaked data in the DESO action or state
what that data indicated. After the DESO reports had been
admitted Mr Clements produced a statement explaining why he
had not carried out any pre-soaked testing for the purposes of
the DESO action.
201. In that statement he explained that creep rupture testing
first started for Balmoral in 2002 showed that the ZN material
used by Balmoral after it stopped using borecene significantly
outperformed MFR 6 and MFR 4 borecene, the tests being done
at 20C in air and Igepal. The results were inconclusive as
against MFR 3. Subsequently samples of MFR 3 and 6 were
tested against two further ZN grades in air and Igepal at 60C;
and borecene at MFR 3 performed substantially worse. These
results were disclosed. In summer 2004 a testing programme
was undertaken for DESO using the BTT test and creep rupture
testing with unsoaked samples. The BTT tests showed Dowlex
2432 substantially outperforming MFR 3 and MFR 6 borecene.
But in the creep rupture tests Dowlex 2432 performed worse.
These results were sent to CAPCIS. In 2005 further creep
rupture tests were carried out for Balmoral at elevated
temperatures. These revealed that MFR 6 performed much
worse than the ZN comparator but MFR 4 only marginally
worse. In summer 2005 Rapra were instructed by Kingspan and
Clarehill, two manufacturers who had only used MFR 6
borecene. In the course of creep rupture tests on unsoaked
samples of MFR 6 in kerosene at elevated temperatures Mr
Clements noticed that the thinner samples provided by one
manufacturer failed notably earlier despite being under the
same stress. He suspected that the difference in performance
was directly related to permeability. "The penny dropped" at the
very end of summer 2005. Accordingly a testing programme
using pre-soaked samples was started in late summer/early
autumn. Only a very few results were available by the time of
his first report in this action
____________________
90 ie the rate at which the environment penetrates through the structure of the
polyethylene.
664
on 27 October 2005. Further data from the testing programme

was contained in his supplemental report. DESO never
instructed Rapra to carry out testing on soaked samples. As a
result his report in that action relied on unsoaked data, but with
a reference to the possible significance of permeability. He
remained of the view that the only way in which finally and
firmly to test the ESCR properties of borecene was to use
samples pre-soaked to equilibrium in order to reflect the inservice conditions.
202. Mr Clements was well aware that CAPCIS were relying
on unsoaked data, which is a normal method of testing that he
had used himself.91 It seems to me singularly unfortunate and
surprising, therefore, that his view as to the unreliability of
unsoaked data did not feature in either of his reports, the first of
which appended curves based on unsoaked data (without
revealing whether it was soaked or unsoaked), 92 or the joint
expert's report, or in the reports in the DESO action, or in the
pleadings or in Balmoral's opening, both written and oral, 93 such
that this controversy came to the fore only in February 2006.
203. Mr Clements' evidence is that he said that unsoaked data
was invalid at the expert's meeting in November 2005. Dr
Clemens of CAPCIS denied this, although he accepts that
shortly before service of the original reports in October 2005
Mr Clements mentioned in passing that he was conducting his
CRT testing on soaked samples and that, after what he believed
was a DESO experts meeting in 2005, Mr Clements had
indicated as they were leaving that he had found some strange
results with materials from a different manufacturer.
204. I am prepared to accept that in late 2005 Mr Clements
made some reference to the fact that he had found a difference
in results from unsoaked data as between samples from
different manufacturers depending on the wall thickness of the
sample, which might make comparative permeability a relevant
factor, and that he was going to undertake a limited series of
tests in the time available on soaked samples. 94 Mr Clements'
first report did, of course, produce a curve avowedly based on
soaked data. But I do not accept that, prior to his letter of 3
February 2006, he made plain that he was contending that
unsoaked data was unrealistic. If he had done so, I am satisfied
that this would
____________________
91 A Rapra publication states: "For all tests it is important that the time delay
between contact with the fluid and the application of stress or strain is minimal":
D. Wright, Environmental Stress Cracking of Plastics, page 13, 1996; Rapra
Technology.
92 In the course of his evidence Mr Clements, who was not I think doing
himself justice at this stage, suggested that he had put in the unsoaked data
because, having gathered it, "it was expected to be put in"; and that because
Balmoral was paying for the generation of the data we have to "produce the
evidence to say we have actually done the tests".
93 I infer that counsel were not aware of the point.
94 See his evidence at 15/124/7-19.
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have been referred to either in the joint expert's report or one of

the supplementary reports and that his letter of 3 February
would not have caused the surprise that it did.
205. A test based on samples soaked in kerosene (whether
soaked until equilibrium prior to the test or soaked during the
test) does not replicate the in-service conditions of a tank. In
real life there will be kerosene on the inside and air on the
outside. The polyethylene is not saturated throughout its entire
volume. There will be a gradient of absorption from the inner to
the outer surface, from which vapour will escape. ESC starts on
the outer surface, which will have a lower concentration of
diesel or kerosene than the inner surface. The outer surface will
be subject to tensile stress and thus be more permeable than the
inside. In the conditions of the creep rupture test both sides are
permeated by kerosene.
206. Mr Clements' view is that, in order to obtain a valid
comparison between two different materials, which in use will
be in long term contact with kerosene, it is necessary to have
both samples at equilibrium so that each starts off in the same
state of permeation. Otherwise you are not comparing like with
like. If both samples have been permeated to equilibrium, the
only relevant difference between the two samples is their
chemical composition, and it is that which is to be tested.
207. Dr Clemens' view, which I accept, is (a) that using
unsoaked data was common practice, a proposition with which
Mr Clements agreed; and that using soaked data is not 95; (b) that
in using samples pre-soaked to equilibrium "you are altering the
whole gross material, severely differently to what happens in
practice"96; and (c) that if the material was pre-soaked to
equilibrium, it would not break in a truly brittle manner; the
failure mechanism would be different to that which would occur
in real conditions.97 Moreover, he disagreed with the suggestion
that the ESC process will only start after the point of
equilibrium absorption. On the contrary crack initiation and
propagation takes place at or very near to the exposed surface of
the samples as the cracking agent penetrates the surface of the
polymer and initiates craze formation by disentangling or
pulling out tie molecules and exploiting existing micro-defects,
long before equilibrium is reached. I accept that this is so, not
least because it is consistent with the chemical evidence to
which I refer below.
208. Lastly it is to be noted that CAPCIS' tests, to which I
shall refer below, were conditioned to the
____________________
95 I have not been shown any reference in academic literature to its use.
96 Day 19/137.
97 He used the analogy of a carrot, which will break in a brittle manner, but
which if left in the larder for some time will fracture in an entirely different
manner.
665
test temperatures in the test environment for about 18-24 hours

during which, on Mr Clements' uptake figures at 80C, some
40-50 per cent of the total liquid which could have been
absorbed would have been absorbed before the test began; and
the nature of the test is such that the surface of the sample
experiences the maximum tensile stress (so that if ESC is to
begin it will do so there) and would be soaked by the time the
test began.
209. I am not persuaded that results from unsoaked data are
unreliable, or even that results from soaked data are more
reliable. In either case the test conditions will not replicate
reality since tanks are never immersed on both sides, whether
before they enter service or during it. Pre-soaking to
equilibrium is, in my view, a more significant departure from
reality than using unsoaked specimens. The fact, if it be such,
that borecene takes up kerosene more slowly might create a bias
in its favour (of uncertain extent and cause). But, for the reasons
give by Dr Clemens, pre-soaking to equilibrium before the test
starts would make so fundamental a change in the material and
its eventual method of failure, compared with reality, as to cast
doubt on the validity of the resulting data, or at any rate its
reliability when compared with unsoaked data. Mr Clements
has made use of extensive unsoaked data in this action and the
DESO action without any more than a tentative qualification.
210. The evidence as to the slower rate of uptake of borecene
as compared with ZN material is, in any event, not very firm.
Mr Clements' first report has figures of the percentage kerosene
uptake of borecene and Dow and BP material at 80C. That is a
very high temperature. It is by no means clear that the same
relationship would apply at lesser or ambient temperatures,
particularly when borecene has, as it does, a fraction which
melts at 75C which ZN material does not. In addition there
appears to be a greater variation in the speed of uptake between
the two ZN materials than between the borecenes and the Dow
material.
The significance of Mr Clements' soaked data
211. In his supplementary report Mr Clements did not deal
with the question raised by CAPCIS as to whether the data in
appendix 3 of his first report supported the master curve in
figure 5; nor did he reveal that that data was unsoaked. He
produced at page 302 a new master curve, from soaked data,
comparing borecene with MFRs 3, 4 and 6 with BP and Dow.
Following Mr Clements' letter of 3 February CAPCIS asked for
the data supporting the master curves. This was produced on 17
February and can now be found, not in any report of Mr
Clements, but at appendix 2 to CAPCIS' second supplemental
report.
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LLOYD'S LAW REPORTS

212. Dr Clemens' opinion was that:

the absolute minimum amount of data required before one
could begin considering attempting to derive a master curve is
3 different stress levels for each of three different
temperatures. If one has less than 3 stress levels at a given
temperature, the potential for error is so enormous that
attempting to derive a master curve is a thoroughly unsound
practice which is liable to lead to gross inaccuracies in the
time-shifted master curve so obtained.
He exhibited the data, now obtained from Rapra, which
supported the master curve in the second report, and details,
from the same source, of the data that had been used to support
figure 5 of the first report. 98 As to the former it was only in the
case of MFR 6 that the minimum of three data points per
temperature was satisfied. In the case of the latter the total data
points were:
(i) MFR 6 four points 0 at 60C, 1 at 70C, 3 at 80C
(ii) DOW four points 1 at 60C, 1 at 70C, 2 at 80C
(iii) MFR 4 three points 1 at 60C, 1 at 70C, 2 at 80C
As to this data he said:
We were thoroughly taken aback at the lack of data from
which the master curves presented in Mr Clements' reports
were generated. . . In our opinion, it is inappropriate to
construct a master curve from any of this data. . . If one
considers the data which Mr Clements had at the time he
constructed the master curve in his first report, we find it
extraordinary that he felt able to proceed in the way in which
he did. Coupled with the misleading presentation of graphs at
pages 80-82 (ie appendix 3) which did not correspond to the
master curve, we are bound to say that we feel somewhat
deceived. If the true data had been presented, it would have
been immediately apparent how inadequate it was. 99
213. I accept the validity of these criticisms of the data and
Rapra's reliance on it, without thereby suggesting that Mr
Clements intended to deceive. Mr Clements referred to an
academic paper100 which suggested that data from two
temperatures at the same stress, and two stresses at the same
temperature, ie a minimum of 3 data points, would be
something that you could start with, provided that the stresses
were low and the fractures brittle, and provided a particular
formula was used. He did not use that formula.
____________________
98 He also exhibited the considerably greater unsoaked data that Rapra had
generated.
99 DT2/293 to 294.
100 "The ductile-brittle transition in a polyethylene copolymer", Lu and Brown,
Journal of Materials Science, 25 (1990) 29-34.
666
CAPCIS' plotting of Mr Clement data, soaked and unsoaked

214. CAPCIS plotted the soaked data from which Mr
Clements had constructed the master curve in his second report
(notwithstanding their view as to its inappropriateness for the
purpose) and discovered that in the plots for materials at 70 and
80C101 the BP material performed worse, although in the
master curve in Rapra's second report it appears as second best.
This result they regarded as "obviously purely a function of the
application of dubious time shift factors". They also plotted a
master curve based on the unsoaked data in appendix 3 of the
first report using average values of time shift factor for each
material. It showed that MFR 6 material was, on a general
ranking, the best and MFR 4 the worst, although the curve was
not one in which they placed any confidence.
The table in Rapra's supplementary report
215. In his supplementary report Mr Clements set out a table
of ESCR figures which contained (a) the data set out in the
table at para 181 above derived from Miss Fatnes' witness
statement; and (b) "additional data from rotational moulding
static oil tank grades from several manufacturers of LLDPE
(datasheets provided in appendix 4)". On its face the table,
which is reproduced in the first two columns of the table below,
showed borecene to be markedly inferior in respect of ESCR.
As appears from the third column the significance of the table is
not quite what it seems.
Material
ESCR Time to
failure in hours
Test: BTT 50 10
per cent Igepal
Comment
Borealis ME
8154 (ZN)
12
For
comparability
with other
materials: see
para 216 below.
Borecene ME
8166 (MFR 3)
51
Ditto. Rapra
result in DESO
action was 250.
Borecene RM
7402 (MFR 4)
53
Ditto.
Borecene RM
8402 (MFR 6)
27
Ditto. Rapra
result in DESO
action was
210.102
____________________
____________________
101 At 60C there was only one BP data point, so no judgment of its ranking
could be made.
102 A Matrix datasheet in respect of metallocene based product - Revolve N 88 with an MFR of 6 had a reading of >1,000 hours for 100 per cent Igepal and 400
hours for 10 per cent Igepal.
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217. In footnote 2 on page 16 of his second report Mr

Clements expressed the view that borecene MFR 3 would have
been "nowhere near" having an improved ESCR compared to
DSM material. In so doing he compared:
(a) DSM's data, described as derived from "a CTL test at
60C, which is 30C higher than the CTL test itself, with a
failure time of 60 hours";
with
(b) "2-4 hours recorded by Borealis for the MFR material at
30C".
In fact the DSM test was performed at 2 Mpa whereas the
Borealis test (in 1996) was at 4 Mpa, so that the two are not
comparable, and the Borealis test was performed at 60C. A
DSM datasheet which records that the test was at 60C also
records that the stress was 2 Mpa. 104 Mr Clements assumed that
the Borealis test was at 30C because that is the temperature of
the ARM CTL test. In addition the Borealis test was a notched
test (notching reduces the time to failure); whether the DSM
test was notched is unknown. Further, the material used by
Balmoral was a blend of Stamylex 2H900 (75 per cent) and
Stamylex 5036 (25 per cent). According to the relevant data
sheets the former material has a failure time of 50 hours and the
latter one of 30 hours. So the failure time of the combination
was somewhere between 30 and 50. Lastly, as appears from
Miss Fatnes' statement, Borealis had conducted ARM CTL
testing at 30C which had produced a figure of 290 hours to
failure for MFR 3.
218. In the light of the matters to which I have referred I do
not regard the data relied on by Mr Clements as establishing
that borecene had a very poor ESCR.
Material
ESCR Time to
failure in hours
Test: BTT 50C
10 per cent
Igepal
Comment
Dow NG 2432
450
450 figure
derived from
Rapra's own
experiment and
not from any data
sheet although
the body of the
report refers to
data from
manufacturers.
Borealis' test
result in 1999
was 25 hours: as
stated in Miss
Fatnes' witness
statement.103
The Dow data
sheet, available
on the internet
but not exhibited,
nor in the Rapra
laboratory, has a
figure of 70
Testing in Igepal
hours.
BP 4330
400
Sclair 8504
>1000
This figure is for

100 per cent
Igepal, a much
less effective
ESC agent than
10 per cent
Igepal. The
datasheet
annexed did not
specify the
solution, but the
data was readily
available on the
internet.
The borecene
figures at 100 per
cent Igepal were
much less than
1,000 but for
comparability see
para 216 below.
Matrix N207
478
In fact this is a
result for N307, a
material
667
219. I have not ignored the fact that Rapra did creep rupture
testing in Igepal which showed a ranking of earliest times to
failure at 60C of (i) MFR 6; (ii) MFR 3; (iii) Dow, and (iv) BP.
I am wary of the utility of these results derived from Igepal. At
best105 they reveal a qualitative ranking of those materials, so far
as ESCR is concerned, at that temperature in that material. But
the tanks in question were to store kerosene or diesel, not soapy
water, and at a lesser temperature. I note that in the DESO
action no Igepal testing was put in evidence by Rapra. There is
no evidence which establishes that a reliable correlation can be
made between Igepal results at 60C and diesel/kerosene results
at
____________________
104 Mr Clements was working off a different document.
105 Dr Clemens' opinion, which I accept, was that it was not possible to make a
distinction between (ii), (iii), and (iv) because of the scatter inherent in CRT tests.
developed after
207, which
Balmoral had
used in the
borecene period.
The data sheet
was issued on 18
December 2003.
216. The considerable dangers involved in comparing BTT
results in one laboratory with those obtained in another is
apparent from the different figures obtained for MFR 3 and
MFR 6 borecene and for the Dow material when tested by
Borealis and when tested elsewhere: see columns 2 and 3. In the
case of Dow there was an 18 fold difference (450/25). Mr
Clements accepted in cross examination that Borealis' test
results were consistently lower than those of others regardless
of the type of material used.
____________________
103 Mr Clemens accepted that he should have referred to the fact that he had
ignored a 25-hour Dow test.
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LLOYD'S LAW REPORTS

ambient temperature106; and it is not self evident that there must

be such a correlation, especially since Igepal is not absorbed
into polyethylene.107
CAPCIS' creep rupture tests
220. Prior to their first report CAPCIS caused to be carried out
a creep rupture test known as a "3-point bending test" on a
number of different types of polyethylene (injection moulded
unpigmented, rotomoulded unpigmented, and unused Balmoral
green tank samples) in different materials. This test method
ensured that the maximum stress was applied to the outer
surface, that being the point at which failures started. The
apparatus used establishes a bending moment similar to that
experienced by the tank wall in the field. Tests were undertaken
at 60, 70 and 80C in air, diesel and kerosene. The specimens
tested in diesel and kerosene were totally immersed (but not
pre-soaked to equilibrium). At the time of their first report there
was insufficient data available for time temperature
superimposition. On the data available CAPCIS concluded that,
at temperatures of 60, 70 and 80C in diesel and kerosene,
unused Balmoral green tank samples performed worse than
unpigmented materials produced using optimised rotomoulding
conditions (as was to be expected), and that there was no
consistent evidence of any difference in the CRT curves of their
borecene materials and BP Rigidex 4330. By the time of the
second report (January 2006) the only brittle failures that had
been recorded in respect of green Balmoral tank samples were
in respect of a number of the ZN samples at 70 and 80C.
The chemistry of borecene
Professor Pethrick's reports
221. In his supplementary report Professor Pethrick sought to
investigate what might explain why borecene had lesser ESCR
than ZN polymers as apparently found by Mr Clements. What
appears in the three following paragraphs, and in paras 226 and
227, is derived from his evidence and I accept it as a general
description of the relevant chemistry.
222. As the molten polyethylene cools the molecules become
less mobile until at about 140C they start to fold up into
crystalline polymer chains called lamellae, similar in
appearance to a snake
____________________
106 Dr Clemens was unaware of any comparative study between creep rupture
failure times in diesel/ kerosene and Igepal, and none has been shown to me. He
thought that you would need to apply different conditions (temperature and/or
stress level) to the two materials to get a fair comparison; and that the fairness of
comparison could only be assessed by experimentation.
107 There is a paper by Ward & Brown which indicates that a good correlation
can be made between the results of ESCR tests on gas pipe resins conducted in
Igepal at 50C at 4 Mpa and tests conducted in air at 80C at 2.4 Mpa.
668
whose body is coiled in descending horizontal rows. These

chains grow outward radially from a central nucleation site,
progressively extending the crystalline phase. The crystalline
phase is to be distinguished from the amorphous phase which is
the proportion of the melt that is not incorporated into the
controlled crystalline arrangement of lamellae during
solidification, and which ends up as a solid comprising
irregular, unstructured or tangled chains. During this process,
irregular chains and branches that cannot readily be
incorporated into the regular structure of the lamellae become
segregated to the surface of the growing crystal. Occasionally a
chain may bridge the gap between growing neighbouring
crystals, and these linkages between crystals (bridging or tie
molecules), together with physically entangled amorphous
chains and branches, provide a path for force to be transmitted
between the crystals and for inter crystallite bond strength to be
achieved. Adjacent crystalline regions connect either directly by
branched chains or via entanglements.
223. In the case of ZN material the lamellae group into threedimensional structures called "spherulites" in which individual
lamellae are distributed spherically around the "seed" crystals,
giving the appearance of a Maltese Cross. The molecules that
are not incorporated into spherulites remain as amorphous
material located between the lamellae and between spherulites.
Branched chains cannot, however, all fold into the regular
lamella structure and elements of the polymer are segregated to
the amorphous region between the crystalline lamellae.
Bridging/tie molecules arise from the natural tendency, as a
result of entanglement and branching (particularly the former),
for elements of the polymer to be segregated to the amorphous
regions between crystalline lamellae. Entangled molecules will
slow down the formation of crystalline regions. Entanglement is
best envisaged by the analogy of spaghetti. Short lengths of
spaghetti can remain relatively separate. Longer lengths
entangle into a mass. The greater the number of entanglements
the more force is need to break them. The wide distribution of
branches in ZN materials assists entanglement.
224. Because metallocene polymers have a narrower
molecular weight distribution, with chains more even in length
and with a more even distribution of branches on the chains,
they are more effective at folding108 during the crystal phase, as
a result of which crystals will grow more readily and therefore
faster. This means faster cycle times for rotomoulders. The
lamellae will be longer. As a result there will be an increase in
strength, but there will be less tie molecule density.
____________________
108 So that the chains form the snake-like pattern referred to at para 222.
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225. The tenor of Professor Pethrick's reports was that,

whereas in the case of ZN materials the lamellae group into
spherulites, in the case of metallocene they formed into a wheat
sheaf structure and that there was less of a tendency for the
polymer chains to form an amorphous phase. The implication
was that the difference in structure and the lesser amorphous
phase would or might explain why the two materials have
different ESCR. But, whilst maintaining the significance of
differences in lamella structure as between ZN and metallocene,
Professor Pethrick accepted in cross examination:
(a) that metallocenes can form both spherulitic and wheat
sheaf (transcrystalline) structures, although metallocenes will
tend to the latter; and
(b) that the results from DSC109 measurements indicated that,
as between ZN and metallocene material. there was no
material difference in overall crystallinity - as would be the
case if ZN material had more of the amorphous phase
226. Professor Pethrick explained that low molecular weight
hydrocarbons such as diesel and kerosene can interact strongly
with the amorphous phase of linear polyethylene. At ambient
temperatures diesel and kerosene are not solvents for crystalline
polyethylene; but they will be able to interact strongly with the
amorphous regions. These agents will endeavour to plasticise
the amorphous regions between the crystallites. That
plasticisation is resisted by the tie molecules that bridge the
lamellae. The ability of the polymer to resist cracking is
dependent on the extent to which the tie molecules can retain
structural integrity and resist crack propagation. If they cannot
resist the applied stress, scission of the molecules occurs and
crazing of the surface takes place. This provides a means for
crack propagation, ultimately leading to failure in those regions
of the tank the subject of higher stresses.
227. A high density of tie molecules bridging the lamellae will
resist ESC; a low density of such molecules will assist it. ZN
materials have a higher content of longer polymer chains than
borecene and therefore a higher resistance to ESC. So, whilst
borecene will, on account of any increased crystallisation be
stronger, its ESCR will be less than ZN. 110 Metallocenes have a
high aspect ratio. This can inhibit the diffusion of ESC so that
borecene is likely to take up an ESC agent more slowly than the
lower aspect ratio ZN material. But once ingress has occurred
borecene is less likely to accommodate the plasticisation action
of an ESC agent without rupture.
____________________
109 Differential Scanning Calorimetry.
110 This may be true as a generality but it will, in my judgement, depend on the
particular characteristics of the materials to be compared.
669
228. This conclusion is, Professor Pethrick claims, supported

by an article by Wright - "Environmental Stress Cracking of
Plastics", Rapra, 1996 - which indicates that ESCR correlates
with the fraction of higher molecular weight polymer present in
a material; and with an article "The Critical Molecular Weight
for Resisting Slow Crack Growth in a Polyethylene",111 which
concluded that the resistance to slow crack growth in the
particular commercial ethylene-hexene copolymer there
examined112 resided in those molecules whose molecular weight
was greater than 1.5 10 to the power of 5.
229. Professor Pethrick's view expressed in his supplemental
report is that borecene's inadequate ESCR is by far the most
significant factor behind the massive increase in Balmoral's fuel
tank failures; and that borecene did not have the ability to resist
ESC together with appropriate rheological characteristics to
make borecene easily processable into the desired structures.
Borecene' rheological properties
230. As the mould rotates, different parts of it will pass
through the powder which becomes tacky and then molten. As
the powder becomes tacky it sticks to the walls of the mould.
The extent to which it does so is in part dependent on the
viscosity (ie the resistance to flow) of the polymer. The lower
the viscosity the greater the flow and the more the material will
fall away from internal protrusions. For that reason a lower
viscosity may make it more difficult to avoid wall thickness
variations at those protrusions. But if the polymer is highly
viscous the result may be that air is trapped in the melt and the
wall structure is unduly foam-like rather than dense and
compacted. Reducing viscosity thus assists the removal of
bubbles. Another potentially relevant characteristic is the viscoelasticity of the material ie its ability to recover its form once
any force applied to it is removed or, more graphically for
present purposes, its ability to drape around a protrusion as the
mould rotates so as not to fall away.
Research at Strathclyde University
231. Professor Pethrick's evidence was that the melt viscosity
of metallocene polymers had been the subject of study at the
University of Strathclyde. That research is potentially relevant
both to ESCR and rheological properties. The viscosity of a
polymer melt is measured by placing the polymer between two
oscillating plates. The energy required to rotate the plates is
then measured. The speed of
____________________
111 Lu, Ishikawa and Brown, Vol 34 Journal of Polymer Science: Part B:
Polymer Plastics; pages 1809-1813.
112 The ZN material with which this case is concerned has a lower molecular
weight.
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rotation can be varied so as to produce a variation in shear rate

(the measure of the speed of movement of liquid against a
surface). The sheer rates experienced in rotational moulding are
very low. Since, at those rates, viscosity is independent of shear
rate, the viscosity, in this context is referred to as zero shear
viscosity []. Rotational moulding is undertaken at shear rates
of between 0.001 and 0.01 s-1.
Zero shear viscosity
232. This research indicated a number of things. Firstly, the
zero shear viscosity of the material decreased, as you would
expect, as between two ZN materials and borecene MFR 3, as
between MFR 3 and MRF 4, and as between MFR 4 and MFR
6. Viscosity is measured in Pascal seconds. The viscosity of
water is of the order of 0.001 of a Pascal second. The viscosity
of treacle is of the order of 1 Pascal second. The viscosity of
MFR 6 at 200C is over 800 Pascal seconds. Mr Clements'
figures (figure 11) were as follows:
Material
Viscosity at 200C (Pa.s)

& 5 millistrain
Sclair
10,000
Stamylex
4,000
BP Rigidex
3,000
Dow NG 2432
2,000
Borecene MFR 3
1,800
Borecene MFR 4
1,300
Borecene MFR 6
1,000
Shear rate/frequency dependence

233. Secondly, at low shear rates polymer material with short
chains all the same length (like borecene) exhibit a viscosity
independent of shear rate ie the viscosity does not reduce as the
shear rate increases. If, however, the viscosity of a polymer is
dependent on shear rates so that viscosity reduces as shear rate
increases (frequency dependence) at relatively low shear rates,
that is an indication, in Professor Pethrick's view, of a number
of factors: a broad distribution of chain length or molecular
weight distribution, entanglement of the chains in the melt and
clustering of polymers. borecene
670
showed a very different dependence on shear rate when

compared with BP and DSM's ZN materials. In the case of
borecene with MFRs of 3, 4, and 6, frequency dependence did
not occur until higher shear frequencies than was the case with
the ZN material. This indicated that in the case of the ZN
materials the polymer chains in the melt were either entangling
or were much longer in length. Polymer chains above a critical
molecular weight will entangle and the viscosity of the melt
will increase significantly (the spaghetti analogy). The
behaviour of the ZN catalysts leads to the creation of a small
number of longer chains which in turn leads to the higher
viscosity of ZN material as compared with borecene.
Changes in viscosity over time
234. Thirdly, if the melt was kept at a constant temperature of
180C or 200C for a period of time and at a constant shear rate
there was an increase in viscosity after a period. That increase
was more marked in the case of DSM and BP material than in
borecene. In the case of melt held at a constant temperature of
180C this difference occurred in the region of 3,000 seconds.
In the case of melt held at 200C any marked increase occurred
at about 1,250 seconds113 in the case of the BP material, but
much later in the case of the DSM material. But the MFR 6
material showed marked increases in viscosity earlier than the
DSM and BP material and the MFR 4 material increases similar
to those of DSM.
235. The consequence of these rheological characteristics in
terms of viscosity and viscoelasticity was that, in Professor
Pethrick's opinion, metallocene polymers are:
probably satisfactory for moulding simple box or barrel type
structures where no protrusions exist. However, where the
design of the container requires strengthening ribs then
"drape" becomes a highly significant issue. borecene polymers
lack viscoelasticity and appear to be unsuitable for rotational
moulding of any more complex structure than a symmetrical
box or barrel without internal protrusions where even wall
thickness is required. Where they are used in the production of
articles by rotational moulding process, metallocenes will
inevitably give rise to significant variations in wall thickness
distribution.
____________________
113 The time window for a constant viscosity is said in para 38 to have
dropped to circa 300-500 seconds but it is difficult to discern this on figure 4. I
note also that the content of para 38 is said to be derived from a study conducted
at 250C whereas figure 4 refers to 200C.
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Professor Pethrick's oral evidence

236. When he came to give oral evidence Professor Pethrick
produced, to illustrate his general thesis, a schematic figure 114 in
which the shear rate formed the x axis and viscosity [] the y
axis. On this figure were plotted values notionally attributable
to three materials with a broad molecular weight distribution
(represented by three dotted lines) and three materials with a
narrow molecular weight distribution (represented by three
undotted lines). The materials in the former category had
viscosities in excess of those in the latter at all shear rates. The
materials in the latter category had viscosity values which
remained broadly constant until a given shear rate was reached
at which stage they began to decline. Viewed from left to right
those values, when plotted, displayed three roughly parallel
lines, which at a certain shear rate turned downwards as
viscosity reduced. By contrast the materials in the former
category had, from the very start, a reduction in viscosity as
shear rate increased ("shear thinning"), so that the three lines
were never parallel but curving downwards as from the lowest
shear rate.
237. In this figure the material with broad molecular weight
distribution was characterised as having a molecular weight
higher, and the material with a narrow molecular weight
distribution as having a molecular weight lower, than a critical
value of "Mc". Mc is the point at which,115 if you plot viscosity
against molecular weight, there will be a step change in the
relationship between viscosity and molecular weight. Before
that point viscosity will increase in proportion to the molecular
weight (here Mn: see para 239). After that point viscosity will
increase at a 3.5 power of the molecular weight. This is because
the longer chains (whose existence increases the molecular
weight figure) produce a disproportionate increase in viscosity.
It is these longer chains that produce entanglements which
enable the polymer to resist ESC. Below the Mc point there is
no entanglement and generation of tie molecules is dependent
on bridging. As a result material with a molecular weight below
Mc is less suitable for ESCR purposes. The molecular weights
of borecene were he said116 around or just below the Mc value
for these materials. That value differs for different materials.
Further the fact that, until relatively high shear rates, borecene
had a constant viscosity against shear rate was indicative of the
fact that the material was not entang-
671
ling. He regarded entanglement as connoting viscoelasticity.

Discussion
238. I did not find the manner in which Professor Pethrick
introduced evidence as to the supposed criticality of Mc - in a
document, not previously circulated, introduced without prior
notice at the commencement of his evidence and then explained
orally - helpful. I was told that Mc was "an established
reference point in any of the polymer literature on rheology" 117
but no such literature was produced or identified by reference.
Professor Pethrick's evidence did not indicate, prior to my
asking him questions, what was likely to be the Mc point
applicable to borecene. But he told me that for a polyethylene it
was, typically an Mn figure of about 18,000, an Mw figure of
around 35,000, and an Mz figure of around 45,000, although
that evidence was given with the caveat that Professor Pethrick
did not know what was the Mc value for the particular
copolymers that constituted the material at issue because
different copolymers have different Mc points.
Molecular weight
239. The experts are agreed that, in general the higher
molecular weight species in a polyethylene material will
improve ESCR. Polymers do not, however, have a single
molecular weight because the polymer chains vary in length,
and, therefore, weight. Molecular weight is expressed in three
different ways:
Mn - the number average molecular weight;
Mw - the weight average molecular weight;
Mz - the z average molecular weight.
Mn is the total weight (strictly mass) divided by the total
number of chains ie the average weight per chain. Mw is the
total of the squares of the weights of the chains (nM 2) divided
by the total weight of the chains (nM). It thus accentuates the
significance of the longer chains because of the squaring effect.
Mz is nM3/nM2. Mz is even more biased towards the higher
chains because of the cubing effect of the numerator.
240. Mr Clements calculated, by means of gel permeation
chromatography, the Mn, Mw, and Mz figures for borecene
MFR 3, 4, and 6 and two ZN materials. The data 118 is as
follows:
____________________
____________________
114 Ie not the result of actual measurements on the materials in question.

115 As appeared from another figure produced by Professor Pethrick at the
beginning his evidence.
116 Day 17/80.
117 Day 17/135/19.

118 I have not included all the runs. The excluded runs do not alter the picture.
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Sample
MN
Mw
Mz
BP
Rigidex
21,600
91,100
255,800
Dow 2432
25,400
81,600
209,000
MFR 3
38,300
91,000
155,200119
MFR 4
37,400
83,900
176,000
MFR 6
35,100
76,300
140,000
Dr Clemens also used gel permeation chromatography to derive

results (para 3.25) for the base resin (unpigmented save in the
case of Rigidex) and produced not dissimilar results as follows:
Manufact
urers
Code
Nominal
MFR
Mn
Mw
ME 8166/7
37,650
79,250
RM
7402/3
34,450
71,850
RM
8402/3
31,800
68,500
Dow NG
2432
3.8
27,100
73,750
Rigidex
4330
22,350
75,900
672
242. There are other indicators that metallocenes have an

advantage over ZN material so far as ESCR is concerned. In the
case of ZN material the short chain branches (derived from the
ethylene comonomer) are concentrated on the shorter chains;
with metallocene they are evenly distributed irrespective of the
length of chain. The literature suggests that that is an advantage
in ESCR terms:
Ishikawa et al first showed the profound increase in
resistance to SCG when most of the short-chain branches are
placed on the long molecules. Scholten and Rijpkema. . .also
showed the importance of placing the chains on the high
molecular weight molecules, and that at the same time, SCB
on the small molecules appear to have little or no effect on
SCG.122
At the same time metallocenes have a significantly lesser
quantity of the long molecules.
Viscoelasticity
He also derived results from the failed tank samples, which

were in the same range. As can be seen, whether borecene has a
lower molecular weight than ZN material depends on (a) which
borecene is being compared with which ZN material and (b)
which definition of molecular weight is used.
241. These figures are significant for a number of reasons.
First, they show the ZN material to have significantly higher
Mz values than borecene. The literature indicates that Mw
"appears to be the best parameter for describing the effect of
molecular weight on slow crack growth and on the low
temperature fracture stress"120 in preference to Mz, but that,
with materials of the same Mw "it has been reported that the
preponderance of the high molecular weight fraction had the
greatest influence on EC resistance121" ie that Mz can rank
materials with the same Mw because it highlights the quantity
of longer chain molecules. Secondly, none of the data places
borecene close to the Mc point indicated by Professor Pethrick.
The figures for borecene are considerably in excess of that point
whichever measurement of molecular weight is employed.
Thirdly, Mr Clements' data shows that the ranking of the Mw
value of borecene is effectively (i) MFR 3 and BP Rigidex; (ii)
MFR 4; (iii) Dow, and (iv) MFR 6.
____________________
119 This figure is suspect. It should be higher than for MFR 4 and MFR 6.
120 "The effect of molecular weight on slow crack growth in linear polymers "
Huang & Brown, Journal of Materials Science 23 (1988), 3648 at page 3653.
121 Wright; Failure of Plastics and Rubber Products; Rapra; page 249.
243. I found it difficult to discern what precise significance

Professor Pethrick attached to the distinction between viscosity
and viscoelasticity in the context of rotational moulding.
Viscoelasticity is the ability of a material to recover after the
application of a force has ceased. In rotomoulding, as the mould
rotates and the melting powder tumbles, the force of gravity
acting on the polymer continues although it operates in different
directions. The upshot of Professor Pethrick's evidence was, as
it seemed to me, that viscosity and viscoelasticity are
components of complex viscosity []123 - and that if the material
has a degree of elasticity it is likely to be more viscous. This
accords with common sense. A material that has a certain
degree of elasticity is inherently likely to have a greater
resistance to flow. It also explains why borecene has a lower
viscosity than ZN material. It is common ground that a polymer
with a narrower molecular distribution, such as borecene, will
behave more like a Newtonian liquid (eg water whose viscosity
does not change with an increase in shear rate) than a polymer
with a wider distribution, such as ZN material, which will
behave in a more pseudoplastic way.
244. Whether or not Professor Pethrick regarded
viscoelasticity as necessary if even wall thicknesses were to be
obtained was not entirely clear. 124 Nor was it clear to me
whether it was being said that there was any given value of
viscoelasticity which
____________________
122 "The Critical Molecular Weight for Resisting Slow Crack Growth in a
Polyethylene" cited at para 228 above.
123 At Day 17/105/16 he described viscosity and viscoelasticity as synonymous.
124 Cp Day 17/93/15: "I'm admitting in fact it is not necessary to have a
viscoelasticity, but it is desirable. . ." and 17/102/22: "I'm saying in fact, it would
help, and I believe it is in fact a very appropriate property to have in the material.
And because I don't have any information to the contrary, I would suggest that it's
a necessity."
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was (a) critical and (b) which borecene did not achieve.
Professor Pethrick did not measure the viscoelasticity of
borecene and comparator materials at the shear rates relevant to
rotomoulding. In the end his evidence was that the importance
of viscoelasticity in rotomoulding, so far as wall thickness was
concerned, was unproven, "because I don't think it's been
considered",125 and so I find it to be.126 I accept Professor
Crawford's evidence, which has support in the academic
literature127 that so far as wall thickness distribution is
concerned there is nothing to indicate that viscoelasticity is an
important advantage.
245. I also note Dr Clemens' evidence that figure 11 (see para
232 above) of the first Rapra report sets out data relating to
seven materials of which only one - Sclair/Nova - exhibits a
significant pseudo plasticity. CAPCIS were unaware of that
material ever being used by Balmoral in oil tanks. The other ZN
material that shows a slight pseudoplastic tendency at the low
shear rates applicable to rotomoulding is DSM Stamylex, which
was the material used by Balmoral immediately before
borecene. The other two ZN materials (Dowlex NG 2432 and
BP HD 4330) are, at rotomoulding shear rates, effectively as
Newtonian (ie not shear rate dependent) as the three borecene
grades. The former was used by Balmoral immediately after the
use of borecene ceased (and has a zero shear viscosity only very
slightly higher than that of borecene ME 8166/7). The latter is
Balmoral's current material of choice.
The significance of shear rate dependence
246. Professor Pethrick placed store by the shear rate
dependence of ZN material at lower shear rates than borecene see para 233 above - as an indication of the viscoelasticity of
ZN material. It is, however, apparent from figure 2 of Professor
Pethrick's first report (para 28) that the shear rates that he was
taking to produce the data in that figure were way above those
actually found in rotomoulding. The x axis 128 of figure 2 starts
at approximately 0.06 s-1 and the lines of data stop some way
short of the start of the graph. Further as the lines reach the start
of the graph they flatten. 129 This indicates that, at the shear rates
relevant to rotomoulding (put by CAPCIS at between 0.001 and
0.01 s-1), there is
____________________
125 Day 17/138/12.
126 I have been shown no reference to the importance of viscoelasticity in the
literature. Professor Pethrick's views appear to have been reached based on
assumptions derived from literature on "film-forming".
127 See in particular his citation of Gonzales and Weber, "The effects of
Viscoelastic Properties on the Molding Performance of Polyethylene Resins",
Rotation, vol 8, Issue 5 (1999) pages 36-41, to the effect that for good
rotomouldability low elasticity is best.
128 The x axis is calibrated in radian seconds which need to be multiplied by 2 p
in order to be converted to s-1.
129 A similar pattern appears in figure 11 of the Rapra report.
673
no significant difference between the shear rate dependence of

ZN and borecene.130
247. But Professor Pethrick's point was that, if at shear rates
higher than those used in rotomoulding, you see in relation to
ZN material a decrease in viscosity as shear rates increase, as
compared with none or a markedly lesser change with borecene,
that is indicative of the fact that ZN material contains a degree
of elasticity/entanglement which metallocenes lack, and that it
is that entanglement which is significant for ESCR purposes.
He disputed the proposition that the data showed that at shear
rates found in rotomoulding significant entanglement is not
happening in any of the materials, including the ZN materials.
He was of the view that:
if you have any shear rate dependence below angular
frequency of around about 10 (ie 10 radian seconds), this is an
additional contribution due to entangled polymers.131
The significance of changes in viscosity over time
248. So far as changes in viscosity over time are concerned the
data as to the effect of holding a melt at a constant temperature
of 180C (figure 3) revealed no significant increase in viscosity
until about 3,000 seconds - a period greater than that over
which the melt would be heated in rotomoulding.
249. So far as the data at 200C is concerned (figure 4), there
are a number of points. Firstly, figure 4 does not appear to me to
display any noticeable increase in viscosity until about 1,000
seconds which is close to the limit of time in which the mould
would be in the oven. Secondly, any increase in viscosity could
only contribute to satisfactory wall formation after a period of
time during which the distribution of polymer will have been
unaffected by this phenomenon because the temperature of the
polymer is too low. This period will end substantially after the
melt point, by which time the wall thickness distribution is
likely to have been substantially determined. Thirdly, whilst the
highest temperatures will be experienced where the melt meets
the mould, lower temperatures will be experienced towards the
interior surface of the mould. So any change in viscosity is
likely to take place, if at all, at the mould wall. But the polymer
is likely to be adherent or even bonded to the mould wall so that
the benefit of any increase in viscosity is limited. Fourthly, I
note that MFR 6 showed the steepest increase in viscosity of all,
albeit not starting until about 2,000 seconds, and DSM the
second lowest, starting at about 3,000 seconds. In
____________________
130 As Professor Pethrick accepted: "I am not wishing to make a point of that":
Day 17/133/2.
131 Day 17/130-132.
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these circumstances I am not persuaded that the data set out at

figure 4 casts any light on the suitability or otherwise of
borecene for rotomoulding. Professor Pethrick did not suggest
that I should set much store by this data and I do not.
Viscosity
250. Borecene was marketed as having comparatively low
viscosity. Mr Clements described borecene as having inherently
low viscosity. For ease of reference I set out figure 11 of
Rapra's first report again:
Material
Viscosity at 200C (Pa.s)
Sclair
10,000
Stamylex
4,000
BP Rigidex
3,000
Dow NG 2432
2,000
Borecene MFR 3
1,800
Borecene MFR 4
1,300
Borecene MFR 6
1,000
251. As is apparent the viscosity of borecene MFR 3 is about

the same as Dow and that of MFR 4 and MFR 6 somewhat less.
But the evidence does not establish that there is a figure for
viscosity below which polyethylene is not suitable for
rotomoulding oil tanks and below which borecene lies. In
relation to figure 11 Mr Clements was asked:
Q. But you don't say in the context of this graph that you can
only properly have a rotomoulding polyethylene if you
achieve a certain figure on the vertical axis?
A. No.
252. In the light of the considerations that I have set out in the
preceding paragraphs I was far from persuaded that Professor
Pethrick's evidence showed borecene either to have very poor
ESCR or such rheological characteristics as made it
impracticable to use for making oil tanks.
The CAPCIS reports
253. The CAPCIS reports make a number of points which I
summarise in the following paragraphs.
Processing conditions
254. Only the rotomoulder has control over the parameters of
the moulding operation. These
674
parameters will include (i) oven temperature; (ii) heating times;

(iii) cooling methods (forced air, water); (iii) cooling times; (v)
speed of rotation of the arm and the plate; (vi) speed ratios ie
the ratio between the speed of the arm and the plate 132; and (vi)
release agents.133 Each change in material requires a change in
processing conditions and careful trialling of each model type in
order to ensure the production of a good quality finished
product. Each material has unique optimum processing
conditions which can affect the quality of the finished product.
Balmoral would have to determine how a new product reacts to
its particular manufacturing processes. This trialling should
involve destructive testing of trial products, including
measurement of wall thicknesses, eg by callipers, particularly at
areas where non destructive measurement techniques cannot
operate eg at corners.
255. In relation to OFTEC CAPCIS say this:
4.76. Whilst OFTEC OFS T 100 states that for a tank
designed to store either diesel or kerosene, the minimum wall
thickness should not be less than 4.5mm, this does not mean
that an oil tank with a wall thickness of 4.5mm is fit for the
purpose of storing large volumes of kerosene or diesel. Indeed,
an oil storage tank would fail the deformation requirement of
this standard should the tank be made to this uniform
minimum wall thickness. What it actually means is that, at
non-critical points (ie regions of low loading) a minimum
4.5mm wall thickness is required. Due to the complexity of oil
tank designs, it is the responsibility of the manufacturer to
assess the actual wall thickness required at any point in his
tank design.
4.77 Unless the tank design is simple (ie cylindrical) only a
design engineer with access to finite element analysis (FEA)
would be able to determine the required wall thickness at any
given point in a tank with any confidence. Prior to the use of
FEA, a design engineer would calculate a "best guess" and
build in a safety factor in the final recommendation of wall
thickness. If a safety factor of 2 was applied then the
recommended wall thickness would be twice the "best guess"
estimate.
Failure rates in non-borecene tanks
256. Balmoral's tanks suffered failures of the same type as
later occurred with borecene when it was using ZN material.
Balmoral's figures for
____________________
132 The evidence of both Professor Crawford and CAPCIS was that non-integer
axial ratios are better when processing borecene. CAPCIS 4.53. eg using a ratio of
4.1:1 instead of 4:1.
133 In addition there are matters affecting processing which may not be within
their control eg changes in ambient temperature; errors and inconsistencies of
machine operators.
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failure rates by 31 December 2005 of the following models

made in 1995 and 1996, ie not from borecene, are as follows:
Model
Failure rate
H 5000
16 per cent
H 3410
11.6 per cent
H 2500
8.2 per cent
H 1590
2.8 per cent
SL 1250
1.7 per cent
V 7270
1.7 per cent
In relation to 1997 to 2002 production Mr Jensen's figures to

31 December 2005 show failure rates for H 2500 (ICO-3940
(ZN)) of 33.4 per cent.
257. Borealis submit that these figures indicate a defect in
Balmoral's horizontal tank designs (increasing in seriousness
with the size of the tank) for which the only explanation is that
the stresses at the failure sites were too high. They point out that
Balmoral have produced no evidence that would permit an
analysis of their engineering design for the tanks and no
relevant engineering calculations. In the light of those figures
Balmoral should either have changed the design of the mould to
reduce stress concentrations at failure sites, or increased the
thickness of the tank walls either generally or at failure sites,
and continuously monitored the result by a form of testing
which would accurately reveal the wall thickness distribution in
critical areas. In fact they did none of those things.
Examination of failed tanks
258. In October 2004 Dr Clemens and Dr Wright of Rapra
visited Balmoral in Aberdeen and selected from a large number
of failed tanks stored in a field 14 sample tanks: one made from
MFR 3 ZN, five made from MFR 3 borecene, seven from MFR
6 borecene, and one from MFR 4 borecene. They cut out
sections around crack sites, and took wall thickness
measurements of those sections. A table of the maximum and
minimum thicknesses and the max/min ratio of these samples is
at para 3.8 of their first report. In only one case - an SL 1250
tank - was the minimum wall thickness less than the OFTEC
4.5mm and that was not at the point of failure. Cracking was
found to coincide with minimum measured wall thickness in
four of the failure sites examined. 134 The results showed
significant wall thickness variations within individual tanks and
as between one tank and another. The extremes of wall
thickness were always located at a change in section area, with
the thickest part usually being at an external, and the thinnest at
internal, corners, ie
____________________
134 Whether or not the point of failure was at the point of minimum thickness,
localised wall thinning would result in stress concentration and increase the
potential for cracking to occur.
675
the phenomenon shown in the page 37 photograph. All but two

of the samples exhibited thick to thin ratios in excess of 2:1.
259. Figures 3.1 to 3.3 to CAPCIS' first report contain
photographs of typical locations of cracks. In the case of the
slimline tanks a typical location is at the interface between the
two halves of the mould where there is a "step" between the
material on different sides of the join. An example of a section
showing this was put before me at the hearing. It appears to me
clear that there is, indeed, what could be called a step which is
probably due to a misalignment of the two halves of the mould.
The CAPCIS figures show that in the case of most of their
samples the minimum thickness of the sample 135 was below or
very close to 5.5136 and that there were considerable variations
in wall thickness in the areas of the samples. Mr Richard
Mawrey QC, criticised CAPCIS' reliance on these figures on
the basis that they had failed to take measurements immediately
adjacent to the crack site, and that the appropriate measurement
would have been to take a section along the line of the crack. I
do not accept the validity of this criticism. Such a measurement
(which might well have been relatively uniform) would not
measure variations in thickness around the area of the crack
which affect the stress concentration at that point.
Creep rupture testing
260. By the time of their second report CAPCIS had updated
figures for their creep rupture testing. I have referred to this at
para 220 above.
Finite element analysis
261. CAPCIS arranged for finite element analysis to be varied
out by Wilde FEA Ltd on two Balmoral tanks designs - SL 1250
and H 2500 - these being Balmoral's two biggest sellers and the
tanks with the biggest failure rates. Finite element analysis is a
computer-based method, originally designed for the aviation
industry, of estimating the stresses and deformation likely to be
experienced in a particular product design. Balmoral made use
of FEA when designing the tanks. The process was, however,
considerably less sophisticated, and slower, than it is now.
262. In the FEA exercise carried out by Wilde the tanks were
assumed to have, in one exercise, 5mm and in another, 9.5mm
wall thicknesses at full load conditions in both cases, and, also,
at half load in the case of the 5mm wall thickness. The exercise
therefore assumes rotomoulding perfection so far as
____________________
135 This is not the same as the minimum thickness at the site of the crack. The
point of failure is determined by the incidence of stress concentration and the
thinness of the tank.
136 But, save in one instance, which was not a point of failure, not below the
OFTEC 4.5.
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wall thickness distribution is concerned. In reality tanks will not

have uniform wall thicknesses and thickness variations will
concentrate stresses and increase the potential for failure. An
attempt was also made to model a variation in wall thickness at
corners by taking a 5mm thickness with 9.5mm at "rounds" and
vice versa. CAPCIS regard the results as to be treated with
caution and I do not propose to rely on them.
263. The simulations were run under linear-elastic
conditions137 with certain assumed properties of polyethylene
one of which was a modulus of 700 Mpa. 138 These conditions do
not reflect reality since polyethylene does not behave in a linear
manner, ie stress and strain are not directly proportionate. In
consequence the resulting Mpa figures are greater than they
would have been in reality at the upper end, ie from about 7
Mpa upwards, and conversely too low at the lower end. Further
the simulation in the FEA exercise assumes that the base of the
tank is fixed to the ground and cannot move in any direction
when in reality the base of the tank may be capable of a little
movement, although this will be limited because of friction if it
is on a concrete base (more if the tank is supported on piers),
and there can be bowing of the tank. As a result some of the
stress readings close to the base would not be accurate, although
I accept that the differences would not be significant. Stress
contour plots139 were made with a cut off stress of 15 Mpa. This
point was taken because polyethylenes typically yield at
between 15 and 20 Mpa140 at 20C. In reality stresses of the
order of 15 Mpa or less would have led to immediate ductile
failure.
264. In the case of the H 2500 at 5mm wall thickness and full
load, the plots indicated that maximum stresses were produced
along edges (changes in section) between the stiffening rib
sections and the wall, and at the "corner" between sides and
ends. Maximum stresses exceeded the minimum yield value of
15 Mpa in a number of locations, including sites where cracking
had typically been observed, ie around rib sections, and corners.
265. In the case of the SL 1250 tank at 5mm wall thickness
full load maximum stresses were indicated along the edges
between the sidewalls and the stiffening sections together with
stress concentrations along the floor perimeter at the sides of
the
____________________
137 Ie on the assumption that strain is proportionate to stress at all levels.
138 This is a short term value ie it is the stiffness that the tank will have at its
creation whereas the modulus will drop over time. Professor Crawford would have
used 300 as a more realistic value: this would alter the absolute figures
(downwards) but not the relativities. The stiffness was assumed to be constant
because the FEA study was linear.
139 The stresses were von Mises stresses, which combine stresses at a given
point from three dimensions.
140 These are stresses which an oil tank is unlikely to encounter in practice.
676
tank. Stresses exceeding the minimum yield value were

indicated at a number of locations, including the edge along the
lower horizontal rib where failures had occurred in service.
266. CAPCIS further record the existence, in the case of many
of the SL 1250 tanks, of the "step" to which I have already
referred, where there is a difference in thickness of around 2mm
running vertically along one of the end walls. This feature is not
reflected in the FEA analysis.
267. CAPCIS draw two conclusions from this data. Firstly the
H 2500 and SL 1250 designs, even assuming uniform
thicknesses, would perform very close to the yield stress 141 of a
typical PE material under static load. Wall thickness variations,
and the step would increase the potential for failure. CAPCIS
would have recommended reconsideration of the designs
because of the high stress areas shown. 142 Secondly the fact that
several of the points of high stress are also points of failure
where wall thickness variations would increase stress
concentration supports the conclusion that tanks have failed
because of the stresses imposed in consequence of those
variations. Professor Crawford agrees with this analysis. The
exercise tells you that the hot spots are placed where special
care is needed to build up wall thickness so as to reduce the
stress level, or that you should increase the wall thickness
generally. If for some reason the stress cannot be so reduced a
change in design (eg by changing the shape or the corner radii)
would be necessary. There are several different ways of altering
the manufacturing conditions, or the design, or both, to achieve
the required objective. CAPCIS accept that the FEA analysis is
not a perfect simulation of the tank material but say that it is
sufficient to locate the areas of high stress and the fact that they
coincided to a large degree with the observed position of actual
tank cracking failures.
268. Balmoral suggests that this exercise tells us nothing of
interest. Insofar as it reveals that the two most popular tanks
failed at points of high stress that is no more than was to be
expected. The mechanism of failure was environmental stress
cracking; so failure was likely to occur at areas of higher stress.
Those stress points were there when the tanks were made in
ZN, and the tanks did not fail to anything like the same extent.
269. I am satisfied that the FEA results provide an instructive
qualitative assessment of the location of the stress "hot spots" in
the tanks, ie an indication of the relative stresses across the
tank.
____________________
141 The stress at which irreversible plastic deformation is first observed.
142 One method of alleviating the effect of wall thickness variation at
internal/external corners is to redesign the mould to give a more generous
curvature at the corner.
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They are not, however, a guide to absolute values. The fact that
some of the readings exceed the minimum yield value of 15
Mpa is not, therefore, an indication that, when filled the stresses
will reach that figure; it is an indication of where the highest
points of stress are to be found.
Pigmentation
270. CAPCIS noted that when the method of pigment
incorporation was dry mix or grind blended there was a very
inhomogeneous structure. The pigment appeared in the form of
tram lines within which lay the base resin particles so that there
was a form of "schnitzel": see figure 3.22c. The lines
themselves were immediately surrounded by a transcrystalline
structure (lighter in colour on the photograph - the same
phenomenon can be seen on figure 2.35c surrounding a portion
of masterbatch). A transcrystalline structure is known to be
detrimental to physical properties. Where a tecroblend was used
and the masterbatch was concentrated at the outer surface of the
tank wall the transcrystalline structure was concentrated at the
walls which would be detrimental to tank properties. In addition
masterbatch particles were very angular leading to points of
stress concentration. The BP Rigidex material, which Balmoral
was using at the time of the report, was fully compounded and
the structure was very homogeneous with no transcrystalline
morphology.
271. But by the time of their second report CAPCIS had come
to the conclusion that pigmentation was not a significant causal
factor. I agree.
CAPCIS' conclusion
272. CAPCIS' overall conclusion was that the two primary
factors which had directly influenced the failures were:
(a) Poor tank design particularly in relation to the
elimination of stress hot spots and localised thin wall sections:
exemplified by the high percentage of failure of two designs,
the SL 1250 and H 2500, compared with the much smaller
number of failures for other designs.
(b) Non optimum manufacturing/processing procedures:
particularly given the absence of evidence that steps had been
taken to optimise production when borecene was adopted as a
material. Care needed to be taken to ensure that the thickness
at any point was sufficient for the loads to be expected in
service conditions, particularly where there were localised thin
sections.
273. CAPCIS rejected borecene as a causative factor because
of the fact that it had been used successfully for oil tanks
around the world (either
677
in neutral or black) or, in the case of most of Balmoral's tanks,

green. If the resin was fundamentally at fault all Balmoral tanks
manufactured would have experienced near total or very high
failure rates. Their conclusion was that borecene was fit for the
purpose, if processed correctly, and if good design principles
were employed.
Professor Crawford's evidence
Theory
274. Professor Crawford's written evidence was to the effect
set out in the following paragraphs.
275. The quality of a rotomoulded product is affected by a
number of factors including:
(a) the nature of the base polymer;
(b) the additives put in it to protect from degradation;
(c) the grinding method use to make the plastic powder;
together with particle size distribution and particle shape;
(d) the nature and amount of pigment used and the method of
combining it with the plastic; any method of incorporation
other than compounding can produce quite significant
reductions in the properties of the base resin;
(e) the design of the product;
(f) the moulding process, which has many variables
(temperature, time of all stages of the cycle, speed and ratio of
rotation, charge weights); and
(g) the processes after moulding such as trimming and
jigging, which can affect shrinkage and warpage or introduce
residual stresses.
Of those rotomoulders have sole control over items (d)-(g).
276. Rotomoulding is an apparently simple, but in fact
complex, manufacturing method involving a rotating mould and
transient heat transfer phenomena that have a major effect on
both the geometry and the properties of the end product. Few
rotomoulders have accurate process control equipment on their
moulding machines to monitor the temperature of the plastic or
the mould, on account of the difficulty and expense of having
such instrumentation on the rotating mould. As a result it is
difficult for them to maintain the consistency of the product.
Although operators will claim to use constant moulding
conditions there are inevitable variations due to (i) start up of
the machine, or shift changes; (ii) variations in ambient
conditions and (iii) machine operator error.143
____________________
143 An internal Balmoral memorandum of 31 July 1998 from Mr Macleod states
that ". . . having studied the RS 430 and RS 330 files I have found that for most
tanks, more than one specification sheer for exactly the same configuration has
been produced but sowing different parameters, This can only lead to confusion ,
where products are either underweight, overweight, undercooked or overcooked".
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277. Moulders need to use their experience to adjust the

cooling rate, which has an important effect on the properties of
the moulded part, so as to obtain a part with acceptable
tolerances. If process control equipment is not being used to
maintain consistent cooling rates, tight quality control checks
are needed to monitor the dimensions and properties of the
moulded parts. Rotational speeds and ratios can also be adjusted
to provide the desired wall thickness distribution. The role of
the material supplier is to provide general advice about the
likely behaviour of their material. It can be no more than
general because the supplier will be ignorant of the details of
the user's moulds (which are likely to be unique to him),
machines (of which there is a wide range of types), practices
and settings. The responsibility for achieving the desired
performance of the moulded part must lie with the moulder.
278. Normally, different moulding machine settings will need
to be used when a material or grade change is made. Many
manufacturers design tanks based on the current designs of
other manufacturers' tanks (thus potentially spreading bad
design practice) with modifications; and then alter the designs
to make improvements from time to time, without any real
technical or design analysis. As a result they may have no real
appreciation of the stress concentrations in their products. Tank
designers should use FEA on new designs to ensure that the
tank can withstand the stress concentrations inherent in its
design.
279. Certain basic design rules are well established, one of
which is that sharp corners or changes in section should be
avoided because they cause stress concentration and can make it
difficult to lay up the desired thickness of plastic, thus
producing the phenomenon shown in Mr Clements' page 37
photograph. With lower viscosity resins, such as borecene,
speed ratios and moulding conditions, such as oven time and
temperature, are important if good wall thickness distribution is
to be achieved at sharp internal corners. When switching from
ZN material to borecene the moulder should know this.
Application
280. Balmoral should have ensured:
(a) that its tank designs, particularly the H 2500 and the SL
1250, were safe, by using the sort of FEA analysis carried out
by Wilde. With that sort of result the tank design would have
to have been changed. The existence, revealed by the FEA
analysis of stress hot spots at points of failure coupled with
noticeable incidences of thinning and thickening at such points
indicates
678
that the tank designs for those tanks are unsuitable;

(b) that thinning of the tank wall did not occur, and especially
not near areas of high stress concentration. The best way to do
this was by destructive testing and measurement with callipers
at corners, where ultrasonic testing is unreliable.
These two considerations are basic. If a manufacturer uses a
design without having analysed it, or if he manufactures tanks
without destructive testing, there is "a disaster waiting to
happen". Such tests are important when a new raw material is to
be used. Its physical properties may be the same or similar to
those used before but its behaviour in the rotomoulder's
machine and its response to the manufacturer's process may,
and probably will, be completely different. It is common
knowledge in the industry that new manufacturing conditions
are required for a new grade of polyethylene which will almost
certainly have different powder and melt flow characteristics.
Had (a) and (b) been carried out the losses experienced would
not have occurred.
281. Professor Crawford regarded his conclusions as
confirmed by the fact that Balmoral had manufactured borecene
tanks in designs other than H 2500 and SL 1250 which have had
a very low failure rate; and that, even in those designs a large
percentage are still performing satisfactorily. This shows that
under appropriate moulding conditions borecene can produce
good quality tanks.
282. As to the latter contention, Mr Jensen's figures down to
31 December 2005 show the following:
Tank type
&
material
Production
Failures
Failures as
percentage
of
production
MFR 3
4,154
848
20.4 per
cent
MFR 6
2,840
1,243
43.8 per
cent
MFR 4
734
158
21.5 per
cent
All
borecenes
7,728
2,249
29.1 per
cent
ICO 43940 (ZN)
82
27
33.4 per
cent
6,433
734
11.4 per
cent
H 2500
SL 1250
MFR 3
____________________
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Tank type
&
material
Production
Failures
Failures as
percentage
of
production
MFR 6
3,721
1,895
45.5 per
cent
MFR 4
1,023
162
15.5 per
cent
All
borecenes
11,177
2,791
24.9 per
cent
ICO 43849 (ZN)
14
34.7 per
cent
283. Professor Crawford fundamentally disagreed with the

view expressed by Mr Clements (a) that once a speed ratio is
optimised for a design of tank it then remains fixed irrespective
of the grade of material subsequently processed; (b) that if
rotational speed is adequate for a particular mould, then,
notwithstanding any change in material, higher speeds will not
achieve any improvement in wall thickness distribution; and (c)
that, on the basis that Balmoral's processes for ZN were suitably
optimised, no change in rotation ratio or speed would have
achieved a wall thickness distribution equivalent to that which
had previously been obtained.
284. In his supplemental report Professor Crawford identified
the principal methods of controlling thickness distribution as:
(a) varying the rotational speeds of the arm and the plate, 144
and the ratio of those speeds, and reversing the direction of
rotation of arm or plate: these affect the regularity of any part
of the mould coming into contact with the powder pool 145; the
influence of these parameters is particularly critical at the
stage when the powder is becoming tacky and starting to stick
to the mould because it is then that the main wall thickness
distribution of the product is created 146; the parameters have to
be set so as to ensure that all areas of the mould surface come
into the powder pool with sufficient regularity147;
(b) increasing or decreasing the temperature of the oven and
the time in the oven, both of which determine whether the
mould is hot enough to pick up powder, and, in the later stages
of heating, the viscosity of the molten plastic which
____________________
144 But he limited himself to suggesting an increase of speed of the arm to no
more than 7. The carousel machine used by him in Belfast was the same as the
one at Balmoral.
145 Reversing the direction helps to avoid material getting trapped in certain
areas of the mould.
146 This evidence confirmed what Dr Walls himself had said at 6/48-9 ("this
molten gooey substance. . . doesn't move around the tool"). Dr Walls also
expressed the view that a difference in viscosity between one material and
another would have a negligible effect on wall thickness variation.
147 If the product is one of lower viscosity it may be necessary to increase the
speed of rotation to ensure that the material does not sag.
679
must be controlled at a value that does not cause excessive

flow;
(c) the use of shielding to restrict temperature rise, or
temperature enhancement (eg by the supply of extra hot air) to
areas of the mould in order to restrict or increase wall
thickness. By this means you can arrange for powder to go
preferentially to any area of the moulding.
285. Attention has, also, to be paid to charge weights. If, for
instance, the manufacturer is working on minimum tolerances
(ie has a charge weight as low as possible), the inevitable
consequence is that there will on occasion be insufficient
material at critical places to prevent ESC failure. If
measurements are only taken in non-critical areas, such as flat
surfaces, and the weight is reduced to the minimum tolerance at
those locations, an unacceptable level of failures will be
inevitable. Self-evidently an increase in charge weight will, all
other things being equal, increase the thickness of the product.
Balmoral's evidence of optimisation
286. After Professor Crawford's first report Balmoral served
evidence about their processing parameters. The principal
evidence was that of Mr Hay and Mr Ross. Mr Hay was the
Production Manager until the end of 1996, but would not,
therefore, have been involved in the production of tanks with
borecene. Mr Ross was Production Supervisor over the period
1997-9. Thereafter, although remaining on the shop floor, he
relinquished man management responsibilities and assumed a
technical support role.
287. Mr Hay's evidence, which I accept, was that when a
mould was first introduced there was "a massive process of
thickness checking, including destructive testing". Tanks were
cut up in order to examine the distribution of the polymer with
the given charge weight. Part of the aim of the trials was to
ensure that there was as little thickening and thinning at
internal/external corners as possible. So far as rotation ratio was
concerned, he would start with a 4:1 ratio as a starting point
(which he usually found satisfactory), look at the distribution of
the material and see whether or not it needed to be changed. If
there was a thin area he would adjust the ratio so as to track that
area through the powder pool. If there were areas with thick and
thin sections, he would either use shields to reduce, or funnels
or venturis to increase, heat and, therefore, thickness. If there
was a change of material, Mr Hay would carry out the same sort
of checking as he did with a new mould. In the early days he
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would even go through the full optimisation cycle for every

material batch change.
288. As to speeds Mr Hay regarded rotation speed as a much
less regularly used process control than ratios or shielding or
funnelling. He found that the moulding operation ran better at
lower speeds whilst higher speeds would give problems of
vibration or excessive movement and throw the material
around. He would never employ a speed above 5 rpm for the
arm or 2.5 rpm for the plate, although he had experimented with
arm speeds of up to 6, at which speed, he said, there was a risk
of contact between the mould and fixed structures eg the oven
doors, especially with big moulds and large charge weights.
289. Mr Ross indicated that speeds were not adjusted. When
experimentation with speeds had been done it was found that a
more even material distribution could be generated on the
limited flat sections that could be measured by ultrasound, but
the effect was not consistent, and he could not say what the
effect was around internal protrusions which could not be
measured with ultrasound. He also indicated that there were
major concerns amongst engineering staff that at higher speeds,
above 6 rpm, there could be mechanical damage to the mould or
its components because of the greater vibration at those speeds.
290. Mr Ross' evidence was that Balmoral used what he
understood to be the industry norm of 4:1 for non-cylindrical
tanks, and that that ratio was not something which Balmoral
would consider changing without excellent reason. There were
occasional trials during the last eight years when other ratios
were investigated but the traditional settings proved the best.
However, the production specification sheets that have survived
show something somewhat different. Some of these are
undated; some are dated 2000 and 2001. Many of these have
ratios of 5:1.
291. Mr Hay's evidence was that, after initial optimisation,
routine thickness testing was done by ultrasound. But there was
regular use of a "lamp test", where a powerful lamp is lowered
into the product and the outer surface is scrutinised for "shinethrough". On some occasions, if so required, lamp testing was
used in conjunction with thickness checking by cutting up the
tanks into pieces. Mr Ross' evidence indicates that cutting up
tanks happened on relatively rare occasions during trials, and
normally only if Balmoral was alerted to the need for it, eg by
lamp testing.
292. Professor Crawford expressed the opinion in his
supplemental report that there was a fundamental failure by
Balmoral to appreciate the impor-
680
tance of optimising processing parameters such as rotation

ratios, speeds and cook time/oven temperature 148 for the new
borecene materials. In his view Balmoral certainly had scope
for using higher speeds than 5 rev/min which is relatively
slow.149 He found it surprising that Balmoral staff never found
any justification for using speed ratios other than 4:1 (as he then
understood to be the position) because it was "inconceivable"
that that ratio could work for all tank shapes, and all positions
and orientations of tank, and for all plastics, and because noninteger speed ratios give a much better distribution of plastic
over the surface of the mould. He also said that it was useful to
reverse the direction of mould rotation particularly when the
powder is being deposited on the inside surface of the mould otherwise a particular flow pattern of the powder over the
surface of the mould gets locked into the system.
293. In Professor Crawford's view the evidence as to
Balmoral's approach to processing reinforced his view that
Balmoral did not use correct moulding conditions, and failed
properly to monitor wall thicknesses by cutting up tanks and
measuring the wall thickness in critical internal corner areas.
Destructive testing should in any event have formed part of a
competent moulder's routine quality control checks.
The parties' criticisms of the scope of the evidence
294. Both sides make claims as to the deficiencies of the other
side's evidence. Balmoral submits that there is no scientific
evidence to meet, or at any rate to match, that of Professor
Pethrick; and that, whilst Borealis' allegations of poor design
and inadequate rotomoulding practices are long on generalities,
they are short on specifics. Borealis retort that Balmoral have
called no evidence to refute Professor Crawford's evidence on
rotomoulding practice, have produced little relevant evidence
on design,150 and have not attempted to show, by practical
experiment, that borecene cannot make tanks with satisfactory
wall thicknesses. Balmoral's rejoinder is that Borealis have not
produced any evidence of a manufacturer (or anyone else)
producing a tank made from borecene with wall thickness
variations within acceptable tolerances
____________________
148 The borecene Processing Guide states that higher oven temperature and
shorter oven times ensure a more even material distribution.
149 Mr Macleod used a 7 rev/min speed in November 1998 in his trial of MFR
6.
150 Such as FEA reports, stress plots or other engineering calculations of
stresses (save in the case of one design relating to a lifting eye), risk assessments,
safety margins, or evidence from David Robertson, Balmoral's Engineering
Manager in the early 1990s, who was responsible for most of the FEA work.
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for tanks containing an ESC agent. 151 Borealis riposte that

Balmoral have in fact made tanks with satisfactory wall
thickness distribution (see the work of Walls and Macleod) and
that a very large proportion of their tanks are still in service.
295. These submissions admit of more detailed discussion. I
intend, however, to confine myself to two observations. First,
the absence of a contradictor to Professor Crawford seems to
me more significant than the absence of one to Professor
Pethrick whose evidence does not, in my view take Balmoral
far enough. Second, it would have been open to Balmoral to
show, by practical experiment, that, using their machines and
moulds, it was not possible or practicable to obtain an
acceptable wall thickness distribution, however you change the
parameters. I appreciate (a) the difficulties of proving a negative
(albeit that is what Balmoral seek to prove) 152; (b) that, had
Balmoral conducted such an experiment it might have been said
that, if only some change had been made which they did not in
fact make, all would have been well, and (c) that there is more
than one way of establishing Balmoral's case. Nevertheless the
absence of any empirical testing does seem to me of some
significance, and of more significance than the fact that
Professor Crawford was not able to specify exactly what should
have been done in relation to each design by way of change of
parameter, an exercise that cannot be done by reference to the
design drawings alone.
Conclusion on fitness for purpose
296. Balmoral have, in my judgment, failed to establish that
borecene was not reasonably suitable for the purpose of making
green oil tanks by rotomoulding in that it was incapable of
being used to make satisfactory oil tanks. On the contrary I
accept the evidence of Professor Crawford that borecene is fit
for that purpose. My reasoning is set out below.
297. I remind myself that the onus of proof in this respect lies
on Balmoral.
298. I am not persuaded that borecene has been shown to be so
defective in ESCR (or so low in viscosity) as not to be
reasonably fit for the purpose of making oil tanks. borecene has
characteristics that differ from those of ZN materials, not least
in the fact that it has a narrower molecular weight distribution
than ZN material, two results of which
____________________
151 The Motoral company in Finland uses natural MFR 6 borecene for oil tanks
and is perfectly happy with the material and would not change it. Its production is
very small; it has taken about 1,000 tonnes over a six-year period. The tanks
appear to be installed indoors and supported by some sort of metal frame. Dr
Clemens also referred to a company in Germany using borecene for diesel tanks in
vehicle manufacture who were perfectly happy. Mr Wood mentioned a company
called JFC in England from whom there were no known complaints.
152 See Balmoral final submissions, para 121.
681
are (a) that some grades of it will have a lesser ESCR than some
ZN material; and (b) that it is less viscous than ZN material. But
that does not mean that it is defective or unsuitable.
ESCR
299. Any conclusion on ESCR ought, if possible, to be based
on satisfactory empirical testing of borecene in the relevant
environment ie diesel/kerosene, from which quantitative
conclusions can de drawn. That would be the best evidence as
to what is likely to happen in practice. It is, no doubt, for this
reason that Rapra carried out such extensive testing in these
mediums in this and the DESO action. Their results do not,
however, support the conclusion that borecene has very poor
ESCR. As to them:
(i) I do not feel able to place any reliance on the master
curves derived from soaked data, namely figure 5 in the first
Rapra report and page 302 of the second, and certainly not
enough to reach the conclusion that borecene's ESCR is so low
as to make it unfit for purpose, for the reasons set out in paras
211-214 above;
(ii) The unsoaked data, which Mr Clements contends is
unrealistic, does not establish that borecene has defective
ESCR. The master curves relied on in the DESO action
derived from sampling in kerosene showed MFR 3 borecene to
have a better ESCR than Dow and the ESCR of MFR 6 and
Dow to be comparable;
(iii) Nor does the table in Rapra's supplementary report
support such a conclusion in the light of the defects in it
referred to in paras 215-216 above
(iv) So far as testing in Igepal is concerned, I refer to para
219 above;
(v) The BTT testing carried out by Borealis is of limited
assistance because of the limitations of that test. However,
insofar as it goes, it is inconsistent with the claim that
borecene's ESCR was very poor. Borealis' BTT figures
showed all relevant grades of borecene to be better than
Borealis' ZN grade ME 8154. MFR 6 borecene which had the
lowest result had a similar result that of Dowlex NG 2432.
Both comparator ZN grades have been used for making oil
tanks. Dowlex 2432 was used by Balmoral.
(vi) The same can be said of Borealis' ARM CTL test where
MFR 3 and MFR 4 borecene has better results than ME 8154.
(vii) The CAPCIS creep rupture testing does not take one
very far because of the paucity of brittle failures over the time
of the tests. It was suggested to Dr Clemens that he had
adopted a testing procedure which was calculated not to
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reveal brittle failure because it was carried out at

inappropriately high stress levels as a result of which there
was a preponderance of ductile failures. I accept that the
reason why the tests started at high stress levels was in order
to discover the point of ductile-brittle transition and that he
was not seeking to avoid getting brittle failures. Nevertheless
the effect is that the results are not very informative. But the
results of the tests do not point towards a marked ESCR
deficiency in borecene. In the tests on pigmented rotomoulded
samples in diesel and kerosene it was only BP material which
produced brittle failures in diesel at 80C and in kerosene at
70 and 80C;
(viii) Nothing in the master curves filed in the DESO action
points to a different conclusion: see para 199.
300. If the evidence as to the influence of the molecular
structure on ESCR was sufficiently cogent or compelling, it
might, either itself or in combination with empirical evidence,
lead to the conclusion for which Balmoral contends. It is not,
however of that character. I approach the evidence with a
degree of caution since, as Borealis submits and as I accept, the
ESCR of a polymer is largely dependent on the density of tie
molecules, which in turn is dependent on a number of aspects of
the polythene's molecular and crystalline structure, such as
molecular weight distribution, density of short-chain branches,
whether those branches are located on small or long chains and
the length of those branches. This list of factors I have taken
from the article of Lu and Ishikawa cited at para 177, footnote
74. That and other literature causes me to apprehend that it may
be dangerous to draw conclusions from research that is not
directed to the particular polyethylene in question and its
peculiar characteristics.
301. Where the evidence has embraced measurable criteria in
relation to borecene, it does not show that borecene has
defective ESCR. Thus borecene is shown to have figures for
Mn, Mw and Mz which comfortably exceed Professor
Pethrick's figure for Mc; and an Mw figure which, depending
on the grade of borecene, either exceeds, equates to or is not
greatly inferior to BP Rigidex and Dow.
Rheological properties
302. That borecene, had lesser viscosity than ZN material at
the temperatures used in rotomoulding was well known to
Balmoral. It gives borecene certain advantages, put forward by
Borealis in its marketing statements in the form of ease of
applica-
682
tion153 and distribution of the polymer over the surface of the

mould and the readier disappearance of bubbles in the melt and thus reduced sintering/heating time. As Professor Crawford
points out in his supplemental report (para 50):
it is accepted in the rotational moulding industry and in the
rotational moulding scientific community that the desired
characteristics of a rotational moulding resin are low zero
shear viscosity and low elasticity. 154
Reduced viscosity is not, however, an unqualified benefit. The
fact that the material is more likely to flow needs to be taken
into account in determining processing parameters in order to
ensure that this characteristic does not prejudice the
achievement of satisfactory wall thicknesses and satisfactory
wall thickness distribution in areas known to be difficult such as
internal protrusions. Viscosity can be significantly altered by
changes in manufacturing temperature (according to Professor
Crawford by a factor of two within the normal moulding range).
303. Nothing in the evidence persuades me that the viscosity
of borecene is so low that it cannot be used satisfactorily in the
rotational moulding of oil tanks. In particular I do not regard it
as established that, because of its rheological properties, it is not
practicable to use borecene to rotomould tanks so as to achieve
an even wall thickness. The page 37 photograph shows that
using borecene can result in unacceptable wall thinness and
unacceptable wall thickness variations. It does not, however,
establish that that was a consequence inherent in any use of
borecene. I accept Professor Crawford's evidence that the
viscosity of borecene is more than adequate to provide the
necessary wall thickness if correct rotational speeds and ratios
are used.155
304. I do not reach that conclusion simply on a want of
evidence, although there is, in my view, force in the submission
that it is significant that Balmoral have not adduced evidence
from an expert rotomoulder to the effect that borecene cannot
practicably be used to rotomould oil tanks. Nor have they
adduced any experimental evidence to the effect that, however
you change the parameters, an uneven wall thickness will
always result.
305. I accept Professor Crawford's evidence (and that of Dr
Clemens) that a competent rotomoulder would realise:
(a) that a new type of raw material is likely to have different
characteristics (such as powder
____________________
153 Ease of application over the surface of the mould will tend to eliminate the
peaks and troughs of material that might otherwise form on smooth curved
areas.
154 Professor Crawford says as much at page 163 of his book "Practical
Guide to Rotational Moulding".
155 His evidence was that some rotational moulders use liquid resins whose
viscosity is much lower than borecene and achieve successful mouldings by
designs which minimise areas where thinning could occur and by using
temperatures and rotational speeds that will give the required thickness in all
areas of the moulding.
[2006] Vol. 2
QBD (Comm Ct)
LLOYD'S LAW REPORTS

and melt flow) and may perform in a manner different to any

type of material previously in use;
(b) that, on any change of raw material, it will be necessary
for a rotomoulder to test and see whether his processing
parameters need to be changed 156 in order to produce a
satisfactory product (with appropriate wall thickness
distribution); this must particularly be so if the product is new
to the industry and has avowedly different characteristics
(such as reduced viscosity) which may make greater demands
on the processor157;
(c) that areas of special concern will typically be internal
corners, which have a propensity for thinning, and external
corners, which have a propensity for thickening;
(d) that such testing should involve the cutting up of products
in order to determine wall thicknesses at locations (such as
corner areas) likely to be the subject of high stress that cannot
be tested by ultrasound, in order to see that there is
consistency of wall thickness and that it is sufficient for the
design of tank in question;
(e) that, after initial optimisation, it is necessary to carry out
regular quality control checks, including destructive testing, of
products manufactured, although the extent of the need for
destructive testing may reduce as the moulder gains increasing
confidence in the efficacy of his processes;
(f) that repeated failures in a particular location with a
particular tank design are a sign that the location is an area of
high stress in respect of which correction needs to be taken
either by a change of design that reduces the stress or in
relation to wall thickness or wall thickness distribution.
306. I further accept Professor Crawford's evidence that
appropriate quality control checks (post initial trialling) should
have picked up the fact that tanks were being processed with
localised thinning such as is shown in the page 37 photograph.
Professor Crawford observed that photographs such as these
would come as no surprise to a competent rotomoulder who
would know that internal protrusions are a classic region where
thinning will occur and that appropriate moulding conditions
must be used to achieve the necessary thicknesses.
307. When, in 1997 Balmoral changed both material (from ZN
to metallocene) and method of pigment incorporation (to dry
blending) it did not carry out a re-optimisation process with
respect to wall distribution. Joint trials took place on 10 April
____________________
156 As Mr Hay, Balmoral's Production Manager until December 1996, accepted:
Day 6/138/9-141/2.
157 I reject the proposition put forward in Mr Clements' first report that once
processing parameters have been optimised for ZN material it is unnecessary to
repeat the exercise on any change of material.
683
1997 at which, as Mr Shorter noted, the tanks made from DSM

material were thick at the top and thin on the bottom. The trials
were not progressed further because of problems of tool
mounting and axis of rotation. In-house studies were to take
place before re-evaluation. In the event no further trials were
conducted with Borealis.
308. After borecene had gone into production, Dr Walls spent
several months in the absence of Borealis, optimising the wall
thickness distribution of tanks made from borecene with
reduced charge weights, in order that such tanks could be sent
to OFTEC for testing. In the course of this inspections took
place of the wall thickness distribution of the tanks produced.
On 3 July 1997 Dr Walls wrote a memorandum to Mr Tanner,
the then Managing Director, Rotomoulding, which contained
the following:
It is likely that OFTEC will be concerned about the thickness
of some of our tanks. This has been an issue in the past. In fact
OFTEC have not actually tested the thickness of our tanks
before, and have expressed concern about the thickness of our
tanks already. In general our tanks our [sic] within spec, but
the horizontal tanks have localised thinning around the inner
rib area. Also, the smaller tanks are thin around the pockets at
the bottom of the tanks. To resolve this problem, the rotation
ratios were changed so that the tanks that were sent to OFTEC
have better thickness distributions than our previous standard
tanks.158
Dr Walls had clearly found that there was localised thinning in
at least two areas and used a change of rotation ratio to improve
the distribution in those areas. But, whatever changes he made
when using lower charge weights, no change was made to the
production settings. Balmoral decided not to go ahead with
lower charge weights and the production settings remained as
they had been with DSM material.
309. Borealis had a quality control system. This involved,
amongst other things, a lamp test for each product. It also
involved (according to the July 2001 update) testing for wall
thickness of the first product made after each tool change and of
the first product of the Sunday and Tuesday night shifts during
each week that the tool was being used. This testing involved
checking by ultrasound that a minimum thickness had been
obtained at certain predetermined points on each particular
design of tank. But it did not involve destructive testing or
measurement at corner areas where the ultrasound would not
function. Nor was the test concerned with changes in thickness,
provided that the requisite minimum was achieved at the
designated
____________________
158 6/1588.
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QBD (Comm Ct)
LLOYD'S LAW REPORTS

points. Nor does it appear to have focused on areas in particular

designs where failures had been experienced. I accept Professor
Crawford's evidence that this is a valid criticism of the
procedures. Failed tanks were coming back in ever increasing
numbers, despite the quality control system. This was an
indication that that system was defective and needed
improvement, eg by destructive testing. I note that Balmoral
had been receiving complaints in 1998 and 1999 about cracked
tanks not made in borecene.159
310. MFR 6 borecene was the subject of trials in November
1998 and Balmoral was supplied with the borecene processing
guide, which explains that:
in order to achieve the desired even wall thickness in the
finished article the rapid melting of borecene compared to that
of conventional materials should be taken into account.
It recommends an increase in rotation speed and optimisation of
the rotation ratio, without both of which "uneven material
distribution can occur". At the trial in November Mr Halvorsen
of Borealis told Mr Macleod that MFR 6 borecene required
higher than normal speeds in order to distribute the material
more evenly because:
High Melt Flow materials at low speeds tend to leave more
material in pockets and flow away from peak areas because of
the very low viscosity.
Mr Macleod ran a trial increasing speeds (and altering the
rotation ratio) from 4:1 to 7:1. and the results showed an all
round improvement in wall thickness, compared with MFR 3,
of approximately 1mm. Mr Macleod's conclusions included the
following:
3.4. The higher melt flow material does result in an improved
material distribution making charge weight reductions possible
but not to the levels stated.
3.5 Higher rotational speeds are required when moulding
with ME 8161.
311. But, when borecene MFR 6 went into production in
January 2000, the rotational speeds were not increased, nor does
there appear to have been any change in the processing
parameters or any check (other than the quality control system,
with its limitations, referred to in para 309 above) to see that
appropriate wall thickness distribution was being achieved. I
accept Professor Crawford's evidence, which corresponded with
what happened in November 1998, that Balmoral could safely
have
____________________
159 See Mr Macleod's report at 8/2613 on 6 H2500 tanks manufactured in
1996/7. These had leaked - in his view because of high stresses due to their
design, overcooking, and under thick corner areas. See, also, document 18/5899
which shows that there were 41 complaints of cracked tanks in 1999, 24 in respect
of tanks manufactured between 1994 and 1996 and nine in unknown years.
684
increased speeds to around 7 rpm160 and possibly more and

could have benefited from doing so. If for some reason it could
not have done so, it would, in the light of Borealis' specific
advice, have had closely to monitor the quality of the product
manufactured using lower rotation speeds in order to determine
whether, by changing other parameters, it could achieve a
satisfactory wall thickness distribution particularly in the area
of internal protrusions. If it could not do so, it would have to
cease using the material.
312. Balmoral submit that the expression "optimisation of
processing parameters", apart from its inelegance, embraces
only a limited number of types of change, such that it is
unrealistic to attribute the failure of the tanks to a failure to
optimise and that, in any event, appropriate optimisation was
carried out, as is apparent from their moulding specification
sheets.
313. As to the former, the permutations of charge weight,
temperature, oven time, speed, speed ratio, rotation reversal,
shielding and heating, the position of the mould on the arm,
dwell time etc are, I accept, such as to enable rotomoulders, by
what may, in some cases, include an element of fine tuning to
secure a satisfactory product.
314. As to the latter the specification sheets show a change in
parameters on occasion, because on some of them figures in
respect of some entries have been crossed out and replaced by
others. What the changed entries do not explain is the reason for
or the effect of the change. There is no basis for inferring that
checks made by Balmoral picked up wall thickness variations in
corners or at protrusions or that changes were made in an
attempt to remedy those defects. The standard testing by
ultrasound did not reach these areas.
315. In January 2002 Balmoral switched to MFR 4 borecene
and to fully compounding the pigment. There is no evidence
that any process of re-optimisation in the light of the change in
material and method of pigment incorporation took place, and I
conclude that it did not.
316. In those circumstances I decline to conclude that the
rheological properties of borecene are such that it is not
practicable to use it to rotomould tanks because it is incapable
of delivering an adequate thickness of wall or an adequate wall
thickness distribution. On the contrary Balmoral, as it seems to
me, failed to take the necessary steps to optimise their
processing parameters and monitor the quality of their
production, particularly in what it should have recognised as
problem areas, such as corners, edges and protrusions, where
there were stress
____________________
160 I note that one of the specification sheets - for a septic tank - originally had
a rotation speed of 6; 32/1072. So does one (unchanged) for "Turret B"':
32/10767.
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LLOYD'S LAW REPORTS

hotspots and a likelihood of unsatisfactory wall thickness

distribution.
Significance of the pattern of failure
317. I regard my conclusions on ESCR and rheological
properties as reinforced by, and at any rate consistent with, the
fact that certain of Balmoral's designs have failed to a markedly
greater extent than others,161 that, in general failure has occurred
at specific locations in respect of each design, regardless of
material, and that stress hotspots were often coincident with
areas of failure. I do not regard these latter considerations as
conclusive. It is possible to postulate a material so defective that
it cannot, practically speaking, be used to make oil tanks,
whatever design or process is used, so that tanks made from it,
despite perfectly satisfactory processing, fail, not wholly
surprisingly, at high stress points. But in the light of all the
evidence I regard this as an unlikely explanation.
318. I prefer the simpler explanation that the tanks failed
because, partly as a result of their design, they were subject to
stresses for which the method of processing did not adequately
cater.162 Whether that is to be characterised as a design or a
processing fault, or both, does not matter much. Design and
processing are interacting factors. Stress hotspots thrown up by
a design can be eliminated or reduced by changes in that design
eg by providing a more generous curvature at corners or a less
severe change in sections. Alternatively they can be addressed
by a change of processing parameters to produce greater wall
thickness and better wall thickness distribution. If, whatever the
processing parameters, the stresses are so high that failure will
ensue, the fault is one of design. If they can be addressed either
by a change in design or an alteration in manufacturing
conditions the fault can be put in either category, or both. If the
change needed is a change in wall thickness, either generally or
in specific places, that could be characterised as a change of
design or one of process. Professor Crawford and Dr Clemens
thought, and I accept, that, even if there was no design change,
in the sense of a change in the geometry of the tank, tanks with
satisfactory wall thickness distribution could have been made in
borecene with appropriate rotomoulding processes.163
319. The absence of detailed design evidence from Balmoral
means that we do not know on what stress calculations
Balmoral's designs were originally assessed as adequate, and
with what safety
____________________
161 Eg the SL 1250 and the H 2500 and H 5000.
162 Or, as Professor Crawford put it: "We are getting high stresses as a result of
the shape which have not been alleviated by the processing methodology and
therefore you have got a cause by high stress": 21/42/18-1.
163 Day 21/165.
685
margin. In the early stages wall thicknesses were reduced from

a proposed 8-12mm level. Reductions in wall thickness have a
"dramatic" effect on the lifetime of a tank. The fact that there
was, with ZN material, a 2.96 per cent failure rate on average is
an indication that with some of the designs there may have been
no, or no adequate, safety factor for a product that had no
redundancy. A change to borecene without optimisation may
well have crossed the line leading to failures on a logarithmic
scale, since crack growth rates accumulate on such a scale.
Small changes in stress can produce large increases in failure
numbers.
320. If, as Balmoral submit, borecene was intrinsically
defective, I would expect to see a more widespread failure
pattern by now, in terms of the proportion of tanks
manufactured (as at 31 December 2005 over 85 per cent remain
in service), of tank types affected, and in the locations of
failure. The high incidence of failures in the SL 1250 and H
5000 designs strongly suggests a design weakness; and the fact
that only a proportion of those tanks have failed points to
inconsistencies in the manufacturing process.
321. In short I accept Professor Crawford's evidence that a
competent rotomoulder would be able to produce tanks from
borecene with acceptable wall thicknesses. Others managed to
do so, including Dr Walls, using lower charge weights, and
Clarehill.
An alternative approach?
322. I have considered whether Balmoral are entitled to a
robuster approach. They say, not without force, that they were
given to understand that borecene was an improvement on
previous ZN materials, with which they had, successfully (in
their view), been making oil tanks. They were not told that they
would have to make radical or significant changes to their
processing parameters (or designs) or a change of pigment. Nor
were they told that it would be more difficult to achieve even
wall thickness with borecene or of the risk that wall thicknesses
would reduce and variations increase to a point where ESC
would occur. So they were entitled to assume, and did assume,
that they could proceed as before, apart from any necessary
tweaking of curing time. If borecene was only suitable for
making oil tanks after an elaborate exercise to change either the
design of the tanks or the processing parameters or both, then it
was not reasonably fit for their purpose of making oil tanks
without such changes.
323. I reject this. In deciding whether a product is reasonably
suitable it is necessary to consider what
[2006] Vol. 2
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LLOYD'S LAW REPORTS

a reasonable purchaser of the product could be expected to do.

In the light of (i) Professor Crawford's evidence (and that of Dr
Clemens) as to what a rotomoulder should do, (ii) what
Balmoral did in fact do,164 I do not accept that Balmoral were
entitled to proceed on the basis that, on switching to what they
knew to be a new generation of polyethylene with different
characteristics intended to produce better performance (the
efficacy of which for them would, as they knew depend on
trials165), they could assume that borecene required no material
change of processing parameters (or designs). Nor is it
established that radical changes were needed, if by that is meant
anything outside what Professor Crawford described as "the
normal exploration of changes that would occur if you are
switching from different grades of polyethylene". The tenor of
Professor Crawford's evidence was that the alterations needed
would not have been radical. It may be that borecene called for
a tighter control of the processing operation. But that did not
make it unfit for purpose.
Intuition
324. Mr Mawrey relied on the fact that prior to changing to
borecene Balmoral had produced satisfactory tanks with ZN
material, but, when it changed to borecene, tanks produced by
substantially the same methods as before, and with the same
designs and moulds, suffered catastrophic failure. Other
companies had had similar problems. In those circumstances the
prima facie inference was that it was the material that was at
fault. Was it realistically to be supposed that several
rotomoulders had all independently got their processes (or
designs) wrong? And what exactly should they have done?
325. I do not regard these considerations as persuasive. The
fact that Balmoral made no change in their production methods
does not seem to me to count in Balmoral's favour. As to other
companies I indicated, at the pre trial review, that I did not
propose to admit some evidence then proposed to be tendered
from other companies upon the grounds that, without a full
investigation of the relevant circumstances, it would lack
sufficient probative value, and that such an investigation would
at worst
____________________
164 Eg (a) the approach adopted by Mr Hay when he was Production Manager;
(b) Dr Walls' optimisation in 1997 of processing parameters for borecene with
lower charge weights); and (c) Mr Macleod's discovery in November 1998, that
different wall thickness distributions were obtained for different plastics when the
same moulding conditions were used in the same mould and that if those
conditions were altered wall thickness distributions could be improved.
165 "In conclusion the trials are the key to going forward enabling the above
advantages to be proven": see para 46 above.
686
involve litigating their cases for the purpose of this one and, at
best would unduly prolong the trial.
326. Absent such investigation I do not derive much assistance
from the fact that other rotomoulders have suffered similar
problems; and such necessarily limited information as has come
out during the trial does not suggest that further inquiry would
have made any difference. My experience of this case indicates
to me that each user is likely to have particular distinguishing
characteristics. The only other claimant of substance in Great
Britain is DESO, which is not large, and had made very few
(about 50-60) tanks before it began to use borecene, which it
began using in 1997. They used both MFR 3 and MFR 6. Some
of its wall thicknesses were, Rapra discovered, less than 3mm at
some locations. Rapra's expert evidence in that case does not
support Balmoral's claims about the ESCR of borecene. The
two Irish companies, Carbery and Kingspan, are large
companies. In the case of Carbery, and, it may be, Kingspan the
tanks have failed in the upper regions and the crack opens up in
a form of fish mouth, suggesting a considerable residual stress.
Carbery started buying borecene in May 2001 and Kingspan in
early or mid 2002. They complain of increased failures from
late 2002 in the former case and not later than 2005 in the latter.
Clarehill had trialled tanks with borecene MFR 6 in February
1999 using a speed ratio of 8:1.4 instead of the 6:1 normally
used with Borealis' ME 8154 (ZN). In respect of a 1,200 litre
40kg tank the result of the change of ratio and adjustments to
the temperature and oven cooling time was a 40 per cent
reduction in cycle time (approx) and improved material
distribution.166 In May 2005 a representative of Clarehill
confirmed to Borealis that borecene-made tanks had been in the
field for three to four years and that Clarehill had suffered only
background failure rates and that all failures had been identified
as not being due to material issues.167 Clarehill had a failure rate
significantly lower than Balmoral's ZN failure rate - about 0.5
per cent as at 30 November 2005.168
327. It may be that, when the full facts are known and
analysed, some or all of these manufacturers will prove to have
good claims or the reverse. I do not find that the fact that they
have unresolved claims of any substantial assistance in
resolving Balmoral's claim. Lastly I do not regard as fanciful
the possibility that other rotomoulders have failed to optimise
their processing parameters on a change of material.
____________________
166 10/3215A.
167 9/9237.
168 32/10691.
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A conundrum
328. Mr Mawrey invited me in his final oral submissions to
consider the position in respect of the tanks that had not yet
failed. In respect of those tanks, all made by the same process,
there were two possibilities:
(i) All have wall thickness variations. Some fail but others do
not;
(ii) Some tanks have such variations. Others do not. It is the
tanks with wall thickness variations that fail.
If (i) is correct, what you would expect is that all or most tanks
fail, or none, since they are all of the same design, with stress
points at the same places, and are all prone to unacceptable wall
thickness variation at points of stress. The only rational
explanation for random failure is some factor other than such
variation. In the absence of some external factor this must be
the material itself. If (ii) is correct it is necessary to account for
why some tanks have acceptable variations and some do not. In
the absence of any evidence of failure by batch, the inference
must be that tanks with the same wall designs and processes are
suffering from random wall variations. If the variations are
random they are something against which Balmoral could not
guard and must be attributable to the rheological defects of the
material, which render it incapable of producing consistent wall
thicknesses.
329. I do not derive much assistance from this conundrum. It
does not, and is not designed to, provide any assistance to
Balmoral's case on ESCR. The selective ESC failure of
Balmoral's borecene-made tanks predicates a cause or causes
which apply to some tanks but not others. If the cause is an
inherent characteristic of the material, such as very poor ESCR,
the proposition meets the difficulty that the mechanical
properties of a material are a constant. If all the material had
this defect, borecenes could be expected to have a very
widespread failure.
330. I have no difficulty in accepting that all tanks are likely to
have wall thickness variations and that the extent to which any
particular tank does have such variations and fails on that
account depends on (a) the extent and location of those
variations; (b) the pattern of stresses actually imposed on the
tank in question over its service life; and (c) the age of the tank.
Items (a) and (b) will differ for every tank and item (c) for most
of them. As to (a), even though the processing parameters may
be or purport to be the same, the precise thickness and
composition of the polymer at different points will differ not
only from batch to batch but from tank to tank. Further there
may be minor,
687
but important changes or adjustments in those parameters, eg in

shot weight actually put in, temperature, and timing as between
one tank and another. As to (b) the extent to which a particular
tank is kept filled, or exposed to sunlight, (and therefore the
extent and location of the stresses imposed), will differ from
user to user. As to (c) Mr Clements has himself pointed out that
"nearly identical products under nearly identical service
conditions will exhibit a range of durability that is rarely less
than a factor of 5".169 In those circumstances I see no reason to
infer that the cause of the failure must be a rheological defect of
random effect.
331. Lastly, Balmoral place reliance upon the fact that failure
rates increased when borecene MFR6 was used - a circumstance
which they submit points towards the material being the cause
of (increased) failure. Miss Hassell's statistics of borecene
failures down to 31 March 2005 (see JS page 42) are as follows:
Fuel
Volume
Failures
Failures
per grade
as a
percentage
of volume
per grade
MFR 3
34,565
2,121
6.1 per cent
MFR 6
21,717
3,529
16.2 per
cent
MFR 4
6,055
265
4.4 per cent
62,337
5,918
Mr Jensen's 31 December figures have increased failures and

failure rates: 20 per cent in the case of MFR 6.
332. In the light of the evidence I do not regard the fact that
there was a greater degree of failure with MFR 6 as establishing
the deficiency of borecene. It seems to me equally consistent
with the fact that failure to optimise production had more
serious consequences with the less viscous MFR 6 than it did
with MFR 3 and MFR 4.
Misrepresentation
333. In the light of my conclusion on fitness for purpose, the
question of misrepresentation does not arise, since, in that
event, Balmoral does not advance a separate case in
misrepresentation. The dispute between the parties as to the
contractual
____________________
169 Rapra second report para 4.5 quoting Wright "The Failure of Rubber and
Plastics Products", page 12.
[2006] Vol. 2
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LLOYD'S LAW REPORTS

position is immaterial. But, since this case may go further, and

since the contractual issue has been the subject of extensive
evidence and submission, I set out my conclusions on it below.
Ter
m
Bore
alis
UK
Bore
alis
Gene
ral
ICO
DSM
Resin
Expr
ess
Ultra
poly
mer
Com
plia
nce
with
spec
ifica
tion
incl
ude
d
Yes
No
No
Yes
Comp
liance
with
descri
ption
or
sampl
e
Yes
(withi
n
accep
ted
tolera
nce
levels
)
Satis
fact
ory
qual
ity
excl
ude
d
Yes
No
No
Yes
Yes
Fitn
ess
for
purp
ose
excl
ude
d
Yes
Yes,
Yes
unless
purpo
se
appro
ved
by
Borea
lis in
writin
g
Yes
Yes
Yes
Limi
t to
pric
e or
repl
ace
men
t
Yes
Yes
Yes
No
No

Do any standard terms apply and, if so, whose?
334. In the period between 1994 and mid 2002 Balmoral made
nearly 400 purchases of polyethylene from one Borealis entity
or another, in respect of which Borealis rendered invoices with
their standard terms either on the back, or as one of the pages,
of the invoice. From December 1995 Balmoral's purchase
orders referred to Balmoral's terms.
335. Balmoral's terms contained the following condition:
8.1.1. It shall be a material condition of the contract and the
Seller shall warrant that the Goods. . . will be of satisfactory
quality and fit for the purpose held out by the Seller or made
known to the Seller in Writing at the time the purchase order is
placed.
Use of standard terms in the industry
336. There are no customary terms in the polymer trade in the
United Kingdom in the sense of terms which are so "certain,
notorious and reasonable" that anyone purchasing polymer must
be taken to have contracted on those terms, unless expressly
excluded or otherwise expressly agreed. But suppliers of
polymer in the UK habitually seek to sell on their standard
terms and conditions. I use the expression "seek to sell" because
the fact that suppliers have standard terms does not mean that
they are always successful in incorporating them. In many cases
those terms exclude one or other, or both, of the warranties of
satisfactory quality and fitness for purpose, particularly the
latter, and limit liability to replacement of defective goods or
repayment of the purchase price. But suppliers' terms differ.
Borealis UK's terms excluded both warranties. Borealis'
General Terms only excluded the latter, but allowed for a
warranty of fitness if Borealis had approved such purpose in
writing (which Borealis UK's terms did not). Both had the limit
of liability to which I have referred.
337. Borealis have put in evidence the standard terms of five
polymer suppliers, in addition to their own, which, whilst they
exhibit similarities, also display differences only some of which
appear in the following table:
688
Limi
t to
pric
e
Limi
t to
repl
ace
men
t
No
Yes
Yes
Yes
Matrix's terms appear170 to limit its obligation to ensuring that

the goods comply with specification and provides an obligation
to repair or replace or give a credit note for non conforming
goods. They also provide for a restriction of liability to (i) 1
million for (a) damage to tangible property and (b) any other
loss or damage caused directly by the seller's negligence and (ii)
125 per cent of the purchase price for any other category of
loss. In addition Mr Cartwright's evidence, which I accept, is
that most polymer suppliers sell on terms which give no
warranties as to the appropriateness of the material for any
specific uses and limit liability to, at most, replacement of the
resin or repayment of the price.
Balmoral's knowledge
338. Mr Joyce was aware that raw material suppliers did not
give fitness for purpose warranties in respect of polymer. 171
The parties' submissions on the terms of the contract
Balmoral
339. In the present case Mr Mawrey submits that there were,
in effect, two parallel universes: the "real world" in which the
parties moved and had their being, and an artificial world
created for them by their lawyers when, but only when a dispute
arose. In the real world, as he submits, none of the
____________________
170 Their print is so small as to render them practically indecipherable.
171 Day 3/75/15.
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individuals who were doing business with each other on behalf

of Balmoral and Borealis paid any attention to the terms and
conditions that the lawyers had drafted for them. Balmoral's
terms were adverted to in the bottom left hand corner of its
purchase orders, but were never otherwise referred to nor
provided to Borealis. Borealis' terms appeared on the back of
their invoices but were never discussed, either when complaints
were made about blooming and warping, or when compensation
was agreed, or when the dispute about the suitability of
borecene arose. It was only when the lawyers came on the scene
that the parties were transposed to an artificial world where
reliance was placed on standard terms and a supposed change in
contractual party (on two occasions) that the claimant is said to
be taken to have accepted, but never did.
340. The court, in his submission, should prefer the real to the
artificial universe and hold that neither party agreed to contract
on the other's standard terms. Alternatively, if the question has
to be determined by a conventional application of the concepts
of offer and acceptance, Borealis' terms were never
incorporated. Although it is true that Borealis' terms were set
out on the back of its invoices, all of these invoices post-dated
the making of the contract and did not form part of the
documentation constituting the subsequent one.
341. Mr Wood's evidence172 as to the course of business, which
I accept, was that, when an order was received, someone at
Borealis UK in Wilmslow, after checking that the price on the
order was the same as appeared on a price list that Mr Wood
had given them, would check with the supplying plant that
delivery could be made. If so, someone at Borealis would
confirm the order (probably by telephone) to someone at
Balmoral. Delivery would take place and within a couple of
days Balmoral would be invoiced.
342. Accordingly, so Mr Mawrey submits, the offer was
constituted by the purchase order, which was accepted either by
the verbal confirmation of the order or by delivery of the goods.
The invoice with the terms on the back came after each contract
was made. That was not a counter offer. It was a claim for
payment under the contract that had just been performed. Its
dispatch at that stage did not alter the terms of contract already
made, or those of the next contract, either on the first or any of
the subsequent occasions, however many times the sequence
was repeated.
343. There was, he further submits, no relevant course of
dealing prior to 1997 when borecene was first purchased.
Balmoral's purchases pre-1997 were too few in number to
constitute a course of
____________________
172 11/156/19-158/16.
689
dealing applicable to the dealing in borecene of a much greater

order of magnitude that began in 1997. The inchoate
negotiations for the Industrial Supply Agreement, although
leading to no concluded agreement, signified to Borealis that its
standard terms were not acceptable to Balmoral and precluded
any inference that Balmoral accepted those terms.
344. Nothing changed in 1999 or 2001. The commercial
contacts continued as before. Balmoral did not accept Borealis'
General Terms and Conditions any more than it had accepted
those of Borealis UK. If Borealis' conditions were not
incorporated by being put on the back of invoices in 1997 and
1998, no more were they incorporated by this means in 1999,
2000, or 2001. As the letter of 3 November 2000 put it "Our
commercial, day-to-day contact is not affected by this change in
invoicing".
345. Nor would the letters of November and December 1998
or November 2000 have signified to someone in Balmoral's
position that there was a change of contracting party, as
opposed to a change of the invoicing and mode of payment
arrangements relevant only for Borealis' internal purposes.
Borealis
The terms
346. Borealis contend that Borealis' standard terms (first
Borealis UK's and then Borealis' General Terms and
Conditions) were incorporated into all its contracts with
Balmoral. In Mr David Allen's submission that incorporation
was achieved by the following means:
(a) in respect of the first contract in December 1994, under
the principle enunciated by Lord Denning in British Crane
Hire Corporation Ltd v Ipswich Plant Hire Ltd [1975] QB 303
at 310/1:
The defendants themselves knew that firms in the planthiring trade always imposed conditions in regard to the hiring
of plant; and that their conditions were on much the same
lines. . . It is clear that both parties knew quite well that
conditions were habitually imposed by the suppliers of these
machines, and both parties knew the substance of those
conditions. . . In these circumstances I think the conditions
on the form should be regarded as incorporated into the
contract. I would not put it so much on the course of dealing
but rather on the common understanding which is to be
derived from the conduct of the parties, namely that the
hiring was to be on the terms of the plaintiffs' usual
conditions.
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(b) in 1995, by virtue of Borealis' quote of 18 January 1995

where the prices were quoted subject to Borealis' terms and
conditions;
(c) the position did not change in December 1995, when a
reference first appeared on Balmoral's purchase order to
Balmoral's terms. That reference was inadequate to effect a
change from Borealis' terms to those of Balmoral;
(d) the first order of borecene by telephone in April 1997
was, in the light of what had happened in the case of the
previous seven orders, on Borealis' terms. So were all the
others in 1997 and 1998, each repetitive sending of an invoice
without demur reinforcing the applicability of those terms;
(e) the express notification by Borealis of new terms in
November and December 1998, and in November 2000,
without objection on the part of Balmoral and with continued
payment of the invoices, confirmed the position; as did the
January 2000 and 2001 rebate agreements, whether or not
Balmoral signed the former, together with the agreement on 12
March 2002 to continue the 2001 rebate agreement for 2002.
347. Until January 1999, he submits, the contracting party was
Borealis UK. In 1999 and 2000 it was the producing company,
being Borealis Norway in the case of borecene and Borealis
Sweden in the case of ZN material.
Discussion
348. Whether or not one party's standard terms are
incorporated depends on whether that which each party says
and does is such as to lead a reasonable person in their position
to believe that those terms were to govern their legal relations.
The court has to determine what each party was reasonably
entitled to conclude from the acts and words of the other:
McCutcheon v David Macbrayne Ltd [1964] 1 WLR 125, 128;
Kendall & Sons v Lillico & Sons [1969] 2 AC 31; Hollier v
Rambler Motors (AMC Ltd) [1972] 2 QB 71. The question is
one of fact to which prior authority may form an uncertain
guide.
The authorities
349. Borealis relied on the Kendall case, supra. There the
seller issued the buyer with a "sold note" shortly after each
contract had been concluded. Nevertheless by the time of the
transaction in question the terms in the sold notes were held to
be incorporated in the contract. The trial judge had found that
the conditions of sale were not incorporated. The Court of
Appeal reversed the judge on this point, and the House of Lords
agreed. In the Court of Appeal Diplock LJ, as he then was, said
this:
690
Where, as in the case of the contract between SAPPA and

Grimsdale, the parties have not agreed to embody their
contract in a written document but have entered into an oral
contract with the intention of thereby creating legal rights and
liabilities and it is sought to rely upon a term contained in
some written document as modifying their respective rights
and liabilities which would arise by implication of law from
the nature of the contract, the only question is whether each
party has led the other reasonably to believe that he intended
that the rights and liabilities towards one another which would
otherwise arise by implication of law from the nature of the
contract, namely a contract for the sale of goods, should be
modified in the manner specified in the written document.
Upon the facts found by the judge the issue by Grimsdale of
sold-notes containing "Conditions of sale" in respect of all
previous sales to SAPPA should have led SAPPA reasonably to
believe that Grimsdale were only willing to agree to sell goods
to SAPPA upon the terms set out in the "Conditions of sale".
The conduct of SAPPA in accepting such sold notes in
previous transactions as recording the sale without making any
comment, query or objection about the "Conditions of sale"
was conduct which would lead Grimsdale reasonably to
believe that SAPPA intended to enter into a contract upon
these terms. Whether Golden had ever read the conditions or
what he thought SAPPA's rights or liabilities under the
contract would be is immaterial.
350. In SIAT v Tradax Overseas SA [1978] 2 Lloyd's Rep. 470
Donaldson J, as he then was, observed that Diplock LJ meant:
that the words and conduct of Party A had to be considered
with a view to what Party B, as a reasonable man, could and
would, if he had applied his mind to the point, have been led to
believe.
351. In Circle Freight International Ltd v Medeast Gulf
Exports Ltd [1988] 2 Lloyd's Rep. 427 exporters of dresses to
the Middle East sued their forwarding agents, whose employee
has negligently left the plaintiff's van unattended in Fleet Street
as a result of which the dresses had been stolen. The forwarders
relied on their conditions, which excluded liability save in the
case of wilful default and contained a limitation of liability. The
conditions were printed on the back of the invoices, eleven of
which had been sent for consignments that pre-dated the loss.
The judge held that the conditions were not incorporated.
352. The Court of Appeal held that they were. Two relevant
tests were identified, the first of which
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may, perhaps, be regarded as part of the second: (a) whether

reasonable notice had been given of the forwarder's conditions
and (b) what had each party by his words and conduct led the
other party reasonably to believe him to be accepting. It was not
necessary that the terms relied on should be specifically set out,
provided they were conditions in common form or usual terms
in the relevant business, nor was it necessary that they should
be contained in a contractual document. The parties were
commercial companies. There had been 11 invoices which gave
notice that business was conducted on IFF terms. The exporter's
managing director knew that forwarding agents might impose
terms which would frequently be standard terms and would
sometimes deal with risk. Accordingly reasonable notice was
given by the forwarders and the exporters' conduct would have
led the forwarders reasonably to believe that their terms were
accepted.
353. In Albright & Wilson UK Ltd v Biachem Ltd [2001] 2 All
ER 537 the claimants ordered two different chemicals from two
different suppliers who instructed the same company to deliver
them. The driver of one consignment, by some mistake,
presented the delivery note relating to the other. As a result his
cargo was discharged into tanks containing the other product
and a large explosion occurred. One of the issues was whether,
in relation to one of the contracts, the standard terms of either
party was incorporated. The order in question was the fifth in a
series. The first order had been preceded by a quotation which
was subject to the supplier's terms and conditions of sale. After
that the purchaser faxed a "blanket" order which stipulated that
supply should be subject to the purchaser's conditions. The
order was confirmed by telephone. Delivery took place. The
supplier then sent an invoice with his terms on the back. There
were then four telephone orders which were followed by a
standard form purchase order which called for supply on the
purchaser's terms and conditions. In each case an invoice with
the supplier's terms was sent after delivery.
354. Eady J held (a) that the supplier's quotation had become
largely historical by September 1996 and could be regarded as
an invitation to treat or, if an offer, matched by a counter-offer
in the subsequent order; (b) that a reasonable onlooker would
determine that the contracts were governed by the purchaser's
conditions; (c) that an invoice subsequent to the contracts could
not affect its terms and (d) that the fact that there had been
several such invoices did not change the nature of the
transactions. The invoice was too late to make a difference in
every case. The Court of Appeal agreed. Circle Freight was not
cited.
691
355. Similarly in Continental Tyre & Rubber Co Ltd v Trunk

Trailer Ltd 1987 SLT 58 manufacturers of trailers ordered a
quantity of tyres from a tyre supplier on their printed purchase
order which purported to incorporate their conditions of
purchase. The sellers claimed that their terms applied because
when the first batch of tyres was delivered one of the
purchasers' employees signed a delivery note with the words
"All offers and sales are subject to the [seller's] current terms
and conditions, a copy of which will be supplied on request".
The Inner House of the Court of Session rejected this
contention on the basis that the contract was complete as soon
as the first batch of tyres was delivered. The signature of the
purchaser's employee on the delivery note had no contractual
effect; it was not a contractual document and was only required
for the purpose of confirming the quantity and description of
the goods delivered.
356. These cases show two things. Firstly, at any rate where
parties have dealt with each other more than once or twice, it
may not be critical to the incorporation of standard terms that
those terms be set out in a contractual document, ie one that
itself constitutes an offer or its acceptance, or even in a
purported record of the contract, nor that the document
containing the terms relied on has preceded the making of every
contract. Secondly, the sequence of events is important. An
invoice following a concluded contract effected by a clear offer
on standard terms which are accepted, even if only by delivery,
will or may be too late. But, if there has been no reference to
rival terms, the appearance of terms on the back of every
invoice and the acceptance of delivery of goods without
objection may indicate acceptance of the terms.
Conclusion
357. I am not persuaded that when Balmoral first contracted to
purchase polyethylene from Borealis in December 1994 the
common understanding between them was that the purchase
was on Borealis' terms and condition. In British Crane Hire
both parties were crane hirers. They each hired out cranes on
similar conditions. The defendants had signed and sent back the
plaintiff's conditions twice before; and would have done so
again if the accident had not happened. In December 2004
Balmoral had not purchased material from Borealis before; nor
had they ever signed or sent back Borealis' conditions; nor, so
far as the evidence shows, had they received a copy of those
conditions when they sent their purchase order or took delivery.
In those circumstances I do not think that Borealis was entitled
to conclude that Balmoral had agreed to their terms.
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358. But by the fax of 18 January 1995 Borealis made it plain

that its prices were quoted "subject to normal terms and to
current conditions of sale" and Balmoral had received an
invoice with Borealis' terms on the back. By putting its terms on
the back of their invoices Borealis indicated to Balmoral that, so
far as Borealis were concerned, they intended the contract to be
on those terms: see clause 2 cited at para 30 above. Those
invoices were seen and initialled by Mr Joyce, the Managing
Director of Balmoral's rotomoulding division. He realised that
there were terms on the back of the invoices. He reviewed them
but did not study them.173 Balmoral thereafter purchased
material at the quoted prices with knowledge of Borealis'
conditions without ever suggesting that they were not
applicable. Borealis did not know that each invoice in respect of
borecene was initialled by Mr Joyce before payment. But they
did know that they were received and paid without demur. A
reasonable person in their position would be entitled to assume,
as was the fact, that someone at Balmoral had considered
whether or not to pay the invoice and had seen the conditions
on the back.
359. In those circumstances Borealis was, in my judgment,
reasonably entitled to assume that Balmoral accepted the
applicability of the conditions subject to which the price had
been quoted. If Balmoral wanted to pay the price quoted
without accepting the terms, it was incumbent on it to say so.
360. Mr Mawrey submitted that the prices quoted were
determined by market and trade conditions (the cost of polymer,
prices charged by competitors, the size of the order, etc) and
were not dependent on acceptance of Borealis' terms. Prices
were agreed in negotiation between Balmoral and Borealis and,
absent an express acceptance of Borealis' terms, the fax of 18
January 1995 did not make those terms applicable.
361. Even if the first half of the submission is correct, the
second is not. Firstly, Borealis would probably not have been
prepared to supply its product at the price quoted or any price, if
its terms were not, as it believed, accepted. Secondly, the effect
of the fax was to make clear that the quoted price was
contractually dependent on acceptance of the terms. In any
event it seems to me unrealistic to suppose that the prices
quoted would not differ at all if Borealis could not, as it
believed, rely on its own terms. Borealis has insurance in
respect of the claims the subject of these proceedings. If
Borealis had no terms and conditions the cost of that insurance
is likely to have been greater than it was and to be reflected in
the price. Even if that were not so, exposure to liability for
fitness for purpose
____________________
173 Day 3/80.
692
would be likely to impel Borealis to take measures to reduce

their exposure (eg by examining in detail the uses, designs,
processing parameters, terms of sale and the like applicable to
each particular customer) which would themselves impact on
the price.
362. Mr Mawrey also submits that the number of orders prior
to the deliveries of borecene was too small to amount to a
course of dealing, and that the supplies that constituted any
putative course of dealing were "as different as can be imagined
from the borecene supplies of 1997 onwards". I accept that, if a
contract has been made for the supply of a relatively small
quantity of product on one set of terms on only a few occasions,
it may, depending on the precise circumstances, be difficult to
establish that later contracts for large quantities of a different
product are also made on those terms. But, here, at the
beginning of the trading relationship Borealis made plain that
its prices were quoted, and it was only willing to supply, on the
basis of Borealis UK's terms.
363. The quote of 18 January 1995 was swiftly followed by an
order for 60 tonnes and the payment of Borealis' invoices
without comment, query or objection. That signified to
someone in Borealis' position acceptance by Balmoral of the
applicability of those conditions. Thereafter Borealis gave
further quotes for material.
364. Thus, when on 6 December 1995 Balmoral faxed another
order which contained a reference to its terms and conditions, it
did so in circumstances where Borealis had supplied material
and given quotes for future supply, to which, as Borealis was
entitled to assume, Borealis UK's terms and conditions applied.
The order of December 1995 was, in my judgment insufficient
to reverse the previous position and to signify (much less to
secure agreement) that Balmoral's terms were now to apply
instead. Balmoral said nothing about any change in terms. It did
not say that Balmoral was going to treat Borealis' quotes as no
longer linked to Borealis' conditions. Balmoral did not provide
a copy of its conditions then or thereafter, nor, apart from the
stamp on the order form, make any reference thereto.
365. In those circumstances I do not regard the reference in
poor typescript at the bottom of Balmoral's purchase orders as
reasonable notice that Balmoral proposed to contract only on
Balmoral's terms in place of those of Borealis. A supplier in
Borealis' position would be entitled to expect that, if Balmoral
was seeking to reverse the previous position, it would make
explicit reference to the fact that it was proposing a change. A
buyer in Balmoral's position would not be entitled reasonably to
assume that Balmoral had agreed to its
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conditions because of the stamp that now appeared on its

purchase order or because Borealis did not comment on it.
366. Borealis UK made further supplies of ZN material and
then in April 1997 started supplying borecene. For each order it
supplied an invoice setting out its terms and conditions, and
these were paid, after checking, without demur. This sequence
of events served to confirm the acceptance of Borealis UK's
conditions.
367. I turn to consider the position if, contrary to my view,
Balmoral's conditions are applicable. The terms, it will be
recalled, provided that:
2.0. BASIS OF PURCHASE
2.1 The purchase order constitutes an offer by the Buyer to
purchase Goods and/or acquire the services subject to these
conditions
2.2 . . .
2.3 The purchase order will lapse unless unconditionally
accepted by the Seller in Writing within 14 days of its date.
The question therefore arises as to whether clause 2.3 was
intended to prescribe a mode of acceptance so that the only
means by which the offer contained in the purchase order could
be accepted was by the seller unconditionally accepting it in
writing. I do not think that the clause should be so construed.
The effect of clause 2.3 is that the purchase order ceases to be
available for acceptance if it has not been accepted in writing
within 14 days. It does not, however, provide that the only way
in which an acceptance is possible is in writing. The contracts
between Balmoral and Borealis were, as it seems to me, made
when Borealis, having discovered that the producing company
could deliver, orally confirmed Balmoral's order. Although the
evidence is unspecific, I infer that this would probably have
occurred within the 14-day period. Accordingly, on this
hypothesis, there would have been an acceptance of Balmoral's
order, on its terms, when the confirmation was given.
The Industrial Supply Agreement
368. I do not regard the brief and inconsequential negotiations
for the Industrial Supply Agreement as leading to a different
conclusion. Those negotiations did not address the question of
the terms upon which the parties were currently trading. 174
Balmoral sought the inclusion of a warranty and the exclusion
of a limitation, which would be consistent with their standard
terms (never shown to Borealis) and inconsistent with those of
Borealis. Negotiations for an overarching agreement petered
____________________
174 Mr Byth's observation "If all else fails, I guess we would have them at
common law if they provided us with defective material" appears to indicate that,
within Balmoral, the question of what were the existing terms of trade had not
been considered in any depth.
693
out in circumstances where Borealis did not accept changes

which would have been inconsistent with their standard terms. I
do not accept that, in those circumstances, the parties are to be
taken to have agreed that neither of their terms should be
applicable, nor that those of Balmoral should apply.
369. The case of Britvic Soft Drinks Ltd v Messer UK Ltd
[2002] 1 Lloyd's Rep. 20 is distinguishable. In that the case the
parties had been contracting on the basis of terms contained in a
written agreement which was due to expire. Before that expiry
negotiations took place at management level as to the terms
upon which the parties' commercial relationship should
continue after the expiry of the agreement. Although agreement
was reached as to prices, no agreement was reached as to the
other terms prior to the expiry of the agreement. Tomlinson J
held that after the expiry of the agreement neither party's terms
and conditions applied. In circumstances where there were
management discussions as to the terms that were to apply he
declined to hold that different contractual terms had been
agreed either as a result of delivery notes incorporating standard
terms which were handed by Messer to Britvic employees, and
signed by them, or as a result of financial staff observing (if
they did) those terms on the reverse side of the invoices they
were required to process. Accordingly the contractual vacuum
was filled by the terms implied by section 14 of the Sale of
Goods Act 1979.
370. In the present case there was no agreement whose expiry
created a vacuum that the parties were negotiating to fulfil. The
parties were contemplating making an overarching agreement.
Balmoral hoped for, but failed to secure, agreement to terms
which would represent a change from the terms on which they
were currently doing business.
371. Nor do I derive assistance from the fact that Borealis
settled claims by Balmoral without reference to its terms.
Settlement of a claim on a commercial basis, without reference
to applicable terms and conditions, is a not infrequent
occurrence, although the fact that exclusionary terms are not
relied on when they could be may bear upon their
reasonableness for the purposes of the Unfair Contract Terms
Act 1977.
1999-2000
372. The letter of November 1998 explained that there was to
be:
a change from the reinvoicing principle through the local
sales company to direct invoicing by the delivering production
unit.
Borealis' terms and conditions were to be harmonised so that:
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irrespective of the source of delivery you will deal with a

commercial partner who applies unified conditions with
respect to commercial, insurance and legal matters.
373. The letter of December 1998 explained that:
Your local Borealis Sales Office will print and dispatch the
invoices in the name of the supplying Borealis plant and
continue to offer assistance on any issues relating to payment.
Invoicing from different sites instead of invoicing through one
local sales company necessitates your maintaining different
supplier files. The creation of one bank account reference for
all the Borealis sites will, however, soften the additional
administrative effort. The planned second stage of the project
will enable central invoicing, independent of local Sales
Offices . . .
374. These letters were drafted by Mr Jan Lindh, the General
Manager of BCC, who gave evidence, and members of a
committee of which he was the Chairman. Although some of
their language betrays the fact that they were written by persons
whose first language was not English, 175 their content appears to
me to be clear enough, even though they are couched in
wording that presents an important change of contractual
partner and terms as a service improvement. Whereas
previously the delivering production unit would invoice the
local sales company which would re-invoice the customer, from
now on that unit was to invoice direct. That would require
customers to maintain different files, because they would be
dealing with different suppliers. But that additional
administrative burden would be lessened by the fact that,
whoever was the supplier, the payment would go to the same
bank account.
375. These letters cannot, in my view, be treated as nothing
more than an indication that, for purposes internal to Borealis,
the mechanics of invoicing would change, but the contractual
position would not. Their natural meaning is that there was to
be a change from the previous position, where the supplier
contracted with the sales office, which contracted with and
therefore re-invoiced the customer, to one where the supplier to
the customer was to be the producing company - hence the need
for different supplier files. It was equally apparent from the
letter of November 1998 that there was to be a change of terms
("You will find the revised document attached"). As Mr Joyce
said in evidence "that is what it says".176
376. Balmoral's acceptance of these new arrangements as to
contracting party and terms is
____________________
175 English was the language in which the letters were drafted. They are not
translations.
176 Day 3/89/4.
694
apparent from the fact (a) that it raised no objection to the

proposals set out in the two letters; (b) that it ceased to address
its orders to Borealis UK but addressed them to Borealis
Coordination Center NV; (c) that it made payment to Citibank
conformable to the attachment referred to in para 94 against
invoices which, by their contents, indicated a change of supplier
and a new set of terms and which described Borealis UK as a
commercial agent.
377. It is noticeable that Balmoral did not at this stage, or in
2000/1, suggest that its terms were in any way relevant, a
circumstance which confirms me in the view I have reached as
to the applicability of Borealis UK's terms prior to 1999.
378. As appears from para 104 above I conclude that Mr Joyce
probably did sign and return the February 2000 rebate
agreement, which included an agreement to Borealis' terms.
Even if I am wrong on that it seems to me that, in circumstances
where Borealis' conditions had applied throughout 1999, the
failure of Balmoral to object to the term in the rebate letter to
the effect that they should continue to apply, and their claim to
the 2000 rebate without objection, would have further conveyed
to someone in Borealis' position that Balmoral agreed to the
application of Borealis UK's terms.
379. I do not accept that there is any difficulty in concluding
that from 1999 onwards the contracting party was Borealis
Norway in respect of borecene and Borealis Sweden in respect
of ZN either on account of (a) the wording of the preamble to
Borealis' General Conditions; (b) the reference on the second
page to the invoice to endorsement to Borealis Coordination
Center; or (c) because of the difficulty of knowing who would
have been liable if Borealis UK had accepted an order, and then
lost it without having contacted the Borealis supplier.
380. As to (a) the preamble referred to the products as being
sold "by the Borealis entity given in the front page". There are
at least two177 entities on the front page: the entity which is
invoicing ("Invoiced by") and the Sales Office or Commercial
Agent. In the light of the explanation given in the letters of
November and December 1998 and the use of the words
"INVOICED BY" it seems to me clear that it is the invoicing
party which is the entity that is to be the seller. After Borealis
UK was expressly described as Commercial Agent the position
was even clearer. The terms themselves make clear that there is
only one entity which is selling.
381. As to (b) the reference to the invoice having been
endorsed to Borealis Coordination Center and as solely payable
to that entity may constitute (as I
____________________
177 On occasion three: see Inv 3 1356 which has a reference to Borealis
Financial Services Ltd or document 18/5914 which has a reference to Borealis
Belgium.
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695
think it does) a notice of assignment of the debt, 178 or simply as

a direction to pay the Center at its bankers, (a question properly
to be determined under the law of Norway or Sweden). 179 Either
way it is consistent with the invoicer being the contracting
party.
382. As to (c), the question does not arise on the facts of this
case but, if it did, I should have thought that the contract was
apparently made with Borealis Sweden if the order was for ZN,
and Borealis Norway if it was for borecene, since the former
did not supply borecene and the latter did not supply ZN. If
Borealis UK had no actual authority to confirm an order for
borecene without contact with the producing company it would
have had apparent authority so to do. If not, Balmoral UK
would be liable for breach of an implied warranty of such
authority.
was already the case. Even if I am wrong on that Borealis was

entitled to conclude from the fact (a) that Mr Forbes had signed
the original version of the agreement; and (b) that Balmoral had
not demurred when Borealis sent a typed up copy signed by Mr
Webster but had continued to order goods, and ultimately to
claim the rebate, that Balmoral assented to the applicability of
those terms.
386. Applying an objective test I conclude that Borealis'
standard terms (first those of Borealis UK and then the Borealis
General Conditions) applied throughout. The application of
such a test may produce a result inconsistent with one party's
subjective belief (or lack of one) but that does not mean, and I
do not accept, that the result is thereby artificial.
Agency
The Borealis UK terms
383. The language of the letters of November and December

1998 and the changes brought about thereby showed that the
producing company was to be the principal, which would
invoice Balmoral the price, and that Borealis UK was to act as
agent. Borealis UK was, by the letter of November 1998, to be
the contact for commercial issues, but noticeably not, as
previously, the recipient of payment. The local Borealis sales
office was, according to the letter of 11 December 1998, to
"print and dispatch the invoices in the name of the supplying
Borealis plant" ie on its behalf. From 29 April 1999 Borealis
UK was described on the invoice as "Commercial Agent".
387. The Borealis UK terms provide, so far as relevant as

follows:
13. WARRANTY AND EXCLUSION
(A) The Seller warrants that the Goods will comply with
Seller's standard specification for the Goods at the date of the
contract. If any of the Goods do not conform to that warranty
the Seller will at its option:
(i) replace the Goods found not to conform to the warranty;
or
(ii) take such steps as the Seller deems necessary to make
the Goods conform to the warranty or
(iii) take back those Goods found not to conform to the
warranty and refund that part of the purchase price paid in
respect of the Goods
Provided that performance of one of the above options (as
limited by sub-clause E) below) shall constitute an entire
discharge of the Seller's liability under this warranty.
(B) The foregoing warranty is conditional upon
(a) the Buyer giving written notice to the Seller of the
alleged defect in the Goods such notice to be received by the
Seller within seven days of the time when the Buyer
discovers or ought to have discovered the defect and in any
event within one year of the delivery of the Goods
(b) the Buyer affording the Seller a reasonable opportunity
to inspect the Goods and if so requested by the Seller
returning the allegedly
2001-2002
384. The letter of 3 November 2000 informed Mr Joyce of the
proposed change for 2001 onwards, namely that all material
would be invoiced by Borealis Denmark and that in the future
Balmoral would deal with only one supplier viz Borealis
Denmark. Balmoral did not demur to that. Balmoral also made
payment to the AMRO account (after a period of continuing to
pay Citibank). Balmoral thereby accepted the new contracting
party and the continued applicability of Balmoral's general
conditions.
385. On 17 January 2001 Mr Forbes signed the 2001 rebate
agreement, incorporating Borealis' terms, containing a
manuscript amendment that Mr Wood had initialled. That
constituted, in my judgment, an agreement that those terms
applied - as
____________________
178 Mr Lindh told me, I am sure correctly, that there was an agreement whereby
the production companies assigned the right to receive the price to Borealis
Belgium; but I have not seen it.
179 By clause 8 the General Terms are governed by the law of the country
where Borealis is domiciled. By virtue of the preamble "Borealis" means "the
Borealis entity given in the front page".
The effect of the standard terms
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defective Goods to the Seller's works carriage pre-paid for

inspection to take place there and
(c) the Buyer making no further use of the Goods that are
alleged to be defective after the date at which the Buyer
discovers or ought to have discovered that they are defective
(d) the defective goods have been used, stored and
maintained in accordance with general practice and the
Goods not having been altered or repaired by any person
other than the Seller or those authorised by the Seller
(e) the Seller being satisfied that the defect in the Goods
was due to its defective workmanship or use of defective
materials and without prejudice to the foregoing the Seller
shall be under no liability for defects due to wear and tear or
neglect or use of the Goods for any purposes other than those
for which they are supplied
(f) the defective Goods not having been sold, let, hired or
otherwise disposed of by the Buyer to a second or subsequent
purchaser.
(C) Save as provided in sub-clause (A) hereof
(i) All conditions and warranties whether express or implied
by statute, common law or otherwise howsoever, as to the
quality or fitness for any purpose of the goods or their
correspondence with description are hereby expressly
excluded to the fullest extent permitted by law, and
(ii) the Seller shall be under no liability for any loss or
damage (whether direct, indirect or consequential)
howsoever arising which may be suffered by the Buyer by
reason of any defect of whatsoever kind in the goods.
(D) Without prejudice to the generality of sub-clause (C)
above all recommendations and advice given by or on behalf
of the seller to the Buyer as to the methods of storing,
applying or using the Goods, the purposes to which the Goods
may be applied and the suitability of using the Goods in any
manufacturing process or in conjunction with any other
materials are given without liability on the part of the Seller its
servants or agents.
(E) In any event the Seller's liability in respect of any defect
in the Goods shall not exceed the purchase price of the Goods.
(F) Nothing herein contained shall be construed as an attempt
to exclude or limit the liability of the Seller in negligence for
the death or injury to any person insofar as the same is
prohibited by United Kingdom Statute.
696
The effect of the Borealis UK terms

388. The effect of these terms, subject to the operation of the
Unfair Contract Terms Act, is clear. If the goods do not comply
with Borealis' standard specification Borealis is bound to take
one of the steps specified in 13(A)(i)-(iii). 180 Clause 13(C)(i)
excludes the statutory warranties of quality and fitness for
purpose on which Balmoral rely. Clause 13(C)(ii) absolves
Borealis from any liability for any loss or damage arising from
any defect in the goods. Clause 13(E) restricts any liability of
Borealis to the price of the goods in any event.
The Borealis General Terms and Conditions
389. The Borealis General Terms provide, so far as relevant:
These General Terms and Conditions of Sale (in the
following "General Terms") together with the order
confirmation shall in so far no (sic) other agreement regulating
the issue has been concluded in writing apply to all products
(in the following "Products") sold by the Borealis entity given
in the front page (in the following "Borealis") to its customers
(in the following "the Purchasers").
...
5. Product Liability
Borealis shall only be liable for damage due to product
liability according to mandatory rules of applicable law and
thus the liability of Borealis shall be restricted in all respects
as much as possible under such law.
6. Limitation of Liability
6.1 Borealis does not assume any responsibility for Products
being suitable for any particular purpose unless Borealis in
writing has approved such suitability.
...
6.3 Borealis' accumulated liability, excluding product
liability which is subject to clause 5.1 above, for whatever
reason including but not limited to delays, defect and
shortfall shall at the option of Borealis be limited to either an
exchange of the defective Products for non-defective
Products or a refund of the invoiced value of the said
Products.
...
8. Applicable Law and Venue
These General Terms shall be governed by the law of the
country where Borealis is domiciled without recourse to the
conflict of laws principles of such jurisdiction, and the parties
shall accept the relevant commercial court as venue.
____________________
180 There is no evidence that the borecene supplied did not comply with
Borealis' standard specification so this clause had no application.
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The effect of Borealis' General Terms and Conditions

390. Clause 5 is concerned with liability which is imposed on
Borealis by mandatory rules in respect of product liability ie
rules in relation to damage to person or property that cannot be
excluded by agreement. It is not relevant to the present case.
391. Clause 6.1 does not exclude the implied term (in English
law) as to satisfactory quality. But it does exclude any implied
warranty of fitness for purpose, unless Borealis has approved
such suitability in writing. It was not suggested that Borealis
had given such an approval in writing.
392. Clause 6.3 limits Borealis' total liability under the
contract to either an exchange of defective for non-defective
product or a refund of the invoiced value. Mr Mawrey contends
that this clause cannot have effect if the defective product
cannot be exchanged because, in that event, there is no option
that can be exercised in one of two different ways. I do not
agree. The clause gives Borealis two options. If only one option
is open to it, it is that option that it will have to choose. The fact
that it cannot choose the other does not mean that the limit on
liability cannot operate at all.
The Unfair Contract Terms Act 1977
393. The relevant statutory provisions are as follows. Section
6 provides:
Sale and hire-purchase
...
(2) As against a person dealing as consumer, liability for
breach of the obligations arising from
(a) section 13, 14 or 15 of the 1979 Act (seller's implied
undertakings as to conformity of goods with description or
sample, or as to their quality or fitness for a particular
purpose);
...
cannot be excluded or restricted by reference to any contract
term.
(3) As against a person dealing otherwise than as consumer,
the liability specified in subsection (2) above can be excluded
or restricted by reference to a contract term, but only in so far
as the term satisfies the requirement of reasonableness.
394. Section 11 provides:
11. The "reasonableness" test.
(1) In relation to a contract term, the requirement of
reasonableness for the purposes of this Part of this Act, section
3 of the Misrepresentation Act 1967 and section 3 of the
Misrepresentation Act (Northern Ireland) 1967 is that the term
697
shall have been a fair and reasonable one to be included

having regard to the circumstances which were, or ought
reasonably to have been, known to or in the contemplation of
the parties when the contract was made.
(2) In determining for the purposes of section 6 or 7 above
whether a contract term satisfies the requirement of
reasonableness, regard shall be had in particular to the matters
specified in Schedule 2 to this Act; but this subsection does not
prevent the court or arbitrator from holding, in accordance
with any rule of law, that a term which purports to exclude or
restrict any relevant liability is not a term of the contract.
...
(4) Where by reference to a contract term or notice a person
seeks to restrict liability to a specified sum of money, and the
question arises (under this or any other Act) whether the term
or notice satisfies the requirement of reasonableness, regard
shall be had in particular (but without prejudice to subsection
(2) above in the case of contract terms) to
(a) the resources which he could expect to be available to
him for the purpose of meeting the liability should it arise;
and
(b) how far it was open to him to cover himself by
insurance.
(5) It is for those claiming that a contract term or notice
satisfies the requirement of reasonableness to show that it
does.
395. Schedule 2 provides:
"GUIDELINES"
FOR
APPLICATION
OF
REASONABLENESS TEST
Sections 11(2), 24(2)
The matters to which regard is to be had in particular for the
purposes of sections 6(3), 7(3) and (4), 20 and 21 are any of
the following which appear to be relevant
(a) the strength of the bargaining positions of the parties
relative to each other, taking into account (among other
things) alternative means by which the customer's
requirements could have been met;
(b) whether the customer received an inducement to agree
to the term, or in accepting it had an opportunity of entering
into a similar contract with other persons, but without having
to accept a similar term;
(c) whether the customer knew or ought reasonably to have
known of the existence and extent of the term (having regard,
among other things, to any custom of the trade and any
previous course of dealing between the parties);
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(d) where the term excludes or restricts any relevant liability

if some condition is not complied with, whether it was
reasonable at the time of the contract to expect that
compliance with that condition would be practicable;
(e) whether the goods were manufactured, processed or
adapted to the special order of the customer.
396. Sections 26 and 27 provide:
26. International supply contracts.
(1) The limits imposed by this Act on the extent to which a
person may exclude or restrict liability by reference to a
contract term do not apply to liability arising under such a
contract as is described in subsection (3) below.
(2) The terms of such a contract are not subject to any
requirement of reasonableness under section 3 or 4: and
nothing in Part II of this Act shall require the incorporation of
the terms of such a contract to be fair and reasonable for them
to have effect.
(3) Subject to subsection (4), that description of contract is
one whose characteristics are the following (a) either it is a contract of sale of goods or it is one under
or in pursuance of which the possession or ownership of
goods passes; and
(b) it is made by parties whose places of business (or, if
they have none, habitual residences) are in the territories of
different States (the Channel Islands and the Isle of Man
being treated for this purpose as different States from the
United Kingdom).
(4) A contract falls within subsection (3) above only if either
(a) the goods in question are, at the time of the conclusion
of the contract, in the course of carriage, or will be carried,
from the territory of one State to the territory of another; or
(b) the acts constituting the offer and acceptance have been
done in the territories of different States; or
(c) the contract provides for the goods to be delivered to the
territory of a State other than that within whose territory
those acts were done.
27. Choice of law clauses.
(1) Where the law applicable to a contract is the law of any
part of the United Kingdom only by choice of the parties (and
apart from that choice would be the law of some country
outside the United Kingdom) sections 2 to 7 and 16 to 21
698
of this Act do not operate as part of the law applicable to the

contract.
(2) This Act has effect notwithstanding any contract term
which applies or purports to apply the law of some country
outside the United Kingdom, where (either or both)
(a) the term appears to the court, or arbitrator or arbiter to
have been imposed wholly or mainly for the purpose of
enabling the party imposing it to evade the operation of this
Act; or
(b) in the making of the contract one of the parties dealt as
consumer, and he was then habitually resident in the United
Kingdom, and the essential steps necessary for the making of
the contract were taken there, whether by him or by others on
his behalf.
397. These statutory provisions only become relevant if, in the
absence of Borealis' terms and conditions, there would have
been a breach of Borealis' obligations in respect of the quality
or fitness for purpose of the borecene supplied in the respects
claimed by Balmoral. On that assumption it is necessary to
decide:
(a) In relation to the contracts where the contracting party
was Borealis UK (to which contracts section 26 does not
apply), have Borealis shown that the relevant Borealis UK
terms satisfy the requirement of reasonableness, having regard
in particular to the matters specified in schedule 2?
(b) In relation to the contracts with Borealis Norway and
Borealis Denmark, does the Act apply at all, having regard to
the fact that they are governed by the laws of Norway and
Denmark?
(c) If the Act does apply to those contracts, are they contracts
to which section 26(3) applies with the result that the
limitations imposed by the Act on exclusion and restriction of
liability do not apply? For that purpose it is necessary to
decide:
(i) Whether the contracts were made by parties whose
places of business were in the territories of different States?
(ii) If so, when were the contracts in question made?
(iii) When the contracts were made was the borecene the
subject of those contracts in the course of carriage or was it
to be carried from the territory of one State to the territory of
another?
(d) If section 26(3) does not apply, then question (a) arises in
relation to the Borealis General Terms and Conditions.
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The Borealis UK contracts

The requirement of reasonableness
398. The effect of the Borealis UK conditions is that, if
Borealis deliver borecene which is either of unsatisfactory
quality or not reasonably fit for the purpose for which it was
required, Balmoral has no redress, beyond, at best, the
possibility of a replacement of the defective product or the
return of its price. Is that a term which it is fair and reasonable
to have included in the contracts?
399. Balmoral submits that it is not. It is, they suggest, neither
fair nor reasonable for Borealis to include in the contracts terms
which exclude liability for breach of the core obligations of
satisfactory quality and fitness for purpose with the result that
Borealis escapes any real responsibility for the unfitness of
borecene for its purpose, which has caused Balmoral
foreseeable loss on a massive scale.
Borealis' submissions
400. Borealis, which has the onus of proof of reasonableness,
points out that this case concerns major commercial companies,
not consumers. Although Borealis is a much bigger concern
than Balmoral, Balmoral is a company with a turnover of over
30 million a year.
401. They also rely on the difference of position between
themselves and Balmoral. Borealis produces raw materials with
a wide range of uses and applications across the world. Borealis
can and does perform a number of standard tests on samples of
its product; but Borealis cannot be expected to test it for all uses
of any prospective purchaser. Purchasers of borecene will, in
their manufacturing processes, change its form, and may change
its properties, by applying heat to it and mixing it with pigment
by differing methods of incorporation. Those purchasers are
specialist manufacturers. Borealis is not. It is the manufacturers
who will know how they intend to use borecene, what will be
the design of the product made from it and of the moulds used
to produce it, how that product will be engineered, to what
stresses it will be subject, and what method of processing will
be used, as well as the uses for which and the terms on which it
will be sold. It is they who are the experts in working out
whether the material is going to work for their purposes and
then making things out of that material. The way in which the
product is made (eg the amount of wall thickness and the
quality of wall thickness distribution) will affect the quality of
the product. Borealis habitually provides, and in the present
case did provide, free samples to enable testing to take place. If
asked to carry out further tests in order to obtain data relevant to
an intended use of the material Borealis is likely to do so. In the
699
nature of things Borealis will have little or no control over the

manner in which borecene is used, and little or no knowledge,
much less control, as to the extent to which, and the terms upon
which, products manufactured from it are marketed and sold.
Every use or application may give rise to a large, even
enormous, claim against Borealis. The success or failure of such
claims may depend, to a significant extent, on matters that are
internal to the claimant (such as the precise method of
manufacture) in relation to which Borealis may have limited
knowledge or access to evidence. In those circumstances, it was
legitimate for Borealis to protect themselves against that
exposure.
402. Balmoral's standard terms contain provisions whose
effect is similar to that of the Borealis UK terms. Balmoral's
terms provide:
4(a) the only liability accepted by the Company for the repair
or replacement of any defective goods is a liability to the
original purchaser for the repair or replacement, free of cost to
the customer, of goods of its manufacture which are
established to its reasonable satisfaction to have been defective
at the time of despatch and where such defect is reported in
writing before the expiration of the defects liability period
(defined below).
...
(c) The expression "defects liability period" means a period,
running from the date of despatch, of six months . . .
(d) The Company shall be under no liability whatsoever for
any form of consequential or other loss howsoever caused, and
is to be indemnified by the customer against all liability in
respect thereof.
403. The rival contentions of the parties raise in stark form the
question whether a major supplier of raw material can, where
UCTA 1977 applies, successfully avoid liability (other than for
the price of the goods or their replacement) for breach of the
conditions ordinarily implied under the Sale of Goods Act 1979.
404. In Granville Oil & Chemicals Ltd v Davis Turner & Co
Ltd [2003] 2 Lloyd's Rep. 356, 362, Tuckey LJ said:
The 1977 Act obviously plays a very important role in
protecting vulnerable consumers from the effects of draconian
contract terms. But I am less enthusiastic about its intrusion
into contracts between parties of equal bargaining strength,
who would generally be considered capable of being able to
make contracts of their choosing and expect to be bound by
their terms. Here the transaction includes carriage of goods by
sea and insurance. These spheres of commercial activity
standing on their own are excluded from the Act
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(see Schedule 1 para 1a (insurance) and 2c and 3 (carriage of

goods by ship)). In this case the element of road transport was
sufficient to render the transaction subject to the Act, but the
mixed nature of the contract of carriage emphasises the
interest of the freight forwarder in having a time limitation
which is applicable across the spectrum of his obligations.
The freight forwarder in that case was held entitled to rely upon
a term requiring suit to be commenced within nine months of
the occurrence of the cause of action.
The guidelines
405. I share Tuckey LJ's reduction in enthusiasm, not least
because of the difficulty of applying so protean a concept as
that of fairness and reasonableness in a context where the
application of these criteria may produce different results
according to whether they are looked at from the point of view
of the buyer or the seller.
406. I turn then to consider the guidelines, other than (d) and
(e) which have no application. I consider them in relation to
both the Borealis UK terms and the Borealis General Terms and
Conditions.
407. As to (a) the strength of the bargaining position of the
parties, the position is as follows. So far as the terms of the
contract are concerned, Borealis would not knowingly have
supplied borecene otherwise than on its terms, or terms to
equivalent effect, unless they had been persuaded to do so for
some very good reason. If Balmoral had raised with Borealis
the question of supplying borecene on Balmoral's terms, they
would, in all probability, have been told that borecene was not
available on those terms. As Mr Cartwright put it he would have
"walked away" the moment the proposal was suggested. This is,
also, demonstrated by what happened in relation to the
proposed Industrial Supply Agreement where the proposed
Balmoral warranty was crossed out by Mr Wood.
408. But Balmoral was a large volume purchaser, which was
able to (and did) negotiate actively, and successfully, on price.
The possibility of Balmoral switching supplier, as in the end it
did, was always a factor tending to keep the price down, and
Balmoral succeeded in driving good bargains in that respect.
Further Balmoral did not have to take borecene. They could
have continued with ZN material, even in 1997 when DSM had
given notice of withdrawal, since Matrix Polymers was waiting
in the wings.
409. So, in relation to price, the parties were on at least an
equal footing (indeed Balmoral may have had slightly the upper
hand), but on terms they were not. Borealis was only prepared
to supply borecene,
700
which became, as Borealis no doubt wished, Balmoral's primary

raw material, on its terms. Other suppliers, whether of borecene
or ZN material were also likely to be willing to supply only on
their similar standard terms, save that Matrix's terms provided
for liability of up to 1 million if negligence could be proved.
410. As to (b) Balmoral received no specific inducement to
agree the exclusionary provisions of either the Borealis UK or
the Borealis General Terms and Conditions.
411. As to (c) Balmoral knew that Borealis' terms were set out
on the back, or on a page, of the invoices, all of which Mr Joyce
signed off. Mr Joyce knew that there were terms on the back of
the invoices. He had reviewed those terms but did not study
them. Balmoral personnel knew, or, at the least, ought to have
known, that the price quoted was on the basis that Borealis'
terms applied. If they wanted to know what Borealis' terms said
and meant, they had only to read and consider them, if
necessary with Mr Byth's advice.
412. A material consideration, albeit not one reflected in the
guidelines, is the reality of the customers' consent to the terms.
As to that, Balmoral did not pay much attention to the terms
upon which they were ordering; Borealis' terms were not up for
negotiation anyway; and, save for the short-lived and
inconclusive discussions about an Industrial Supply Agreement,
there was no negotiation in which the applicability of the
standard terms, with or without variation, was hammered out. I
do not however accept that Balmoral's assent to the terms
should be regarded as more apparent than real, having regard to
the number of different occasions when they either signed
documents expressly incorporating those terms or had the
opportunity to demur when Borealis explained that they were
going to apply.
413. Another material consideration is the damage that could
be suffered if the borecene provided should prove unfit for the
purpose of manufacturing oil tanks. As the facts of this case
show, such unfitness could foreseeably lead to very substantial
loss to Balmoral, far exceeding the cost of the borecene itself.
414. Section 11(4) in terms applies only to the restriction in
clause 13(E) of Borealis UK's terms and to the option to limit
liability to the invoiced value in clause 6.3 of the General Terms
and Conditions. But it is well established that it is a relevant
consideration in relation to the requirement of reasonableness as
a whole.
415. Borealis has very substantial resources and also extensive
insurance cover (sufficient as I understand it to cover this claim)
although the terms of the insurance are not before me. That
said, the
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potential size of the totality of claims to which Borealis could

be subject, if the terms relied on are inapplicable, is
unquantifiably large.
416. Balmoral had insurance cover in respect of product
liability, ie insurance against losses arising from damage done
by Balmoral's products, but not product recall and guarantee
cover. Mr Joyce's witness statement said that, as he understood
it, it would have been difficult and prohibitively expensive for
Balmoral to insure and that he was seeking further information.
None has been provided. Mr Webster's evidence is to the effect
that the availability of such insurance and its price was linked to
the quality assurance procedures at the insured's premises. I
infer from that that product recall and guarantee insurance
would have been obtainable, if Balmoral's quality assurance
programmes were acceptable to insurers, but that it would
probably have been expensive. I have, however, no idea of the
sort of figures involved.
Balmoral's standard conditions
417. In Watford Electronics Ltd v Sanderson CFL Ltd [2001]
BLR 143 Chadwick LJ attached significance to the fact that a
purchaser, who relied on the 1977 Act to prevent reliance on a
supplier's standard terms, had similar terms in his own
conditions of sale. This showed "that Watford was well aware
of the commercial considerations which lead a supplier to
include a provision restricting liability for indirect or
consequential loss; and, in particular , was well aware that a
supplier would be likely to determine the price at which it was
prepared to sell its products by reference (amongst other things)
to its exposure to the risk of unquantifiable claims to indirect or
consequential losses which might be suffered by the customer if
things went wrong". The fact, however, that a purchaser has
similar conditions of sale to those which he impugns cannot be
conclusive, not least because the purchaser may be hard pressed
to defend his own conditions of sale against a 1977 Act
challenge. Further, in the present case Balmoral supplied oil
tanks with a ten year warranty. Thus, although Balmoral's
standard sale terms indicate the type of awareness to which
Chadwick LJ referred, it cannot be said that it was reasonable
for Borealis to include its exclusionary terms because Balmoral
did much the same in relation to oil tanks manufactured from
borecene.
Conclusion
418. I regard the question as to whether or not Borealis UK's
terms satisfy the requirement of reasonableness as quite finely
balanced. In the end, however, Borealis have not satisfied me
that their conditions satisfy that requirement.
701
419. The relevant provisions are (a) clause 13(C)(i) which

excludes all conditions and warranties as to quality or fitness
for purpose or correspondence with description "to the fullest
extent permitted by law"; (b) clause 13(C)(ii) which relieves the
seller from any liability for any loss that the buyer suffers by
reason of any defect in the goods; and (c) clause 13(E) which
limits liability in respect of any defect to the price in any event.
These clauses exclude the core terms implied by the Sale of
Goods Act of satisfactory quality and fitness for purpose and
deny the buyer any redress if the goods are defective, save that,
in the event of a failure of the goods to comply with the seller's
standard specification, and subject to compliance with the
conditions in clause 13(B), the buyer may recover their price.
420. The requirement is that the terms shall have been fair and
reasonable ones to be included "having regard to the
circumstances which were or ought reasonably to have been
known or contemplated when the contract was made". It is thus
directed, in part, to potential rather than actual circumstances.
The question is not, as it was under section 55 of the Sale of
Goods Act 1893, whether it would be fair and reasonable to
allow reliance on the term in the events which have happened.
421. When the contracts were made Borealis knew that
Balmoral was buying borecene for the purpose of making oil
tanks and that it was relying on Borealis to supply a polymer
capable of being used to make consistently satisfactory tanks. It
was the assumption of both sides that it was so capable. The
supply of a product which, because of a latent defect (whether
in respect of ESCR or rheological properties or both) made the
manufacture of consistently satisfactory tanks impossible would
confound those assumptions. In those circumstances a blanket
exclusion of any liability whatever is prima facie unreasonable
(as was the exclusion of any liability for the supply of carbon
dioxide with an excessive benzene content in Britvic Soft
Drinks Ltd v Messer UK [2002] 2 Lloyd's Rep. 368; and
Bacardi-Martini Beverages v Thomas Hardy Packaging Ltd
[2002] 2 Lloyd's Rep. 379). I do not regard the supply of
product with a latent defect as so remote a contingency that it
ought to play no weight in determining the reasonableness of
the exclusion. Nor were these contracts in respect of which
there were notorious difficulties in successful performance or a
high risk of failure.
422. A determination of the reasonableness of a contractual
exclusion requires consideration of whether the allocation of
risk effected by the exclusion is appropriate. I have not been
persuaded that requiring Balmoral to bear the entire risk of a
latent defect in Borealis' product is an appropriate allocation of
risk. The Sale of Goods Act itself
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recognises that, all other things being equal, it should be the

seller who bears the responsibility. Borealis has extensive
insurance against just such a risk. Whilst product recall
insurance would probably have been available to Balmoral,
albeit expensively, Balmoral did not have such insurance. The
evidence does not establish that product recall insurance would
have been normal for someone in Balmoral's position.
423. But commercial parties habitually make agreements
amongst themselves that allocate risk; and the court should not
lightly treat such agreements as unreasonable. The present case
is not, however, one in which the contracts made were the result
of a serious negotiation as to the incidence of risk: cp the
Watford case where that was exactly what took place. Borealis'
terms were presented on a take-it-or-leave-it basis and
Balmoral's scope for going elsewhere on any better terms was
very limited (on the evidence before me to Matrix and, even
with them, obtaining any substantial sum would depend on
proving negligence). Whilst Borealis UK's terms were standard
in the trade they are not the product of any agreed process of
negotiation between representatives of sellers and buyers.
424. I take into account the submissions made by Borealis
which I have set out in para 401 above as to the extent of their
potential liability and the cost implications of their being
potentially liable for claims in respect of unfitness for any of the
many purposes for which borecene might be bought. In respect
of these submissions two matters strike me as of particular
relevance. First, whilst liability for fitness for purpose can be
onerous it is not unqualified. It only arises when the buyer
reasonably relies on the seller and the goods are not reasonably
fit for what the seller knows is their intended purpose. The
defect must be one that lies within the seller's sphere of
expertise. The seller can, of course, still be liable for a latent
defect of which he is himself unaware. But, as between seller
and buyer, it is more appropriate that loss from such a defect
should be borne by the seller. As Scott Baker, J, as he then was,
said in St Alban's City and District Council v International
Computers Ltd [1995] FSR 686 is not unreasonable that he who
stands to make the profit should carry the loss. Borealis is a
very large organisation, much larger than Balmoral both in term
of assets and technical expertise, and has insurance against
liabilities such as these. It can spread the cost of that insurance,
and of any exposure not covered by insurance, over a very wide
range of purchasers. Balmoral might be able to pass on the cost
of product recall insurance but whether that is so is, on the
present evidence, an open question.
702
425. It is material also to look at the consequences. If borecene

was, contrary to my findings, not suitable for making oil tanks
because of a latent defect, Balmoral will have suffered a huge
loss (a foreseeable consequence of such a defect) which they
had no real opportunity to avoid at the manufacturing stage. It is
not reasonable that they should be without any redress from the
manufacturer at all.
426. Lastly, it is not without significance that Borealis settled
some of Balmoral's claims, without reference to Borealis'
conditions. That cannot automatically mean that reliance on the
impugned terms would have been unreasonable, or that the
terms themselves were unreasonable. But, especially when the
settlement is as high as 170,000, it is an indication to that
effect.
Does the Act apply to contracts made with Borealis Norway
and Denmark, given that they are governed by the laws of those
States?
427. Balmoral rely on the general principle that, in the absence
of evidence that foreign law differs from English law, the
English court will apply English law to the issue: Dicey,
Chapter 9-001.
428. Borealis rely on two authorities that show that the
principle is not absolute. In Damberg v Damberg [2001] 52
NSWLR 492 the New South Wales Court of Appeal refused,
despite the assumption of the parties that it would be bound to
do so, to accept that German law in relation to the taxation of
capital gains, and the evasion or avoidance thereof, was the
same as that of Australia. The assumption was, on the facts,
particularly inapposite since there were indications that German
and Australian law were completely different. At the relevant
time for most of the transactions in issue Germany had a capital
gains tax but Australia had none, save for short term capital
gains. Heydon JA, referred to a wealth of authority, English and
Commonwealth, as to the presumption that the lex fori applies
as well as to cases where the presumption had not been applied.
The cases cited in the latter category reveal a number of
possible criteria as to when the presumption will not be applied
eg (a) where it is not in the interests of justice; (b) where the
foreign law is not based on the common law; (c) where the
English law relied on alters the common law; (d) where it is
inherently improbable that the foreign law is the same; (e)
where fairness requires it. The court did not find it necessary to
specify criteria that would determine when the presumptions
would not be applied. It simply decided that it could not be
assumed that German law and Australian law in relation to
avoidance or evasion of capital gains tax were the same.
Taxation law could not be assumed to rest "on great and
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broad principles likely to be part of any legal system".

429. In Shaker v Al-Bedrawi [2003] Ch 350 the trial judge had
applied the provisions of Part VIII of the Companies Act 1985
requiring companies to have "relevant accounts" before making
a distribution to a Pennsylvanian company, upon the footing
that such a requirement was a "generally applicable rule". The
Court of Appeal referred to cases where the rule was
inapplicable eg (a) where English law creates some special
institution; (b) in prosecutions in respect of acts committed
abroad; (c) where summary judgment is sought. They reached
the view that if Part VIII were to apply to the company the
statutory provisions would have to be significantly adapted, and
thought (obiter) that that might of itself be a sufficient
indication that the case was one where some special institution
was created in English law such that those provisions could not
apply to a Pennsylvanian company. The basis of the Court's
decision was that the Second Directive could not, at that stage,
be accepted as showing that the requirement for relevant
accounts was one which was generally applicable to private, as
opposed to public companies.
430. Borealis submit that there is no reason to assume, and
that it is unlikely, that Norway or Denmark have enacted
legislation that allows purchasers who are not consumers to
circumvent contractually agreed restrictions in terms identical,
or even substantially similar, to the 1977 Act. They further
submit that section 27(1) of the Act (which provides that, if the
law of any part of the United Kingdom is the law of the contract
only by choice of the parties, most of the Act is not to apply if
apart from that choice the law of the contract would be a nonUK law), shows that the draftsman of the Act did not intend that
contracts which were, or, but for an express choice of foreign
law, would be subject to foreign law should attract its
provisions. Further section 27(2)(a) provides that the Act has
effect notwithstanding any contract term applying some foreign
law if that term was imposed in order to evade the operation of
the Act. That provision suggests that, absent an imposition for
that purpose, the Act should not have effect. It would then be
very odd, Mr Allen submits, if a contract expressly subject to a
non-United Kingdom law should, in the absence of evidence
that that law does not have the same provisions as the Act, be
subject to it.
Conclusion
431. In my judgment the court should apply English law,
including the Unfair Contract Terms Act. I have reached that
conclusion for two reasons.
703
432. Firstly, I regard it as artificial to apply the English law of

contract without reference to the 1977 Act. If, as I must, I have
to have regard to the Sale of Goods Act 1979, why should I
ignore the 1977 Act? A possible ground is that the 1979 Act, as
successor to the Act of 1893, is, in relation to the matters which
it addresses, largely declaratory of the common law. But the
1893 Act has itself been the subject of amendment. The
provisions of the Unfair Contract Terms Act 1977 Act might
well have been put into effect by way of amendment to the Act
of 1893, as happened with the Supply of Goods (Implied
Terms) Act 1973. The latter Act implemented the English and
Scottish Law Commissions' First Report on Exemption Clauses.
The 1977 Act was passed in consequence of the Commissions'
Second Report. I respectfully concur with the decision of the
Federal Court of Appeal in Canada in The Ship "Mercury Bell"
v Amosin [1986] 27 DLR (4th) 641 where Marceau J
distinguished "substantive provisions of a general character"
from "others of a localised or regulatory character" and treated
the rule as rationally acceptable "only when limited to
provisions of the law potentially having some degree of
universality". In the same case Hugessen J observed that "the
proper expression of the rule. . . is that the court will apply only
those parts of the lex fori which form part of the general law of
the country". The 1977 Act may properly be regarded as falling
within that category.
433. Secondly, I think that it would be unfair to do so. The
prime purpose of the rule is to establish on whom lies the onus
of producing evidence of the content of foreign law. In the
absence of any pleading that the 1977 Act had no application
Balmoral was by the time of the trial reasonably entitled to
assume that the case would be conducted by reference to
English law including the 1977 Act. Balmoral pleaded the Act
in its reply. Borealis pleaded, and then abandoned, time bar
defences in Danish and Norwegian Law in its defence. In a
further reply on foreign law Balmoral relied on the
presumption. There was a rejoinder to that reply. Borealis did
not plead that the presumption was inapplicable. In those
circumstances I do not think that I should decline to apply the
1977 Act.
434. I am confirmed in that view by two further
considerations. Firstly it would have been very easy to adduce
evidence as to whether Norway or Denmark has provisions
identical or similar to those contained in the 1977 Act. Borealis,
who, in effect, contend that neither Norway nor Denmark has
any provision equivalent to the relevant provisions of the 1977
Act has failed to adduce evidence to that effect, notwithstanding
that Norway and Denmark are the places of incorporation of the
Borealis entities relying on those laws. If Borealis
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was going to say that these laws had no provision that would
restrict the applicability of the exclusion clauses, it should, and
could easily, have produced the evidence to establish that.
Secondly, the laws of those countries may have provisions
restricting the entitlement of suppliers to exclude or restrict
liability which are (a) the same as English law; or (b) more; or
(c) less favourable to the purchaser; or (d) may have no such
provision at all. The effect of applying English law, but without
reference to the 1977, Act is that I shall have assumed that the
answer is (d). Whilst this is a possible answer it is by no means
the only one. To make that assumption might be a great
injustice.
435. I do not derive any assistance in reaching this conclusion
from section 27 of the 1977 Act. The Act plainly contemplates
that its provisions (a) will not apply to a foreign law contract
unless the foreign law has only been chosen in order to evade
the operation of the Act and (b) that its most significant
provisions will still not apply even if the parties have expressly
chosen the law of England, Scotland or Northern Ireland if, but
for that choice, the contract would be governed by a foreign
law. The purpose was, no doubt, to ensure (a) that people did
not evade the operation of the Act by an artificial choice of law
and (b) that parties who chose English law did not, by litigating
in England, find themselves forced to have the 1977 Act apply
in circumstances where that was not the natural law of the
contract. But neither of those facts has any bearing on the
incidence of responsibility for adducing evidence of foreign
law. The section says nothing about the rule or presumption,
which was in force well before the Act was passed.
Does section 26(3) apply to the contracts with Borealis Norway
and Borealis Denmark?
(i) Are those contracts made by parties whose places of
business were in the territories of different States?
436. The first question is: which parties are to be considered?
Is it Balmoral, on the one hand, and Borealis Norway or
Borealis Denmark, on the other? Or does it include Borealis UK
as agent? If so, does section 26(3) not apply because of the
inclusion of Borealis UK as a party?
437. In Ocean Chemical Transport Inc v Exnor Craggs Ltd
[2000] 1 Lloyd's Rep. 446 the Court of Appeal held that the
reference in section 26(3)(b) to a contract "made by the parties"
referred to the principals in the contract in question and not the
agents through whom the contract was made. Mr Mawrey
submitted that that case applied in the ordinary case of an agent
who incurred no personal liability on the contract in question;
but not to a
704
case where the agent is, as he submits to be the case here, an

English agent who is personally liable under the contracts.
438. I do not accept that there is any relevant distinction
between the Ocean Chemical case and this one. The basis of
that decision was that it was "as clear as could be" that the
reference to parties was to the principals. I do not regard that
clarity as diminished if either the buyer or the seller's agent
assumes personal liability. If that is so, there are up to four
"parties" - the seller, the seller's agent, the buyer, and the buyer's
agent. The statute gives no indication that, if seller and buyer
are in different States the fact that at least two of such "parties",
presumably one on either side of the contract, are in the same
State, then the Act must apply. Nor does such a conclusion
appear to me consistent with the statutory purpose. The policy
behind the Act is that it should not strike down exclusions from
liability contained in international supply contracts. It would be
very surprising if a contact for the supply of a cargo of crude oil
fob Bonny in Nigeria made between a Nigerian seller and an
English buyer, both acting through English brokers, should
cease to be an international supply contract, if either broker
undertook personal liability on the contract. The purpose of the
section is to deal with contracts where the supplier and the
purchaser are in different States and the goods are being, or are
to be, carried from one State to another, or to a State other than
the one where the contract was made. It is not concerned with
whether the agent of the supplier is in the same State as the
purchaser or his agent.
439. But in any event I do not think that Borealis UK should
be regarded as having undertaken a personal liability under the
contracts with Borealis Norway or Borealis Denmark made
after 1 January 1999.
(ii) When was the conclusion of those contracts?
440. Mr Mawrey submitted that, when the draftsman referred
to the conclusion of the contract, he did not have the making of
the contract in mind - otherwise he would have used the
language of offer and acceptance that he had used in section
26(4)(b) and (c). The conclusion of a contract, he submitted,
"logically follows its formation and must be either co-terminous
with or shortly before its performance" and was, in the present
case, "at or before the time when the obligation to pay arose:
that is on the raising of the invoice". At that stage the goods
would have been delivered to Balmoral and would no longer be
in the course of carriage.
441. I do not accept this submission. A contract is normally
regarded as having been concluded when it has been made. It is
at that stage that the negotiations have reached their conclusion.
I see no
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reason to give the words "conclusion of the contract" anything

other than their ordinary meaning. Further, if what is meant is
the performance of the contract, there is no reason why that
should mean anything other than full performance. If they are to
refer to some point prior to complete performance, it is
impossible to say what that earlier point is. Mr Mawrey's
submissions would have the curious consequence that a contract
for the supply of goods to be manufactured in Germany and
delivered in England would not be an international supply
contract if payment was due after delivery.
442. If the relevant time is the time when the contract was
made, that was either when Borealis UK confirmed the order or,
at the latest, when Balmoral took delivery of the goods. If the
latter, the goods were not then in the course of carriage. If the
former, they may have been. In my judgment the contracts were
made when the order was confirmed. By that stage there had
been an offer to buy and an acceptance of the order. From then
on the parties could reasonably regard themselves as having
come under an obligation to deliver and accept delivery. There
is no need to rely on delivery as constituting both the making of
the contract and its performance by Borealis.
(iii) When the contracts were made with Borealis Norway and
Borealis Denmark was the borecene the subject of those
contracts in the course of carriage or to be carried from the
territory of one State to that of another?
443. The borecene in question was manufactured in Norway
and sold by either Borealis Norway or Borealis Denmark. It was
delivered in the United Kingdom, either to Balmoral in
Aberdeen or to ICO in Gainsborough, Lincs. That would
suggest that when the contracts were made, the borecene was
either in the course of carriage or was to be carried from one
State to another.
444. But in some cases during 1999 and 2000, although the
country of origin specified on the invoice for the borecene was
Norway the place of despatch was described as Great Britain. In
those cases Borealis was the importer, the goods came from one
of Borealis' transhipment centres (in the form of rented
warehouses) in Great Britain, and VAT was charged on the
invoice. Where the place of despatch was described as
somewhere other than Great Britain Balmoral was the importer
and no VAT was charged on the invoice. Balmoral had to
account to theCustoms for the VAT. In the case of goods sold by
Borealis Denmark the place of despatch was always Great
Britain. Borealis Denmark was always the importer of the
goods, charged VAT on the sales and accounted for the
705
VAT to the Customs. It was within Borealis' power to determine

whether it was the importer or not.
445. The invoices where VAT was charged, with Great Britain
named as the place of dispatch, indicate that at some stage prior
to delivery to Balmoral the borecene had arrived at a place in
Great Britain from which it had been despatched. But the
invoice does not indicate how long the goods in question stayed
at the place of despatch, so that, looking at the invoice alone, it
is possible that the goods were at the place of despatch to which
the invoice refers when the contract was concluded.
446. Mr Allen submitted that it was inappropriate to adopt too
technical an approach to this question. The reality was that
Borealis Norway or Denmark were selling borecene to a
purchaser in the United Kingdom. Even if the order was
supplied from goods that had been stored in England for some
time prior to the date of the order the goods were still in the
course of carriage. They were only at a stopping place in the
course of carriage between the country of manufacturer and the
country of the purchaser.
447. Section 26(4)(a) requires the court to determine whether,
at the moment of contract, the goods supplied under it were still
in the course of carriage from the territory of one State to the
territory of another. In Amiri v BAE Systems [2005] 2 Lloyd's
Rep. 767, Mance LJ, as he then was, observed that section 26(4)
was "open to the comment that it has not been fully worked
out" and that it may have been thought that the classical types
of international trading contract (cif, fob, etc) should be
excluded without more. Even contracts such as those may not
come within section 26(4)(a), if it is given a literal construction.
Take the case where there is a string of CIF sales and the last
one is made when the vessel is within the territory of the State
where the cargo is to be discharged. On one view the goods are
not then in the course of carriage from one State to another.
Such a view is inappropriate. In the example given the goods
can be properly said to be in the course of carriage from one
State to another, just as a passenger may be said to be in the
course of carriage from London to Paris when the Eurostar
stops at Lille.
448. I am satisfied that I should regard the borecene the
subject of the invoices naming Great Britain as the "place of
despatch" as goods which, when the contracts were concluded,
were to be carried or were in the course of carriage from the
territory of one State (ie Norway) to the territory of another. The
course of business involved Borealis UK checking with
Borealis Norway that the goods could be produced and then
confirming the order to Balmoral. It would follow that the
goods would not, when the contract was concluded, have been
in the
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United Kingdom and were to be carried thither once they had

been manufactured. The evidence before me does not indicate
that Borealis' warehouses in the UK were anything other than
transhipment centres or that borecene ordered by Balmoral was
supplied to them from stock which, at the time of the contract,
was in store in the United Kingdom waiting for a purchaser.
Conclusion
449. It follows that, in my judgment, whilst the 1977 Act
applies to all the contracts with Borealis UK, it does not apply
to any of the contracts with Borealis Norway or Borealis
Denmark.
(iv) Have Borealis shown that the relevant terms of the
contracts with Borealis Norway and Denmark satisfy the
requirement of reasonableness?
450. The General Terms and Conditions are in fact somewhat
more favourable than the Borealis UK terms, since the implied
condition as to satisfactory quality is not excluded and there
may be an implied warranty of fitness for purpose if the seller
has approved the suitability of the product in writing. It is not
suggested that that occurred and the term of fitness for purpose
is excluded. For the same reasons as I have set out in relation to
the Borealis UK terms I am not satisfied that the clauses 6.1.
and 6.3 of the General Terms satisfy the requirement of
reasonableness.
Summary
451. In summary my conclusions on the contractual questions
are as follows:
Borealis UK
(a) The contracts for the supply of borecene to Balmoral
made between April 1997 and the end of 1998 were made
between Balmoral and Borealis UK and were on Borealis
UK's standard terms;
(b) Those terms, as a matter of construction, excluded the
statutory terms of satisfactory quality and fitness for purpose;
(c) Those contracts were subject to the 1977 Act.
(d) The relevant terms ie clauses 13(C)(i) and (ii) and 13(E)
do not satisfy the requirement of reasonableness;
Borealis Norway
(e) The contracts for the supply of borecene to Balmoral in
1999 and 2000 were made between Balmoral and Borealis
Norway, through the agency of Balmoral UK, and were on
Borealis' General Conditions;
706
(f) The General Conditions excluded the statutory term as to

fitness for purpose;
(g) The contracts with Borealis Norway were international
supply contracts such that UCTA 1977 did not apply to them.
(h) If UCTA 1977 had applied, clauses 6.1 and 6.3 of the
General Conditions would not have satisfied the requirement
of reasonableness;
Borealis Denmark
(i) The contracts for the supply of borecene to Balmoral
made from 2001 onwards were made between Balmoral and
Borealis Denmark through the agency of Borealis UK; and
were on Borealis' General Terms and Conditions;
(j) All those contracts were international supply contracts
such that UCTA 1977 did not apply to them.
(k) If UCTA 1977 had applied, clauses 6.1 and 6.3 of the
General Conditions would not have satisfied the requirement
of reasonableness.
Damages
452. In the light of these conclusions no question of damages
arises. Nevertheless, in case this matter goes further, I propose
to set out my conclusions.
453. The parties advanced submissions on damages upon the
hypothesis that Borealis was liable under all of the contracts,
recognising that, if Borealis was only liable on some of them,
their approach to quantum would have to be reconsidered. I
shall proceed on the same basis. The parties also appreciated
that any conclusion that I might reach might well require further
working out in the light of whatever approach or combination
of approaches I accepted as valid.
454. Before considering the issue it is necessary to record how
Balmoral dealt with increasing tank failure. By the end of 2002
Balmoral was beginning to face a flood of complaints. The
problem with borecene-made tanks became public knowledge.
The Environment Agency became involved. Balmoral had to
increase the number of staff members devoted to dealing with
complaints. By November 2003 nine staff were involved; by
February 2004 13. Detailed records were kept of each
complaint and entered on a spreadsheet (the "Emergency
Spreadsheet") which forms the basis of the quantum claim.
Additional files were created for "Environmental" claims ie
claims in respect of damage caused by oil spillages.
455. In the autumn of 2003, by which time the Environment
Agency were expecting positive action, Balmoral adopted what
became called a "planned change-out" policy whereby it would
change tanks made of borecene MFR 6 before cracking
developed, starting with tanks at the most
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vulnerable sites, and with the most vulnerable models

(horizontal and slimline) and leaving vertical models until later.
Balmoral contacted its distributors and advertised in the
national media and on its website in order to identify as many
of those tanks as possible. Distributors were invited to make
contact with the end-user, sending a form to be returned to
Balmoral if the user owned a tank with a serial number
beginning with 0001 up to 0201. Advice was given to
customers, distributors and fuel suppliers that tanks within that
range should not be filled to over 50 per cent capacity. A
separate department of two people implemented the
programme. In spring 2005 some fuel suppliers decided to
advise their customers to adopt this policy with all Balmoral
tanks.
456. Matters were complicated by the coming into force of
new legislation viz:
(a) The Control of Pollution (Oil Storage) Regulations 2001.
These require a phased transfer from single skin to bunded
tanks or some other containment. The Regulations do not
apply to (i) tanks of 200 litres or less; (ii) tanks in buildings or
wholly underground; (iii) tanks on a farm if the oil is used in
connection with agriculture; or (iv) domestic tanks with a
capacity of 3,500 litres or below. If the regulations apply the
container must be "situated within a containment system".
Bunding is a recognised method of secondary containment, but
a containment system can be provided in brick or concrete.
The regulations applied from 1 March 2002, their
commencement date, to all new installations since 1
September 2001. In respect of tanks within specified distances
of water or wells they applied from 1 September 2003. All
remaining tanks had to comply by 1 September 2005.
(b) The Building Regulations 2000 came into force on 1
January 2001. Schedule 1, para J6 requires tanks of 3,500
litres or less to be so constructed and protected as to reduce to
a reasonable level the risk of oil escaping and causing
pollution. Guidance published by the Secretary of State, in
force from 1 April 2002, states that secondary containment
(such as having an integrally bunded tank or a bund
constructed from masonry or concrete) must be used where
there is significant risk of pollution and that a significant risk
arises if the tank is more than 2,500 litres in volume or is close
to water (in various defined respects). The Regulations apply
to new builds.
457. If the end-user did not want a replacement he could get a
refund of the current average sale price of the tank. If the
replacement of an old single skin tank by a new one was
inconsistent with the
707
Regulations Balmoral would either give the end-user an option

to upgrade or a cash refund.
458. In April 2004 Balmoral replaced its ten-year guarantee
with a one-year one.
459. By early 2005 the cost of tank replacement was of the
order of up to 350,000 per month and Balmoral was in severe
difficulties. It decided that, in order to slow down the rate of its
losses, it would have to take a tougher line with customers.
Claimants were required to produce a proof of purchase
invoice, and to pay for a site survey, including photographs of
the tank and installation, by an OFTEC registered company. If
the survey showed that the problem was not the result of misuse
or defective installation and was within the warranty period,
then, unless the tank was made from MFR 6 borecene, the
customer would be offered:
(a) a cash payment of the residual value of the tank; or
(b) a new tank, in which case the customer would have to pay
the difference between the cost of the new tank and the
residual value of the old, together with discretionary
compensation with a limit of twice the residual value.
460. In the case of a tank made with MFR 6 borecene, owners
were to be offered:
(a) the original price of the tank; or
(b) a new tank at the difference between the cost of the new
tank and the original purchase price, together with
discretionary compensation on a "deferred" basis subject to a
limit of twice the purchase price of the tank and a successful
outcome of this litigation.
461. This change of policy produced bad feeling and bad
publicity. Forcing end-users to deal with their insurers also
meant that those insurers could later appear with substantial
claims against Balmoral.
462. At present most planned replacements have been put on
hold because of cash flow implications.
Balmoral's claims
463. Balmoral's claims can be expressed as follows:
A PAST LOSS
1. EMERGENCY CHANGE OUTS
To 31 March 2005: 2,779,420
To 31 December 2005: 578,131
Transport and disposal: 66,859
Total: 3,424,410
2. PLANNED CHANGE OUTS
To 31 March 2005: 425,940
To 31 December 2005: 31,383
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Total: 457,323
3. ENVIRONMENTAL CLAIMS
4. OVERSEAS CLAIMS
5. ADDITIONAL COSTS
To 31 December 2005
Staff: 1,802,849
Capex: 25,000
IT: 46,000
Insurance: 254,072
Total: 2,127,921
6. LOSS OF PROFITS
The claim is put forward in respect of the period from 1
January 2001 to 31 December 2005 on the basis that
Balmoral's tank business would, but for the cracking of tanks,
have grown at 10 per cent, 20 per cent or 30 per cent
annually, producing a loss of profit of either 4,757,274 or
7,371,024 or 10,203,154.
B FUTURE LOSS
7. EMERGENCY CHANGE OUTS
12,557,328
8. ENVIRONMENTAL CLAIMS
9. OVERSEAS CLAIMS
10. ADDITIONAL COSTS
755,403 per annum
11. LOSS OF PROFITS
The claim is put forward in respect of the period from 1 January
2006 to 31 December 2011 on the basis that losses would
increase in 2006 at the same rate as the 2004 to 2005 increase
and then reduce to zero on a straight line basis over the
following five years.
The forensic experts
464. Balmoral's expert was Miss Sally Hassell, an experienced
forensic accountant. I found her a highly competent and reliable
witness in relation to matters which she had personally
researched and calculated. She had, for instance, extensively
reviewed the "Emergency Spreadsheet" and made adjustments
which, I am satisfied, make it a reliable document from which
to assess the cost of tank failures which can be attributed to
borecene.181 Her checking, collation and amendment of data,
some of it extremely voluminous, seemed to me thorough and
conscientious. She was, inevitably, as she recognised, on less
sure ground when dealing with projections as to what would
have happened if the cracking problems had never arisen. Her
reports were well constructed and, particularly considering the
complexity of the material, clear.
____________________
181 The experts were agreed that the Emergency Spreadsheet was an accurate
record of tank failures for the period 1993 to March 2005.
708
465. Borealis' expert was Mr Flemming Jensen. He is an

insurance loss accountant. It was suggested that such a
background would naturally incline him to take whatever point
could properly be made in the reduction or resistance of the
claim. I did not, however, regard him as having strained to take
every point, although, understandably, he was not prepared to
assume what had not been established. He seemed to me both
competent and conscientious, although he could, on occasion,
have painted with a broader brush.
Past loss
Emergency change outs
466. The figure of 2,779,420 down to 31 March 2005 is an
agreed figure. It derives from a calculation, to be found at paras
5.1 to 5.3. of Miss Hassell's supplemental report ("Hassell 2"),
of the cost of dealing with tanks made from borecene which
failed in excess of the agreed, underlying, non-borecene rate of
failure of 2.96 per cent. As at 31 March 2005 a number of
complaints had been dealt with ("completes"), a number had
been deferred, and a number were open. The figures for dealing
with completed (526) and deferred (51.48) complaints are
agreed. A "deferred" complaint is one where the complaint has
been rejected, eg because the end-user has failed to provide
proof of purchase, or to organise and pay for his own site
survey, or because installation was not in accordance with the
guidelines. The sum for dealing with a deferred complaint
covers the cost of initial processing and rejection of the
complaint. The complaint is described as "deferred" (a) because
of Balmoral's doubts as to whether the policy will hold; and (b)
because the end-user may challenge this rejection. Miss
Hassell's calculation assumes that the open complaints will
become completes or deferred in the same proportion as the
actual figures in those categories.
467. In relation to the period down to 31 December 2005
Borealis agrees the figure of 411,130 which appears in the
table at para 6.6.2 of Hassell 2. That figure is based on the same
methodology as produces the 2,779,420 total but with more up
to date figures for the average cost of dealing with
complaints.182 That cost has reduced, partly because there has
been a higher proportion of refunds and refunds are now of
residual value. The cost of deferred items has also reduced to 4
because Balmoral now shifts responsibility for obtaining site
surveys to the end-user. Miss Hassell also puts forward an
alternative calculation of 578,131. This alternative calculation
(para 6.7.2) assumes that claims that have been completed or
deferred will not be reopened, but that all open
____________________
182 MFR 3: 41, MFR 6: 512, and MFR 4: 556.
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claims will be dealt with in accordance with the policy in force

before the change in 2005, on the basis that that harder line
policy cannot last. On that assumption 578,131 is agreed as a
figure.
468. In my judgment it is the higher figure that is appropriate.
The hypothesis upon which this question arises is that (contrary
to the fact) I have decided that borecene is not fit for the
purpose of making oil tanks and that, particularly in relation to
MFR 6 borecene, tanks have failed in large quantities for that
reason. On that hypothesis it does not seem to me that Balmoral
would be able to resist having to maintain at least their former
policy. It would not be possible to hold the line that end-users
must bear the costs of surveys, that only the residual value
should be refunded, and that there should be very limited, if
any, compensation.
469. In a document handed in on Day 22 Miss Hassell floated
the idea that for this calculation I should use the agreed historic
costs (526 and 51.48) in relation to all change outs, including
those completed and deferred, upon the basis that the tough line
policy might backfire on Balmoral, complaints would be
reopened, or new complaints would come in which would have
been avoided if Balmoral had not declined to change out the
tank involved, so that Balmoral would, in the end, become in at
least as bad a state, in respect of complaints to date, as if they
had maintained the previous policy. I regard this as too
speculative to rely on.
Transport costs
470. The dispute relates to the costs alleged to have been
incurred bringing defective tanks back to Aberdeen for
disposal183 when the distributor was unwilling to deal with
them. Until June 2005 when Balmoral ceased to have a
Transport Division this transport was done by that division. The
claim is for 66,858.75 (50,478.75 transport and 16,380 for
handling). The transport cost is Balmoral's standard delivery
charge which varies according to the size of the tank. The
handling charge is a "notional" charge to cover the labour in
dealing with the tanks.
471. Mr Jensen would disallow the handling cost on the
ground that it is a normal overhead expense, has not been
proved, and would be easily absorbed. He would only allow
10,095.75 of the transport costs. The basis upon which he
would only allow the latter sum is that he does not accept that
none of these tanks could have been brought back as a backload
after delivery of tanks to a distributor. The suggestion is that 81
per cent of the tanks could have been backhauled: see para 5.5
of Mr Jensen's
____________________
183 Balmoral had an arrangement with another company to take the tanks away
from Aberdeen at no cost.
709
second report ("Jensen 2") and paras 363-364 of Borealis' final

submissions. The 19.2 per cent figure, which reduces
50,478.75 to 10,095.75, is the proportion that the third party
turnover of the Transport Division for the year ending March
2004 (331,000) bears to the inter-company turnover
(1,726,000).
472. I do not regard the 15 charge as having been proved as a
loss. Some labour was no doubt involved in unloading the tanks
and moving the so called "graveyard" stock to the graveyard, ie
the place at Balmoral's site where returned tanks were stored.
But no one at Balmoral has been able to identify any additional
cost involved and the work, which was probably done by those
whose pay appears in the group service part of the accounts,
does not seem to me to be such that the fact that it had to be
done, without identifiable additional cost, should be regarded as
a loss to Balmoral.
473. As to the transport costs, there appears to me to be an
inconsistency between the way in which the claim is in truth put
forward and the manner in which it was, at any rate ultimately,
resisted, namely that Balmoral could and should have used
backhaul shipments to bring tanks back to Aberdeen. In giving
evidence Mr Main, Balmoral's Group Financial Director, said:
A. No, the reason we put it (ie the breakdown of transport
turnover) forward was I was asked a question by Ms Hassell:
Is there a cost in bringing tanks back? I said Yes, there is
because if we bring a load of tanks back it means we're not
bringing a paying load from a third party back so there is a real
cost to us. She accepted that but in discussions with the
experts from the other side this wasn't accepted, and they said
they needed evidence to show that we did generate third party
income and therefore we produced this.
And later, in answer to questions from me:
Do I understand from that that matters were so structured that
if you had to collect a faulty tank, you usually, or often,
arranged to collect it when you were delivering a load in the
vicinity, so that you could bring back the defective tank on the
transport with which you had delivered some goods to
somebody?
A. Yes, the tanks would be changed out by an installer team,
taken back to distributors based at their own base and then we
would collect probably a number of tanks at one time, rather
than picking individual tanks up.
MR JUSTICE CLARKE: But you would endeavour to do
this exercise of collecting tanks as a backload?
A. We wouldn't send a lorry down specifically to pick tanks
up.
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474. In effect, therefore, Balmoral's claim is that, because all

the tanks were backhauled, it lost the opportunity to take
backloads from paying third parties. Mr Main gave evidence
that the transport division, which provided services to the other
divisions at commercial rates, endeavoured to find backloads
from third parties and did so with a high percentage of success,
such that there were very few miles driven without loads.
However in the marine part of the Transport Division the work,
which often involved taking cranes and low loaders to the
docks, was mainly local, and did not generate backloads.
475. This general evidence does not seem to be supported by
the only figures available. The income from backloads is the
third party element of turnover. Some backloads, however,
involved the carriage of raw material for Balmoral's divisions,
which generated an inter-company charge. Inter-company
turnover also included the recharge of cranage and low loaders,
and of third party transport sometimes used to deliver products.
So, even if every delivery had had a backload of equal value the
inter-company and third party turnover figures would not be the
same.
476. I approach the matter in this way. There are in the papers
no documents that indicate which lorries returned empty, and
which full. The evidence does, however, show that Balmoral
tried, as one would expect, to obtain backloads from third
parties in cases where it did not have a backload of its own. The
fact that some 11 per cent of the total turnover for 2003/4 (ie the
ratio of 331,000 to 331,000 + 1,726,000) derived from third
parties shows the extent of its success. But the fact that the third
party proportion of inter-company turnover is nearly 20 per cent
does not establish that in 80 per cent of the cases there was no
backload, not least because inter-company turnover is not
limited to receipts from outward journeys but includes the
matters referred to in the previous paragraph, and because loads
and backloads cannot be regarded as always of equal value.
There was some confusion in the evidence as to whether the 80
per cent figure included a charge to Balmoral for returning
empty to Aberdeen. Mr Main's evidence was that where raw
material for the division was carried in a backload, there was an
inter-company charge. I infer from that evidence that empty
backhauls were not charged. There is no positive evidence that
they were. That would not be the way in which transport costs
are usually charged.
477. In those circumstances it seems to me that Balmoral have
established that they have lost the opportunity of earning
revenue from third party backhauls because of the need to bring
back defective tanks; but not that they would always have been
able to obtain a backhaul from a third party
710
nor that, if they did so, it would be at the same price as the
outward journey. No accurate estimate is possible, not least
because the amount by which the 1,726,000 figure would have
to be reduced in order that it should represent only the cost of
outward journeys for which there was no inter company
backhaul is unknown. In view of the smallness of the item, I
would have taken a broad brush approach and have awarded
Balmoral one third of their 50,479 claim viz 16,826, say
16,850.
Planned change outs
478. The number of planned change outs to 31 March 2005 is
agreed. The number to 31 December 2005 is one that Mr Jensen
has no reason to doubt. A figure of 458 for the cost of the
change out is agreed. The issue that divides the parties is
whether the change out policy was a reasonable one and
whether Balmoral is seeking to recover for tanks that did not
need to have been changed out at all. Balmoral changed tanks
whose production fell within the serial range "0001. . ." to
"0201. . ." The first two digits - "00" and "02" - denote the years
2000 and 2002. The second two digits denote the month. Most
of the tanks within that range were MFR 6 tanks. But some
were not. For instance, some MFR 3 tanks manufactured in
very early January 2000 immediately before the introduction of
MFR 6 came into the 0001 range; and some MFR 4 tanks
manufactured in January 2002 immediately after the change to
MFR 4 came into the 0201 range. In the period up to 31 March
2005 930 tanks were called in of which, as is now known or
estimated,184 778 were made of MFR 6 borecene. If the claim
for all 930 is valid its value is 425,940. If the claim should be
limited to 778 tanks the claim figure up to 31 March 2005 is
356,324. In relation to planned change outs down to 31
December 2005 the relevant figures are 31,383 or 26,228.
479. Borealis contend (i) that they should not be responsible
for the planned recall of tanks not made with MFR 6 borecene;
and (ii) that in 2003 Balmoral, which knew that some tanks had
low and some high failure rates, could and should have
restructured the planned change out so that it was limited to
MFR 6 tanks with failure rates higher than 10 per cent. On Mr
Jensen's calculations that would produce a figure, for the period
down to 31 March 2005 of 174,498.
480. I agree with Borealis' first, but not its second, point. As to
(i), it was no doubt sensible to give the public a range of
numbers between which the MFR 6 population would lie. But it
was not
____________________
184 Tanks whose serial number did not match the production records (probably
because of problems in the format of the number) have been assumed to be in the
same proportions per grade of borecene as those tanks where matching was
possible.
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impractical for Balmoral to check, from the serial number of

any responding customer's tank, whether it was made of
borecene MFR 6. The production records contain details of the
serial numbers, which are in sequential order, and the
material.185 Change out of a tank is quite expensive; and the cost
of checking whether the material of the tank was borecene MFR
6 would have been small in comparison. Even if the records
were archived they could be accessed. As to (ii), Borealis was
faced with substantial failings of tanks made with MFR 6
borecene. It was under pressure from the Environment Agency.
By 2004 and 2005, the years when the policy was being put into
effect, some tank designs were failing much more than others,
as Balmoral would have known. As it has turned out so far,
there have continued to be markedly different failure
percentages for different designs. But, when the policy was
made, Balmoral was not to know that this pattern would
continue. Their policy to change out MFR 6 was, in my
judgment, a reasonable response at the time to the dilemma in
which they then found themselves, particularly having regard to
the fact that a failure to call in a tank because, say, there had
only been a 7.5 per cent failure rate to date, could have
catastrophic consequences. Further the matching of production
data to failure data, which would allow an accurate calculation
of those designs in which there was a failure rate higher than 10
per cent has proved a mammoth task, only completed in the
course of preparation of the experts' reports in this action.
481. Accordingly the appropriate sum under this head is
356,324 plus 26,228 ie 382,552.
Environmental
482. I ruled at an early stage that I would not deal at the
hearing with the issue of environmental claims, ie those that
have or may lead to environmental pollution. These claims can
appear unexpectedly, or in unexpected amounts, either in
addition to a claim for replacement of the tank or where no such
claim has been made, eg because the end-user finds it easier to
deal with his own insurer, or is forced to do so because Borealis
has rejected his claim. Balmoral will often have no idea of the
costs involved for a long time. The incidence of further
unexpected claims is also very difficult to predict, both as to
number and amount. It seemed to me that the appropriate course
would be to make an interim award of damages in relation to
the matters that could be dealt with now, leaving these claims
over until later.
____________________
185 See, for instance, CF 2/330.
711
Overseas
483. For similar reasons I decided not to deal with the issue of
claims made against Balmoral outside the UK.
Additional costs of dealing with complaints down to 31
December 2004
484. Miss Hassell's reports identify the following staff and
staff related items:
Staff costs: 821,051
Recruitment costs: 23,373
Temporary staff costs: 63,936
Overhead: 230,820
1,139,180
Staff costs: 821,051
485. The staff costs item consists of staff costs incurred in
dealing with the cracking problem with the tanks and the
planned change out. The staff costs of 821,051 are the product
of the following:
Customer Service Dept 2003-2004: 342,531
Allocation of direct staff 2002-2004: 321,086
Allocation of indirect staff 2002-2004: 157,434
821,051
486. The 342,531 figure is the cost of administrative
personnel in the Customer Services Department from July 2003.
The 321,086 is, as to 138,640, an allocation of 95 per cent of
the salary and other emoluments of Philip Pritchard, Balmoral's
site services director and the manager of the team dealing with
customer complaints, and, as to 182,446, a proportion of the
salary and emoluments of other staff, including Mr Joyce. The
157,434 figure is an allocation of a proportion of the salary
and other emoluments of indirect staff (eg the finance director
and staff in the accounts section). The proportions taken are
percentage proportions of time spent in the years 2002 to 2005.
The details are at exhibits 27-30 of Miss Hassell's first report
("Hassell 1").
487. The issues between the parties on this aspect of the case
are these. First, in respect of the costs of the Customer Service
Department and Philip Pritchard, there is a relatively small
difference of 17,750. The relevant figures are as follows:
Miss Hassell
Customer Service Department 2003: 59,238
Customer Service Department 2004: 283,293
342,531
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Pritchard 2002: 17,393

138,640
TOTAL: 481,171
Mr Jensen
Customer Service & Pritchard (Wages): 417,497
Customer Service & Pritchard (Benefits): 45,925
TOTAL: 463,421
Difference: 17,750
488. In order to reach his figure of 463,421 Mr Jensen took
from the management accounts the April-June 2002 cost per
month (pay and benefits) of the Customer Service Department
("CSD") or its precursor and compared it with the actual costs
of the CSD over the period July 2002 to December 2005, so as
to produce an incremental cost. Miss Hassell recognised that
this was a valid methodology. There are at least two reasons for
the difference between his figures and those of Miss Hassell.
Miss Hassel's calculations begin in July 2003 and the
individuals concerned are not limited to those in the CSD. Mr
Jensen's figures start in July 2002 and calculate an increase over
a base amount. They are limited to the CSD.
489. I propose to take Mr Jensen's figure because I am not
wholly convinced that the salary costs of all the staff in Miss
Hassell's calculations are incremental. Some of those involved
are not in the CSD and Mr Woolley, the Operations Director, is
included full time from November 2003, which is excessive.
His evidence did not indicate that he worked full time on
complaints.
490. The more substantial issue is as to whether a claim lies in
respect of staff, such as Mr Joyce, whose work is not
exclusively directed to dealing with the cracking problem, and
whose emoluments will not have increased because of it
(although their workloads may have done). Of the 821,051
figure 182,446 is in respect of "direct" labour, other than Mr
Pritchard, including, predominantly, Mr Joyce, and 157,434 is
in respect of "indirect" labour: see para 486 above. Mr Jensen
allowed 78,342 in respect of these items: see appendix D 8 of
Jensen 2.186 This figure was reached by excluding all claims in
respect of "indirect" labour and any claim for Mr Joyce.
491. In Euro Pools plc v Clydeside Steel Fabrications Ltd
2003 SLT 411 at paras 11 and 12187
____________________
186 DF 2/649.
187 2003 Scots CS, unreported (17 January 2003).
712
the Outer House of the Court of Session made the following

observations:
11.. . .A managing director will typically be paid a fixed
salary, perhaps with profit related bonuses. If he requires to
spend part of his time organising rectification work following
a breach of contract, he will not be paid any more, and there is
thus no direct cost to his employer as a result of the need to
perform the rectification work. In reality, however, there is still
a loss to his employer as a result of the rectification work. A
managing director will normally be expected to devote the
whole of his working time and effort to the affairs of his
employer; a term of that nature is commonly found in
managing directors' service contracts, and in many cases
would be implied even if it were not expressed. . .If one of the
company's suppliers commits a breach of contract, and in
consequence the managing director requires to spend a
significant amount of time supervising remedial measures, that
time is lost to the other tasks that the managing director is
obliged to perform. That in my opinion clearly represents a
loss to the company. It may not leave the company out of
pocket, in the sense of having to pay more to the managing
director; nevertheless, the company will inevitably be deprived
of part of the services that it would normally expect from the
managing director. That might mean, for example, that the
managing director was unable to devote as much time as
would otherwise have been possible to the planning of an
important marketing initiative, or the development of a new
product, or to general administration of the company's affairs
and the supervision of its employees . . .
12. Similar principles apply to the remedial work performed
by employees other than a managing director. If, for example,
an engineer is obliged to spend time recommissioning a
filtration system, that means that he is unable to perform other
work for his employer. The employer thus loses the benefit of
part of the employee's time . . .
492. I respectfully agree with that approach. There may,
however, be circumstances where the additional work
necessitated by a breach of contract is sufficiently limited in
extent that the company cannot sensibly be regarded as having
suffered a loss because the employee in question had to do it.
On the figures given in the relevant exhibits that does not
appear to me to be the case for the staff now under
consideration. Similarly circumstances can be envisaged in
which the employees are so underemployed that the company
suffers no loss because they have to work a bit more. That is not
shown to be the position here.
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493. The second issue is that the staff costs involved (whether
"direct" or "indirect" staff) have not been time logged or
otherwise vouched. They are simply percentages given to Miss
Hassell by Balmoral as representing the estimated proportion of
time that the relevant individuals had to spend dealing with the
problem. I do not think it would be just to exclude the claim on
that ground. The percentages put forward appear to me to be
reasonable, having regard to the magnitude of the problem. The
case is not in the same category as Tate & Lyle Food and
Distribution Ltd v GLC [1982] 1 WLR 149, where a percentage
of the total damages was claimed in respect of overheads. In my
judgment Balmoral have sufficiently established a loss under
this head. That loss is 182,446 and 157,344.
494. I do not regard these costs as covered by the loss of profit
claim. The evidence does not suggest that the time that was
spent dealing with the cracking problem was time that would,
but for that problem, have to have been spent in generating or
administering the additional sales that form the subject matter
of the loss of profits claim.
Recruitment costs: 23,373
495. These are the costs for recruiting staff in 2003 and 2004
for the purpose of dealing with the tank cracking problem.
There is very little difference between the parties on the figures
(the defendants' figure of 21,973 is based on the documents
seen by Mr Jensen by 13 March 2006). I accept Miss Hassell's
evidence that the recruited individuals are as set out in her
Exhibit 26 and that the costs are sufficiently established.
Temporary staff costs: 63,936
496. These costs - for 2003 and 2004 are agreed.
Overhead: 230,820
497. Miss Hassell's calculation consists of taking the number
of customer services staff in the years 2002-2004 and
calculating what percentage they represent of the total staff.
Those percentages are then applied to those expenses for the
relevant years that would increase as a result of the employment
of those additional staff. Mr Jensen has a much higher overhead
figure (486,940) reached by taking certain costs for a base
period of January to August 2002 so as to arrive at an average
monthly amount. This amount is then adjusted monthly in
accordance with the Consumer Price Indices and then com-
713
pared to the actual cost from September 2002 to December

2004. I propose to use Miss Hassell's figure because it is
smaller, and because to use Mr Jensen's higher overhead figure
as well as Miss Hassell's figures for direct and indirect labour,
would introduce an element of duplication.
Archive staff deduction
498. Both Miss Hassell and Mr Jensen deduct 14,571 in
respect of temporary archive staff. According to a document
entitled "Reconciliation of Increased costs" handed in on Day
23 Mr Jensen seeks to deduct another 40,690 for archive staff:
but paras 8.17 and 8.18 of Jensen 2 suggest that the latter figure
was his total allocation to that department. Both experts are
agreed that the archive staff is appropriately treated as litigation
cost. The material before me does not enable me to reach a view
as to the 40,690 figure. Had I awarded damages, I would have
required further information on this point, if it could not be
agreed.
Capital expenditure: 25,000
499. This item, which represents the cost of assembling the
Customer Service office and telephone system, is agreed.
IT: 46,000
500. This sum represents 23,000 for each of 2004 and 2005.
Miss Hassell regarded the costs, which amount to about 2,000
per annum per person, as reasonable and I accept her evidence
on that.
Insurance premiums: 191,669
501. Balmoral's annual premiums for product liability
insurance have greatly increased as appears from the following
table:
Year
Primary
cover
Premiu
m
Excess
cover in
millions
Excess
premiu
m
2001
2,000,0
00
51,450
3 < 2
4,410
2002
2,000,0
00
53,550
3 < 2
5,250
2003
1,000,0
00
182,564
9 < 1
21,000
2004/5
(15
months)
149,004
2005
133,678
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502. Miss Hassell's figure of 191,669 down to 31 December

2004 was derived by taking the 2002 premium of 53,550 and
postulating that it would, but for the cracking problem, have
increased by 10 per cent year-on-year in 2003 and 2004 and
deducting the premiums, thus increased, from the actual
premiums for the primary layer: see para 13.9.3 of Hassell 1.
The 10 per cent figure is the percentage that Marsh Ltd, the
brokers, say was applied to Balmoral's public/products rating
because of market conditions, the balance being almost
exclusively as a result of the intimation of pollution losses from
Balmoral's tanks. Borealis are concerned that the increase in
premium for the primary layer arises because overall cover has
been doubled; but there seems to me no basis for inferring that.
Nor do I accept Mr Jensen's suggestion that the expected 2002
premium should have been increased by 100 per cent rather
than 10 per cent for which there appears to me to be no warrant.
503. In the original calculation the premiums for the last two
years were not divided as between the primary and excess
layers. But Miss Hassell produced a further calculation (see the
document entitled "Additional Analyses") which assumed that
the excess of loss premium for those years was the same
percentage (10.3 per cent) of the total premium as it was in
2003. In my judgement this is a proper approach, in
consequence of which the amount of Balmoral's loss is as
follows:
2003
123,659
2004/5
52,663
2005/6
36,476188
Continuing
48,634
15 months
The amount down to 31 December 2004 is thus 176,332.

Summary
504. In monetary terms there is not in fact a great deal of
difference between the respective calculations down to 31
December 2004. The reconciliation reveals a difference of
152,634. Of that 110,377 relates to the insurance premium
and 40,690 to the additional deduction for archive staff, which
may in fact be a deduction of only 26,119 (40,690 - 14,571).
505. Subject to clarification in relation to the archive staff
point the amount that I would have awarded is as follows:
____________________
188 48,634-12,158.
714
Item
Amount
Staff costs
463,423
"Direct" costs
182,446
"Indirect" costs
157,434
Recruitment
23,373
Temporary staff
63,936
Overheads
230,820
Capital expenditure
25,000
IT
23,000
Increase in insurance
176,332
Less archive staff
(14,751)
Provisional total
1,330,852
Increased costs for 2005: 755,403

506. Miss Hassell reached a figure of 755,403 by taking the
2004 figures for staff salaries, recruitment cost, temporary staff
cost, allocation of direct and indirect staff cost and overheads of
678,904 (para 13.1.2 of Hassell 1), adjusted to 670,000 (para
19.7.1. of Hassell 2). To this was added 23,000 for IT costs
and 62,403 by way of a further calculation of the difference for
2005 between the actual cost of insurance for the primary layer
and the assumed cost if premiums had only increased by 10 per
cent year-on-year: see para 13.4.6 of Hassell 2 and para 13.9.3
of Hassell 1.
507. Mr Jensen produced a figure of 407,104 by the
methodology that he uses to forecast the future level of
increased costs: see paras 560-561 below.
508. Miss Hassell's approach appears to me to be a reasonable
one, save that, in the light of her additional analysis, the
62,403 figure for 2005 should be 36,476 (48,634 - 12,158).
The total increased cost for 2005 is, thus, 729,476.
Past loss of profits
Loss of sales
509. This is the claim in respect of which the parties are
furthest apart. Miss Hassell produced three illustrations as the
basis of a loss of profits claim, each put forward on the basis
that the cause of the loss of sales, and hence profit, was
Balmoral's loss of reputation because of the cracking problem:
(i) Illustration 1. This assumes that in respect of the years
between 2001 and 2005 Balmoral has lost a year-on-year 10
per cent cumulative
[2006] Vol. 2
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LLOYD'S LAW REPORTS

straight line increase in profit because of the tank cracking

problem;
(ii) Illustration 2: This assumes that, in addition, Balmoral
lost a further 10 per cent year-on-year straight line cumulative
loss because it lost the business that it would otherwise have
got because of the introduction of the new Regulations;
(iii) Illustration 3 assumes that, in addition, Balmoral has lost
a further 10 per cent year-on-year cumulative straight line loss.
Each of those illustrations produces a forecast figure for sales
from which the actual sales figure is deducted to produce a
shortfall: see paras 17.2.2. and 17.3.8 of "Hassell 1". The final
revised figures for shortfalls are at 11.18.3 of Hassell 2.
510. Miss Hassell puts forward these illustrations, all of which
Borealis characterise as speculative and unrealistic, as possible
outcomes. In para 17.5 of Hassell 1 she expressed the view that
it was reasonable to assume that Balmoral would at least have
continued its historic growth as in illustration 1; and in para
11.10.2 of Hassell 2 that it would be "pessimistic to assume that
Balmoral would have simply repeated its historic performance
given the opportunities in the industry". Her re-examination
includes the following passage:
Q. Now, at the beginning of your cross-examination, in
answer to a question concerning your three models, or three
options for loss of profits, the 10, 20, and 30 percent, you said
in answer to a question by Mr Allen, I can give you the options
in my order of preference if you like, but that invitation was
either advisedly or inadvertently not taken up by Mr Allen. It
may possibly be of some assistance to His Lordship if you
were to indicate of those three options in which order you
consider them to be preferable?
A. Right. Perhaps putting me on the spot on precise order. I
think probably what - provided that it's accepted there is
evidence that the regulations have been implemented, and I
believe that there is, I think that it's reasonable to think that
illustration 3 was achievable but I think that illustration 2 takes
you to what is a realistic assumption of actual outcome, so it
makes a discount effectively for the uncertainty of that things
might not go quite to plan.
511. The answer to the question - how much less did Balmoral
sell on account of the cracking problem? - is dependent on so
many imponderables as to come close to speculation. I have no
crystal ball to determine the answer. It is, however, clear to me
that Balmoral must have suffered a loss of profit on account of
the problems with cracked tanks and that it would be unjust to
decline to
715
determine any figure on account of the formidable difficulties

involved in doing so. That Balmoral might suffer such a loss of
profit was something that Borealis should have had in
contemplation as a possible consequence of supplying borecene
which was unfit for the purpose of making oil tanks. I reject the
suggestion that any profit attributable to the additional demand
for bunded tanks in consequence of the new legislation was too
remote.
512. My task must be to examine what, on the established
facts, is shown to be the probable level of loss. I start with the
historical figures for the turnover in pounds of the Balmoral
rotomoulding division. These are:
Year
Other
Fuel tank
RM div
96
2,006
2,393
4,399
97
2,334
2,634
4,968
98
1,855
2,921
4,776
99
1,739
3,279
5,018
00
1,912
3,610
5,522
01
1,966
2,998
4,964
02
2,457
2,547
5,004
03
2,773
2,218
4,991
04
3,477
1,926
5,403
05
1,870
513. These figures show Balmoral's rotomoulding turnover to

have been in the 5,000,000 region, and that, as sales of fuel
tanks declined, sales of other products increased. The evidence
does not however establish that Balmoral was constrained,
either physically or psychologically, to a level of production
measured by that level of turnover. Paragraphs 46ff of Mr
Joyce's second statement indicate that existing machine capacity
could cope with at least the levels of production in illustrations
1 and 2, although more dubiously in relation to illustration 3
(see para 9.64 of Jensen 2).
514. The figures for the division do not reveal a 10 per cent
year-on-year increase. But between 1996 and 2000 the turnover
in fuel tanks does show a year-on-year increase of, on average,
about 10.75 per cent, despite the fact that Balmoral were more
expensive than other manufacturers, followed by steady
decrease thereafter.
515. The figures also show that revenue lost from fuel tanks
was balanced by revenue gained from other things. Borealis
submitted that the increase in turnover from the latter should be
regarded as the fruit of resources devoted to those sales, which
either would not or could not have been so devoted
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LLOYD'S LAW REPORTS

if Balmoral was securing increases in fuel tank sales in line with

any of Miss Hassell's illustrations. The evidence does not
however persuade me that that was so.
516. Miss Hassell's illustration 1 takes the figures for fuel tank
sales for 1998-2000 and assumes that, but for the cracking
problems, those sales would increase at the same rate until
2005. Borealis contend that three data points are wholly
inadequate to establish a trend line to the end of 2005 or
beyond. There would be more force in this contention if the line
being plotted was of data subject to a high degree of
unpredictability or scatter. Whilst continuation of turnover is
always to some extent unpredictable the figures show that, in
respect of fuel tanks, Balmoral was consistently maintaining a
10 per cent increase in turnover year-on-year over a four year
period, in circumstances where it was under what a March 1996
internal report described as "extreme price pressure in the
market". All other things being equal that was something that
could reasonably be expected to continue.
517. It would appear that the majority of Balmoral's sales prior
to 2001 were single skinned tanks. The sales figures (turnover)
from February 2001 (Jensen 1, Exhibit 11), when Balmoral
started to keep detailed separate statistics, show the following
percentages:
Year
Single skinned
tanks
Bunded tanks
2001 (Figures
from February)
57 per cent
43 per cent
2002
51 per cent
49 per cent
2003
36 per cent
64 per cent
2004
26 per cent
74 per cent
Statistics in relation to single skinned tanks reveal that the

majority in number (85 per cent) of Balmoral's sales of fuel
tanks between 1997 and 2000 were of tanks with a capacity of
2,500 litres or less. These, if sold to domestic end-users, as
small tanks would tend to be, or for use in agriculture, would
not be caught by the Control of Pollution Regulations. Nor
would such tanks, unless close to water, be caught by para J6 of
Schedule 1 of the Building Regulations. In subsequent years
there was a change of mix in favour of the commercial sector.
518. In submitting that an assumption of continued 10 per cent
growth year-on-year after 2000 parts company with reality
Borealis places heavy reliance on a letter of 18 October 2001
written by
716
Mr Joyce to Mr Milne. That letter contains the following

passages:
Jim
Just a brief note to keep you posted on the current status of
the rotational moulding tank market. You may not actually
believe this, but I can assure you it is getting worse.
Kingspan
No real change in terms of pricing. Still exceptionally low,
despite the fact that they continue to offer free Watchman
probes with every tank. Would you believe that they are
allowing Richie (sic) Lowry's Company to offer the
Watchman.
Up until last week, I had not spoken with anyone from
Kingspan for a number of months. Out of the blue, and on the
same day I got calls from Philip Browne and Brendan
Deering. Philip wanted to know if Atlas Tanks were affecting
us. I said he should know being part of the same group.
...
Atlas Tanks
Despite Richie's comments to us, he is exceptionally active
among our accounts. Typical deals include, 90 days credit, 2
tanks f.o.c with every full load and low profile type tanks at
105.00 nett.
How can a start up company offer deals like this? I stick to
my original thought that Kingspan are behind this 100%.
...
Harlequin Tanks
Similar pricing levels to the other two. Consignment stock
and low prices. I wish we could put together a long term
business plan like that. This must have taken years to think of.
Balmoral Tanks
We seriously need to consider our position in this market,
and be clear on what we are trying to achieve. We continue to
gain excellent margins and some of our distributors can
successfully sell tanks at higher prices. However, the market
price to the merchants/distributors continues to fall and I have
serious doubts that it will be able to recover.
The crazy thing about it all is that the end-user would pay at
least double the current price. The manufacturers and the
manufacturers alone are destroying this market. There really is
no one else to blame . . .
I attach a summary of our contribution per product group,
which I would like to discuss with you as quickly as possible.
[2006] Vol. 2
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519. Mr Joyce was said to be a man not given to looking on

the bright side. Even if that was so (and none of his previous
memoranda were as gloomy), the facts referred to in the letter written toward the end of 2001, the first year of the period
which illustration 1 takes as the start of a series of years from
2001 to 2005 with 10 per cent annual increases - indicate that
market conditions were tough because of the competition.
Kingspan, with "exceptionally low" prices, was way and above
the market leader. The Richard Lowrie referred to was the
former Sales Director of Kingspan, who had, according to what
he told Mr Joyce, been offered 1,000,000 by Kingspan not to
set up in competition and had told Balmoral he would not
compete with them. In the event he had set up Atlas Tanks,
which entered the market in April 2001, and was, according to
the letter, "exceptionally active" with bargain offers amongst
Balmoral's accounts.189 Market prices to distributors continued
to fall. Mr Joyce must have thought that the market was bad and
getting worse.
520. The letter noticeably does not mention cracking tanks as
having any impact on sales. Nor does any document pre-dating
it. Complaints in 2001 were significantly higher than historic
levels (about 400 for that year, with complaints increasing
particularly from July onwards 190) but the bulk of complaints
came in 2002 (1,000), 2003 (c 2,100), and 2004 (2,000). 191 An
analysis of complaints carried out in August 2001 revealed an
increase in the percentage of complaints in the period January
1997-July 2001 compared with January 1997 to December 2000
ie to 1.58 per cent of production for single skinned and 1.48 per
cent for bunded from 1.33 per cent and 1.21 per cent. 192
521. Mr Mawrey submits that it would be wrong to place
much reliance on this letter and that it cannot be read as
showing a serious and permanent downturn in business; nor can
the absence of reference to cracking detract from the fact that
Balmoral was beginning to realise that the cracking problem
was serious. Balmoral also draws attention to a number of other
factors. It had a reputation for quality. In a 1997 survey about
88 per cent of distributor respondents placed Balmoral first in
terms of quality and 84 per cent placed it first in terms of
service. It had a wider range of tanks than its competitors.
Although the results for the first half of 2001 were below
budget the dip was not particularly large; there had been dips
before and sales had risen again. Further the period from
September to November was the time when sales usually
reached their monthly peaks, October usu____________________
189 Atlas started with small single skin tanks; but later expanded its range.
190 See the graph at para 15.1.3 of Hassell 1.
192 18/5707-8.
717
ally being the highest. The new regulations increased demand

for bunded tanks, which, themselves, were at the more
expensive end of the market. 193 So a small change in the
proportion of tanks sold that were bunded could produce a
significant change in the turnover received for the sale of the
same number of tanks. Consistently with this, between 2000
and 2004/5 Balmoral's volume of sales fell by 75 per cent, but
because of the change to bunded tanks, sales value fell by only
45 per cent.
522. Balmoral also point out that it aimed to dominate the
bunded tank market (see its "Growth and Development 2000"
plan), had expanded its tank range in anticipation of the effect
of the new regulations, and launched a marketing campaign
focusing on bunded tanks. It had spent 250,000 on new
moulds in order to exploit the opportunity for such tanks. True
it is that there were new entrants but that should be regarded as
a response to increased demand rather than an attempt to take
Balmoral's market share. Balmoral had always been more
expensive, but that had not stopped them progressing before. In
order to meet Miss Hassell's illustration 3 for 2005, it would
need about 8 per cent compound volume growth from 2000.
Events in 2001
523. In 2001 the upward trend of Balmoral's tank sales
changed dramatically. By September 2001 actual sales had
begun to diverge significantly from 2000 actual and 2001
budgeted figures.194 The true cause of this decline is debatable.
Mr Joyce's letter suggests that the cause was a crowded market
and price competition from companies seeking to gain market
share in order to take advantages of the additional sales that the
regulations would generate. The fact that between January and
August sales figures were 9.1 per cent down on the same period
for 2000,195 with all months save February and May down on
2000, would tend to support that, and to suggest that there were
factors affecting Balmoral other than problems of tank cracking.
Mr Joyce thought that Balmoral's withdrawal from the Irish fuel
market in 2000 and the absence of a sales manager from
October 2000 to October 2001 might be to blame. If so, these
were factors that (a) had nothing to do with cracking and (b)
would have, particularly in the case of the former, continuing
effect. Another factor may have been that buyers were preparing
to shift to bunded tanks. Mr Joyce
____________________
193 For example, in September 2005 a single skin SL 1250 had a price of 345
and a bunded version either 1,160 or 1,200 (with a "Watchman Plus" fitted as
standard).
195 See Schedule E 2 to Jensen 1 (DF 1/223). The decrease by comparison to
budgeted figures was even more marked. In August and September 2001 the
reduction was about 25 per cent: see DF 2/430.
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expected that the dip in sales in the first two quarters would be
reversed in the last two.
524. By September 2001 complaints of tank cracking were
being received in significant numbers (over 50 in July, over 60
in August, about 35 in September, nearly 50 in October 196), and
by 2 November 2001 Mr Woolley had referred - see para 111
above - to the worryingly high number of complaints in respect
of the H 2500 and SL 1250 tanks. (There were also complaints
of bulging in respect of the SL 1250 tank.) By the end of the
month Mr Joyce was recording in an internal memorandum 197
that Balmoral's reputation had been severely affected by the
cracking problem and that competitors could begin to use it
against them, bearing in mind that some of Balmoral's key
stockists were already dual stocking. After September the
increasing divergence between actual and budgeted figures for
the remainder of the year may be attributable in part to the
delivery of defective batches of borecene and the consequent
interruption of production. But the effect on production cannot
have been that large. 603 tanks were manufactured from the
defective borecene - about three days lost production; 403 had
to be scrapped and the remainder sold on a concessionary basis.
Sales continued to decline thereafter.
Conclusion on loss of sales
525. I am not persuaded that, absent the cracking problems,
Balmoral would have sustained a continuous year-on-year 10
per cent increase in turnover of fuel tank sales, or such a series
of increases (or increases and decreases) in turnover as would
have averaged out to the same effect. A sustained run of that
size, which Balmoral's projections carry on until 2012, would
be quite an achievement, and there were, as it seems to me,
indications that the good run of year-on-year increases up to
2000 was about to run out. Market conditions had changed.
Bunded tanks were the coming product. The low pricing and
increased competition referred to in Mr Joyce's letter were
matters that depressed his view of prospects, quite apart from
any significance that the cracking problem might have.
Although the cracking problem was beginning to be felt it does
not seem to me that by the autumn of 2001 it had reached such
a point that it was likely to have been a substantial cause of the
shortfall in sales between both budgeted and 2000 figures.
526. The new regulations represented an opportunity for
increased business, from which the oil tank market benefited.
DEFRA estimated that, on a worst case analysis, about 60 per
cent of the overall existing stock of 818,423 tanks in the nondomestic
____________________
196 The total number of complaints about split tanks was of the order of 158 in
2000 and 390 in 2001.
197 18/6019.
718
market were either unbunded (40 per cent) or inadequately

bunded (20 per cent).198 It also estimated that 36,378 new above
ground tanks were purchased annually. A Regulatory Impact
Assessment issued by the Office of the Deputy Prime Minister
estimated that in 1998 about 80,000 tanks were sold to the
domestic market with about half of them having a capacity in
excess of 2,500 litres; that 10 per cent of them were currently
bunded and that J6 of the Building Regulations would require a
level of bunding of 15 per cent with an additional national cost
of 1.8 million. But there were several manufacturers chasing
the business, many with low prices, eg (i) Kingspan; (ii)
Harlequin, the brand name of Clarehill; (iii) Atlas (new); (iv)
Carbery; (v) DESO; (vi) Tuffa; and (vii) PC Rotomoulding.
Midas Tanks Ltd ("Midas"), which entered the fuel market in
October 2003, with a bunded tank range, was to become
another.199 The existence of several others in the market may
have made the market more price sensitive.
527. I note, also, that in 2004 the Society of British Gas
Industries conducted a survey for OFTEC. That indicated that
five principal manufacturers of above ground plastic oil tanks
sold 79 per cent single skin and 21 per cent bunded (in units).
By 2000 20 per cent of Balmoral's sales were of bunded tanks.
Too much should not be read into these statistics since the
comparison is between the respondents to the survey (Kingspan,
Carbery, DESO, Clarehill and Balmoral) in 2004 and Balmoral
alone in 2000. But in 2000 Balmoral had not been beset by
cracking problems and was a prominent member of the market.
If its share of the market in 2000 was representative there would
seem to have been little change in the proportion of bunded
tanks sold by the market between 2000 and 2004.
528. In addition, the Regulations were likely, for the most part,
only to affect businesses (not including agricultural business)
and it is unrealistic to think that there would be 100 per cent
compliance with them. Some users would be ignorant of the
Regulations and some would ignore them, at least until they
have to change a tank. The extent to which the Regulations
would prove to be the driver for bunded tanks is, in any event,
uncertain. In its Regulatory and Environmental Impact
Assessment on the COP Regulations DEFRA estimated that
some 60 to 90 per cent of new tanks ordered would have been
ordered in bunded form, whether the Regulations were brought
in or not.200 Even so, if only 40 per cent of new tanks were
bunded tanks that were bought bunded because of the
regulations
____________________
198 DF 2 454 and 18/5846 para 22.
199 Midas was established by Chris Golden who left Kingspan at the same time
as Richard Lowrie to join Atlas.
200 18/5846, para 22.
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that would be an additional market of, say 36,378 40 per cent

= 14,551.
529. Most of Balmoral's tank designs were and, as previously
noted (para 517), historically most of Balmoral's sales had been,
of tanks of 2,500 litres or below, in respect of which the COP
Regulations would not require domestic users to have a bunded
tank, nor would the Building Regulations require one if the tank
was not near water.
530. As to Balmoral's reputation for quality, albeit at a higher
price, it is difficult to gauge its significance in relation to
bunded tanks. At least three different users are relevant (a) the
user who already has a Balmoral single skin tank; (b) the user
who already has a single skin tank from some other supplier;
and (c) the user who has no tank at all. Users in category (a)
would, I expect, on the whole be likely to replace their existing
Balmoral tank with another, but some in this category would
take the opportunity to trade down, especially if they found
themselves compelled to buy a new tank soon after an earlier
purchase. Users in category (b) would be unlikely to trade up,
although some might. Those who were acquiring a tank for the
first time would make their choice according to the importance
to them of quality and service (as reported to them in most
cases by the distributor) over price.
531. Further, insofar as reliance is placed on a loss of trade in
bunded tanks on account of Balmoral's reputational problems,
any evaluation of that loss of trade must take account of the fact
that, for the most part, the cracking problem arose in single skin
tanks. Some distributors who became wary of Balmoral's single
skin tanks may have had less anxiety or no anxiety at all in
relation to bunded tanks. One such distributor was Mr Chris
Glass of Hesset Grain & HG Tanks who had ceased buying
single skin but continued to buy bunded tanks and sewage
treatment products from Balmoral. He bought his single skin
tanks from Atlas and Midas. By contrast Mr Ian Mackie of CHF
Supplies stopped purchasing all but a small percentage of oil
tanks from Balmoral.
532. I did not find the position of Kingspan much of a reliable
guide to Balmoral's prospects in the bunded market. Kingspan
is a significantly different company. It is the market leader. Its
products are cheaper (Balmoral's prices are about 30 per cent
higher) and had a useful "Watchman" accessory, as some of
Balmoral's tanks came to do. It operates in the Irish market,
which Balmoral no longer does. Its environmental containers
division includes tanks; but it is not possible to discover the
division's figures in relation to tanks alone. In its 2001 accounts
the division, which includes but is not limited to tanks, is
expressed as growing "on the
719
back of increased demand for products that offer increased

environmental protection" although turnover growth in
environmental containers appears fairly flat. Its 2002 accounts
indicated that it had led the conversion in commercial
applications in the UK from single skin to bunded, but the
division's growth in sales was 2 per cent. The accounts also
indicated that Kingspan had focused on the UK and Irish
markets but had now identified other markets to be supplied
from their new Polish facility. In 2003 the division's 17 per cent
increase in turnover was said to be underpinned in the main by
increased conversion to double-skinned domestic oil storage
tanks and "by a much improved position in the Irish domestic
waste treatment market". In 2004 the division had an increase
of sales of 11 per cent said to be based on a shift towards "more
value-added environmental solutions" (presumably a reference
to, or including, bunded tanks) and its value adding Watchman
system and the success of the Polish based mainland European
business. The interim statement to 30 June 2005 records that
organic (ie not derived from acquisitions) revenue in the
division increased by 20 per cent but with much of that growth
coming from a range of effluent treatment products. It also
records that "revenue in fuel storage products in the UK and
Ireland continued to grow despite an underlying reduction in the
total volume available in the market. This growth reflects the
continuing conversion to higher value double skinned products
with telemetry enhancements". Nothing in these accounts
makes out a 10 per cent year-on-year increase in tank sales.
533. It follows that I am even less satisfied that Balmoral
would have achieved a 20 per cent or 30 per cent year-on-year
increase in turnover. These suggestions, especially the latter,
appears to me to be particularly optimistic, and to rest more on
wishful thinking than evidential support. No evidence has been
produced showing that any manufacturer has achieved such
sustained increases in turnover in fuel tanks sales.
Mr Jensen's calculations
534. Mr Jensen's calculations were these. First he estimated a
loss of sales for September to December 2001 by calculating
projected sales for the period September to December 2001.
These were calculated by applying the 9.1 per cent average
reduction of January to August 2001 fuel tanks sales compared
with January to August 2000 sales to the sales from September
to December 2000. He then deducted the actual sales for the
period September to December 2001 making a loss of
283,530: Schedule E2. This figure he took as reflecting a loss
of sales filtering through from July 2001.
[2006] Vol. 2
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535. In relation to loss of sales from 2002 onwards Mr Jensen

put forward three different bases of calculation.
Basis 1 Schedule E3201
536. On this basis he calculated the average sales of the whole
rotomoulding division for 1999-2001 and took that figure as the
projected sales figure for 2002, 2003, 2004, and 2005 (to
March). He then compared it with actual sales for those years
producing a loss in 2002 and 2003 of 259,253 and 272,237.
The overall loss of sales was:
2002
259,263
2003
272,237
2004
(139,760)
2005
(135,397)
720
gross margin (ie sales less cost of sales) for the year ending 31
March 2005 for single skin and bunded tanks. She chose that
year because she thought that the earlier figures would have
been distorted because warranty costs had been put through the
cost of sales. She then calculated the share of the cost of
carriage and rebates that sales of single skin and bunded tanks
should bear by applying the proportions of sales of each of
those tank types to those two costs. She then calculated the
share of fixed costs included in the cost of sales which ought to
be allocated to sales of the two tank types and then added back
into gross profit (because they are not costs that would increase
with increased sales). She did this by taking the relevant
product's share of the total cost of sales and applying it to the
fixed costs. By this process she derived a gross margin of 35 per
cent for single skin and 40 per cent for bunded tanks. She then
assumed that 75 per cent of tanks would be bunded during the
period. With this data, applied to the loss of sales calculated in
respect of illustrations 1, 2 and 3, she derived a loss of profit,
down to 31 March 2005.
Mr Jensen's calculations
256,333
537. He then performed the same exercise but using, as from
2002, an average of fuel tank sales figures alone for the years
1999-2001, producing estimated lost sales as follows:
2002
843,981
2003
1,172,666
2004
1,464,463
2005
274,528 to March
3,755,638

538. His third exercise was the same as for Basis 2 but using
as the basis of projection the 2000 actual figures discounted by
9.1 per cent. This produced estimated loss sales of
2002
736,068
2003
1,064,753
2004
1,356,550
2005
253,875
3,411,246
Loss of margin
Miss Hassell's calculations
539. Once a figure has been arrived at for the loss of sales it is
necessary to identify what is the profit that is attributable to the
loss of gross receipts from those sales. Miss Hassell has first
calculated the
____________________
201 DF1/224.
202 DF1/228.
203 DF1/229.
540. Mr Jensen reviewed the financial statements from 2002 to

2005 and derived an annual gross profit margin. Like Miss
Hassell he included in addition to the costs of sales carriage
and rebates as further variable costs. He took a different
approach to the calculation of fixed costs, which was to take the
standard costing for a SL 1250 tank - Schedule E16 - which had
a figure for overhead costs included in it. He then derived from
Exhibit 12 to Hassell 1 what percentage of Balmoral Tanks'
factory overheads was variable (54.93 per cent): Schedule E17.
He applied that percentage to the overhead costs in the standard
costing. He thus established the variable (84.27 per cent) and
fixed (15.73 per cent) proportions of costs of sales. The result of
his exercise was to show a rate of gross profit ranging from 27
per cent to 44 per cent: Schedule E11. By the time of his
supplemental report he had, in consequence of discussions with
Miss Hassell, made further revisions to his calculation of the
fixed element of the cost of sales by using the percentages of
fixed costs which had formed the assumptions upon which the
cost of replacement tanks had been agreed in the Joint
Statement ("the new percentages" eg Rent - 100 per cent;
Salaries - 67 per cent; Fuel - 20 per cent): Jensen 2 Schedule
E16.This produced different and higher profit margins: see
Jensen, Schedule E1.
541. In her second report Miss Hassell employed a similar
methodology. First she updated Exhibit 12 to her first report
which had allocated factory
[2006] Vol. 2
QBD (Comm Ct)
LLOYD'S LAW REPORTS

overheads between fixed and variable costs, but, now using the
new percentages. This suggested that 38.12 per cent of the costs
included in the factory overhead were variable (the figure used
in Jensen 2 Schedule E16). She then took Mr Jensen's summary
of the SL 1250 tank production, updated with the 38.12 per cent
figure, and produced the result that 21.61 per cent of total
manufacturing costs were fixed. She then used this figure as the
fixed cost adjustment to be added back to the gross profit, thus
deducing a gross profit margin for each of the years 2002/3 to
2004/5 for single and bunded tanks. I call this "Method A".
542. She also reworked her own calculations of the amount of
fixed costs using the new percentages. From that she derived
the percentage of fixed costs of total costs of sales and applied
those percentages to the cost of sales of single skin and bunded
tanks. That enabled her to calculate an adjusted cost of sales
(cost of sales plus additional variable costs ie carriage and
rebates less fixed cost adjustment) and thus produce a gross
profit margin. I call this "Method B".
543. Method A and Method B produced the same result for
2004/5 and comparable results for 2003/4. But Method B
produced for 2002/3 a margin 3 per cent below Method A. Miss
Hassell accordingly took the higher margins for 2002/3, the
average of the estimates for 2003/4, and the 2004/5 figure,
producing gross margins as follows:
721
Mr Jensen's final calculations

545. In contrast Mr Jensen's calculations - Jensen 1/E 1 as
amended by Jensen 1/E2 - take the estimated lost sales which
form Bases 1, 2 and 3, and apportion those losses as between
single skin and bunded tanks. Thereafter the rate of gross profit
derived from Mr Jensen's other calculations is used to produce
figures (as revised) for lost gross profit which are as follows:
Basis 1
264,641
Basis 2
1,519,106
Basis 3
1,392,647
Attribution of lost sales as between single skin and bunded

tanks
546. Mr Jensen's calculation for attributing lost sales as
between single skin and bunded tanks is buried in Schedule E10
of Jensen 1. The allocation for 2001 was Single 56 per cent and
Bunded 44 per cent. That allocation, as I understand it, is
reached by deducting the revenue for single skin/bunded tanks
for each year from the estimated revenue for those types of tank
in 2000. Thus the figures for sales in 2000 and 2001 were as
follows:
2002/3
2003/4
2004/5
Year
Single
Bunded
Single skin
31 per cent
45 per cent
40 per cent
2000
2,132,149
1,442,848
Bunded
37 per cent
46 per cent
45 per cent
2001
1,808,771
1,189,041
Miss Hassell's final calculation
Difference
323,378
253,806
544. Miss Hassell's final calculation - see appendix 8 of

Hassell 2 - takes the shortfalls in turnover predicated by
projections 1, 2 and 3. In the case of projection 1 it assumes that
the shortfall is 60 per cent in single and 40 per cent in bunded
tanks. In the case of projections 2 and 3 it assumes that sales of
single tanks would have grown at the 10 per cent rate and that
the additional growth shown in illustrations 2 and 3 would be in
bunded tanks. In the case of all three projections it takes the
gross margins referred to in the previous paragraph. This
produces alternative claims in respect of the years 2001 to 2005
of:
Ratio
56 per cent
44 per cent
Projection 1
4,757,274
Projection 2
7,371,034
Projection 3
10,203,154
See appendix 8 and para 11.18.4 of Hassell 2.
Conclusion on loss of profit down to 2005

2001
547. In my judgment it is appropriate to use Mr Jensen's
method of calculating the loss of profit down to December
2001. I do not regard it as established that Balmoral's reduction
in turnover in the nine months up to September 2001 is
attributable to the cracking problem. Until mid-2001 the volume
of complaints was relatively small (just over 100 to the end of
June) , and even in 2001 was markedly less than in 2002-2004;
further the effect of a rising ride of complaints would take time
to have an effect on sales. There were, moreover, other factors
operating to reduce sales (eg increased competition, pulling out
of Ireland, and loss of a sales manager). In those circumstances
damages should be calculated by reference to the period
September to December 2001. It seems to me reasonable to
assume that, but for the cracking
[2006] Vol. 2
QBD (Comm Ct)
LLOYD'S LAW REPORTS

problem, the sales for that period would bear the same
relationship to the sales for the same period in 2000 as the sales
in the period January to August 2001 bore to those in that
period in 2000.
2002-5
548. For this period I propose to take an average of fuel tank
sales alone, and not of the whole rotomoulding business,
because I am not persuaded that Balmoral could not have
achieved both greater sales of fuel tanks and also the increase it
did achieve in sales of other tanks. To take the average of sales
in the three years up to and including 2001 reflects the fact (a)
that 2001 sales of fuel tanks were down for reasons that
probably had little to do with Balmoral's tank cracking
problems, and (b) that one year is not necessarily representative.
A year in which relevant turnover decreases by over 9 per cent
before the cracking problem has any significant impact may be
not only unrepresentative but rogue, in that, but for that
problem, fuel tank sales would have resumed their upwards 10
per cent a year increase. Or it may be a sign of further
deterioration or stagnation to come. In those circumstances I
think that the least unsatisfactory basis for estimating
Balmoral's loss of profits on account of the cracking problem is
to take the shortfall between Balmoral's fuel tank sales turnover
and the average turnover for the three years ending with 2001
(estimated in relation to September to December). That
shortfall, at any rate, seems to me properly attributable to the
effect on Balmoral's reputation of the cracking problems.
However, the base figure of projected fuel tank sales of
3,391,255 should be index linked to allow for inflation.
722
tanks from Balmoral (eg Mr Glass), some were not prepared to

purchase tanks at all (eg Mr Mackie). It is not sensible to
assume that there was practically no loss of bunded sales in
2004 when some distributors ceased buying bunded tanks from
Balmoral. In my judgment the appropriate course, for want of
any more reliable figure, is to take the ratios of the value of
single to bunded tank sales contained in the table at 11.14.2 of
Hassell 2 viz:
Type
2001
2002
2003
2004
2005
Singl
e
60 per
cent
51 per
cent
46 per
cent
36 per
cent
36 per
cent
Bund
ed
40 per
cent
49 per
cent
64 per
cent
74 per
cent
74 per
cent
The 2005 figure is a repeat of 2004. If a more up to date figure

for 2005 can be found, that can be used.
550. Lastly it is necessary to determine the applicable rate of
gross profit. In this respect I think it appropriate to take Miss
Hassell's figures - see para 543 - as follows:
2002
2003
2004
2005
Single
skin
31 per
cent
45 per
cent
40 per
cent
40 per
cent
Bunded
37 per
cent
46 per
cent
45 per
cent
45 per
cent
Future loss
Allocation of loss of sales as between single skin and bunded

tanks
Emergency change outs 12,557,100
549. It is then necessary to apportion those lost sales as

between single skin and bunded tanks. Mr Jensen's method, as
explained in para 546 above, appears to me artificially to fix the
ratio of single skin to bunded tanks by reference to the ratio that
existed in 2000, when the reality is that bunded tanks took a
higher portion of turnover in later years. This may, in part, have
been due to the impact of the cracking problem on Balmoral's
sales of single skin tanks. But, even without the problem, the
proportion of turnover attributable to bunded tanks would
surely have increased. Mr Jensen's calculations produce the
result that for 2004 and the first three months of 2005 the
proportion of lost sales attributed to bunded tanks is 1 per cent.
Although there is evidence that some distributors were prepared
to buy bunded but not single skin
551. The extent to which Balmoral will have to change tanks

in future (ie from 1 January 2006 onwards) depends on the
future failure rate of tanks. Miss Hassell reaches 12,557,100 in
the following way (Hassell 2, para 7.2.4):
Miss Hassel's approach
MFR 3
MFR 6
MFR 4
Product
ion
34,565
21,717
6,055
Illustra
ted
failure
rates
25 per
cent
100 per
cent
33 per
cent
Illustrat
ed
failures/
change
outs
8,641
21,717
1,998
32,356
Less:
already
dealt
with
(2,706)
(5,255)
(523)
(8,484)
Less:
standar
d
failures
(1,020)
(643)
(179)
(1,842)
62,337
Excess
failures
4,915
15,819
1,296
22,030
Valued
at 570
2,801,5
50
9,016,8
30
738,720
12,557,
100
552. In the above table the standard failures are the failures to
be expected by applying the 2.96 per
[2006] Vol. 2
QBD (Comm Ct)
LLOYD'S LAW REPORTS

cent underlying failure rate to production. The 570 figure is

agreed. The critical question therefore, is whether the illustrated
failure rates represent the likely incidence of failure. The
calculation in the table assumes no deferrals. If Balmoral is able
to apply its warranty terms as it has done historically, without
end-users returning to Balmoral later, then Miss Hassell would
value 5 per cent of the failures at the lower, agreed, rate of 49.
That rate assumes that the current policy of requiring the enduser to pay for a survey does not continue to apply. This would
produce a claim of 11,983,219 (see Hassell 2 para 7.2.5). 5 per
cent was the historical rate of deferrals to March 2005. The rate
for 2004 was about 7.75 per cent. Miss Hassell took 5 per cent
on the ground that the 7.75 per cent rate reflected the tougher
line policy which she thought would probably not be
maintainable.
553. This exercise assumes that every failed tank will be
reported. In fact not all tanks that would fail within the
guarantee period will be reported to Balmoral. The end-user
may change the tank before it fails, lose the guarantee, move
on, or may not be bothered to make a claim, especially if the
failure is towards the end of the guarantee period.
554. The underlying failure rate of 2.96 per cent was, in the
event agreed.204 That percentage had been reached by taking, in
respect of tanks produced in 1995 and 1996, the failure rates per
year of production for each year of the ten year guarantee
period.205 For each year of that period an average was taken of
the failure percentages in respect of 1995 and 1996 production.
That produced an average failure rate for each year from the
year of production onwards. The total of the averages for the
individual years was 2.96: see para 9.8.1 of Hassell 1.
555. In a subsequent calculation Miss Hassell used the data
from the first calculation to derive the cumulative standard
failure rate at 2004, ie the percentage of 1995 and 1996
production that had failed by the end of 2004. She then took the
cumulative actual failure rates to 2004 of tanks produced (from
all materials) in the years 1997 to 2002. Thus, by way of
example, the cumulative actual failure rate in 2004 for tanks
produced in 1997 (year seven of the guarantee period) was 4.48
per cent. The cumulative standard failure rate for year seven
was 1.28 per cent. The ratio between them is 3.50 (4.48 1.28).
By repeating this exercise for all production from 1997 to 2002
Miss Hassell derived a series of multiples which appear in the
second column below:
____________________
204 Although Mr Jensen sought to adduce evidence casting doubt on it, which I
declined to admit.
205 The period in fact spans 11 years - from 0 to ten - since a tank purchased on
1 January 2002 might fail on 2 January 2002 and one purchased on 31 December
2002 might fail on 30 December 2012. Both failures would be within the warranty
period.
723
Year
Cumulative
failure rate by
2004 as a
multiple of the
cumulative
standard failure
rate
Multiple applied
to the
cumulative
standard failure
rate at the end
of the guarantee
period, ie 2.96
per cent
1997
3.5
10
1998
7.86
23
1999
8.66
26
2000
26.06
107
2001
38.03
114
2002
11.27
33
556. She then applied the multiples in the second column to

the cumulative standard failure rate for year ten, ie 2.96 per
cent. This produced the estimated ten year percentage failure
rates for different years of production in the third column of the
table above. This exercise assumes that the actual rate of failure
will continue to outstrip the standard rate by the same multiple
throughout the guarantee period. Miss Hassell then deducted
2.96 from each of the failure rates in the last column to get an
"excess" failure rate ie the estimated failure rate attributable to
the deficiencies of borecene. On that basis she postulated
cumulative excess failure rates as follows:
MFR 3
1997
7 per cent
MFR 6
1998 & 1999
22 per cent
MFR 6
2000 & 2001
97 per cent
MFR 6
2002
30 per cent
557. These figures go some way to support the illustrated

failure rates in the table at para 551. But they are open to the
following objections:
(a) the exercise is dependent on the assumption that the
relationship between ZN and borecene failure rates is a
constant multiple. In fact failure rates declined or flattened out
in 2005 for most materials (see para 10.1.5 of Hassell 1 and
the graphs at para 2.9.1 of Hassell 3 206) and their direction in
the future is unclear;
(b) the illustrated failure rates are not the same as those
proposed in Miss Hassell's first report;
(c) the failure rate of 100 per cent for MFR 6 was not
supported by Mr Clements in evidence;
(d) the exercise compares failure rates of all production of a
particular year with the underlying ZN failure rate, whereas
there are dramatic differences between failure rates for
different tanks. Many tank designs have very low failure
____________________
206 The graphs also show that MFR 6 and MFR 4 achieved considerably
higher failure rates in years one to five than other grades.
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QBD (Comm Ct)
LLOYD'S LAW REPORTS

rates (eg between 0.5 and 8 per cent) even in MFR 6.

Nevertheless all MFR 6 made tanks are assumed to fail.
558. As to these points Balmoral observes the following.
Firstly, the reduction of predicted against actual failure rates in
2005, applicable as it is to most materials and years of
manufacture, and, in particular to MFR 6, must be attributable
to some factor independent of the material, of which the MFR 6
change outs and the 50 per cent fill policy for those tanks
(which, if followed, would reduce the stress to close to nil) are
the obvious candidates.207 Secondly the difference in the figures
is little more than a rounding exercise or a degree of estimation.
Thirdly, Mr Clements' revised opinion was, none the less, that
some models of MFR 6 tank would fail as to 100 per cent
within the ten year period. Fourthly, Mr Mawrey contended that
the probable result of an adverse judgment to the effect that
borecene was not suitable for making oil tanks and that as a
result tanks, particularly those made from MFR 6 borecene, had
failed in large numbers, would be that Balmoral would have to
replace all MFR 6 tanks. It was most unlikely that tank owners
would be content merely to continue to adopt the 50 per cent fill
policy (or oil suppliers prepared to do so); and likely that the
Environment Agency would put pressure on Balmoral to change
out all MFR 6 tanks. In that context 33 per cent was a cautious
estimate for MFR 4 tanks; and 25 per cent was a reasonable
estimate for MFR 3 tanks. Mr Joyce's fear is that the attitude of
the authorities may extend to all tanks made from all grades of
borecene, although such a policy would seem to me to be open
to a charge of irrationality, having regard to the very low
incidence of failure in some designs (some lower than the
average failure of ZN materials).
559. The figures in the table at para 551 above do not contain
any evaluation of the years in which the change outs will occur.
If borecene was compelled by the Environment Agency to
change out all of its MFR 6 tanks, the change outs could occur
quite soon.
Mr Jensen's approach
Approach 1: most recent trend
560. Mr Jensen offers two approaches for projecting future
failure. Approach 1 bases future failures on the most recent
trend. The exercise is essentially as follows. Firstly he
calculated the expected tank failures in respect of each year of
production (1997-2002) for such of the years 1997 to 2012 as
were applicable in the case of a ten year
____________________
207 Consistently with this proposition the MFR 6 2000 failure rates show a
decline in 2004 (but the MFR 6 2001 do not). There are other candidates - eg
weather trends.
724
guarantee: see Schedule A16.208 He did that by applying the

failure percentages for each year from production that went to
make up the 2.96 per cent underlying rate. Then he took, for
each year of production from 1997-2002 the actual failures
down to 2004: Schedule A19.209 In respect of 2005 he took Schedule A17210 - the known complaints down to September
2005 and added a pro rata estimate for the last three months of
2005, thus producing a total of complaints for 2005 in respect
of each year of production. In respect of the period from 2006
to 2012 he forecast failure rates by assuming that over those
years' failures would reduce in respect of tanks from each year
of production by a percentage that was related to the last known
trend of reduction for that year of production. Thus in respect of
1997 production the reduction in complaints from 2004 to 2005
(from year seven to year eight) was 54 per cent. So he assumed
that complaints in 2006 would be 54 per cent less than in 2005.
He, also, assumed that failures in 2007 would be 54 per cent
less than what they were in 2006. This was, I assume, because
he had no data in respect of reductions from years eight to nine.
In respect of 1998 production he assumed that the reduction for
2006 (years seven to eight) would be 8 per cent. That was the
average of the rates of reduction from years seven to eight in
the number of complaints in respect of production of 1997 and
1998. In respect of the reduction in 2007 and 2008 (years eight
to nine and nine to ten) he again used the 54 per cent figure.
The workings can be found at appendix 18 211 - calculation of
percent change each year; and appendix 20 212 - calculation of
future projected failures. The results are then carried to
appendix 13.213 The actual and forecasted figures then have the
projected failure rates deducted so as to produce an excess ie
the number of failures attributable to borecene. Mr Jensen's
second Report contains revisions to this calculation.
Approach 2: past history as a guide
561. Approach 2 assumes that past history provides an average
level of failures that can be used to project future failures.
Under this approach Mr Jensen takes, in respect of each year of
production the average of the complaints for the three years
2003, 2004 and 2005 and assumes that the same
____________________
208 DF 1/137.
209 DF 1/140.
210 DF1/138.
211 DF 1/139.
212 DF 1/143.
213 DF 1/130. Some of the figures in appendix 13 said to be derived from
appendices 17 and 20 have been adjusted on a basis that is not clear to me.
[2006] Vol. 2
QBD (Comm Ct)
LLOYD'S LAW REPORTS

number of complaints will arise in succeeding years. For the

last year from production (year 11) he takes 50 per cent of the
average to reflect the fact that tanks will have been purchased
throughout the year of production and the warranty will expire
on dates throughout that year. Mr Jensen's original workings are
at Schedule A 13A.214 His amended workings are at Schedule
A9 to Jensen 2.215 They show a figure for excess failures in
respect of the period 2006-2012 of 7,640.
562. In the absence of satisfactory scientific evidence, any
prognosis of the likely incidence of failure in the future is
extremely difficult. Any assessment is made more difficult by
reason of the fact that, regardless of the actual rate of failure,
Balmoral may in practice be compelled by the Environment
Agency to take steps to change tanks which imposes upon them
obligations greater than would arise if it were simply to replace
every tank that actually failed.
563. In my view the appropriate course is to take Mr Jensen's
second approach. Here again, this seems to me the least
unsatisfactory option. The assumption that underpins Miss
Hassell's approach is neither self evident nor supported by any
cogent evidence. In relation to the latest years (2002, 2001,
2000) the number of data points for actual failures is small so
that the assumption rests on a very slender base. If tanks made
from MFR 6 are prone to fail in early or relatively early life, as
the "Failure rate by material by age of tank" graph at para 2.9.1
of Miss Hassell's third report tends to suggest, Miss Hassell's
calculation will greatly overstate the total failures for the tenyear warranty period. As it is it produces very sizeable figures
(over 5,500 tanks per year in the case of 2008-2010: see para
5.88 of Jensen 1). The calculation also assumes that the
downward trend of failures in 2005 does not signify any
continued dip or flattening out in failures, but rather that
failures, despite what happened in 2005, will continue at such a
rate as will achieve the large totals set out in the table at para
551 above. The dip is predominantly attributed to the MFR 6
change out and 50 per cent fill policy. Whilst those are likely to
have reduced the number of emergency change outs, it does not
follow that they were the only contributor to that reduction. I
note, also, that in 2004 (when the policy was in effect) the
number of MFR 6 2001 failures increased.
564. Mr Jensen's first option seems to me to put too much
emphasis on what happens to be the trend at particular junctures
(year eight to nine, year
____________________
214 DF 1/131.
215 DF 2/600.
725
seven to eight etc) as established in 2004. This may be a poor

guide to the overall trend.
565. On the basis of approach 2 the excess failures are 7,640.
It is then necessary to determine what percentage of those will
be deferrals. I propose to take 5 per cent upon the basis that, on
the hypothesis upon damages fall to be calculated, namely that
borecene is unfit for purpose, Balmoral's ability to defer is
likely to be more restricted than heretofore. Accordingly, by my
calculations, Balmoral's loss is:
382 49
= 18,718
7258 570
= 4,137,060
= 4,155,778
subject to a discount for accelerated payment.

Increased costs
566. Miss Hassells's calculations assume that the annual figure
for change outs is 755,403, ie the same cost as for 2005: see
paras 10.7.1 and 13.4.6 of Hassell 2. In her first report she
suggested that those costs would continue at the 2004 level until
2010 and would then fall so as to reach zero in 2013, so that 67
per cent of the figure was charged for 2011 and 33 per cent for
2012.
567. Mr Jensen's proposed two different methodologies, which
reflect his approach to estimating future failure rate. Under the
first, he takes the calculation of future excess failures on a
declining trends basis and then assumes that costs would reduce
on the same basis as the change in annual complaint activity
Thus in 2004 the number of excess failures was 2,247. In 2005
the number of excess failures was 1,665, which is 74.09 per
cent of 2,247. Mr Jensen took the amount of costs calculated for
2004 and estimated that those for 2005 would be 74.09 per cent
of those for 2004. In relation to future IT costs he calculated
amounts for 2006 and 2009 only, on the footing that computer
equipment only requires replacing every three years. Under the
second basis he takes the calculation of future excess failures on
a mean basis, and then makes the same assumption as in the
calculation on the declining trends basis.
568. In my judgment the increased cost of dealing with
complaints should reflect the level of complaints and decline as
it declines. I therefore would have adopted Mr Jensen's second
basis. But I would start the calculation in 2006 taking the 2005
figure as 729,476 + 12,158 = 741,634. The addition of
12,158 restores the sum taken out in
[2006] Vol. 2
QBD (Comm Ct)
LLOYD'S LAW REPORTS

Miss Hassell's calculation of insurance premiums in order to

reach a total as at 31 December 2005.
Loss of profits
569. In calculating future loss of profits Miss Hassell assumes
that loss of profit into 2006 will continue at the 2004 to 2005
rate (ie that the loss in 2006 will be the percentage increase in
loss in 2005 over 2004 applied to the loss in 2005) and then
decline over the next five years on a straight line basis. This
produces the following claim:
Projection 1
5,768,000
Projection 2
12,351,000
Projection 3
20,216,000
See para 11.19 of Hassell 2.

570. Mr Jensen expressed the view that the worst of any sales
losses was over and that there was no basis for any award in
relation to future loss of profits on account of Balmoral's
reputational difficulties. Sales revenue for 2004 for rotational
moulding was very high (5,402,952) with the first quarter of
2005 (1,341,050) showing similar levels.
571. I regard an assessment of what continuing loss of profit
Balmoral will suffer on account of the effect of the cracking
tank problem on its reputation as extremely difficult. A decision
that the cracking arose because borecene was unfit for purpose
may reduce the degree of opprobrium suffered by Balmoral but
cannot wholly erase the effect on their reputation. The evidence
of Mr Joyce indicates the considerable extent to which that
reputation has suffered because of the cracking problem with
end-users, distributors, and public authorities. I regard it as
unrealistic to assume that the continuing effect of that will
disappear when this judgment is delivered. Distributors who
have left Balmoral may well be difficult to woo back. At the
same time I see no reason why the period over which the effect
on Balmoral's reputation should be expected to continue is until
the end of 2011. In my judgment a fair assessment of Balmoral's
loss would be to take the figure for loss of profit for 2005, as
calculated on the basis set out above, as the loss of profit for
2006 and reduce it on a straight line basis so as to expire at the
end of 2008 ie so that the loss for 2007 is two thirds and for
2008 one third.
Conclusion on damages
572. In the result, therefore, the amount that I would have
awarded, had I been wholly in Balmoral's favour on liability is
or is to be calculated as follows:
726
A PAST LOSS
1. Emergency change outs
2,779,420 + 578,131 =
3,357,551
Transport and disposal
16,850
2. Planned change outs
382,552
3. Environmental
Stood over
4. Overseas
Stood over
5. Additional costs down

to 31 December 2004 and
for 2005
1,670,852 + 729,476 =
2,400,328 (subject to
clarification in respect of
archive staff).
6. Loss of profits
283,530 down to
September 2001 and then
in accordance with Mr
Jensen's Basis 2.
B FUTURE LOSS
7. Emergency change outs
4,155,778
8. Environmental
Stood over
9. Overseas
Stood over
10. Additional costs
741,634 for 2006 and then

in accordance with Jensen
Basis 2: see para 568.
11. Loss of profits
See para 571.
Less
12.
A discount for accelerated

payment in respect of all
future loss.
573. Had the question of awarding damages arisen, I would

have invited further argument on (a) the appropriate discount
rate to be taken in respect of future losses; (b) the archive staff
deduction; and (c) any matters that cannot be resolved in
working out the consequences of the judgement on quantum.
The complication of the exercise is such that I recognise that
there may be refinements in my calculations that need to be
addressed.
Postscript
574. I cannot leave this case without making two observations.
The first relates to the expert reports. Such reports must (a)
append what they say they append; (b) identify clearly and
accurately the facts upon which they are based; (c) state clearly
and prominently any key points of disagreement with the
opposing side; and (d) include reference to facts known to the
expert which have, or may have, a significant bearing on the
issue, even if unfavourable to his clients' cause. They must also
be as concise as possible.
[2006] Vol. 2
QBD (Comm Ct)
LLOYD'S LAW REPORTS

575. As I have already mentioned appendix 1 of Mr Clements'

first report did not contain the creep rupture curves which the
body of the report said that it contained. Appendix 3 contained
curves which apparently supported figure 5 when they did not.
Neither the report nor the appendices revealed that the data in
appendix 3 related to unsoaked samples. The data in support of
figure 3, and the expansion of it on page 302 of the second
report, was not contained in either report or its appendices. The
contention that unsoaked samples were unreliable did not
feature in the reports at all. Nor was any reference of any kind
made to the fact that Mr Clements had, albeit with a
qualification (considerably weaker than his later assertion as to
the unreliability of unsoaked data), used unsoaked data in the
DESO action which pointed in a different direction to what he
was saying in this action. I appreciate that Mr Clements may
have felt under some restriction in referring to the DESO
material; but I do not think he was justified in omitting any
reference to it.
576. At the end of Rapra's second report Mr Clements
subscribed to a number of common form declarations. These
did not include the following declaration, present at the end of
the first report:
I have endeavoured to include in my report those matters
which I have knowledge of or of which I have been made
aware that might adversely affect the validity of my opinion. 216
Borealis invited me to infer that the omission was deliberate,
not least because in the first report the words omitted appear in
the middle of a block of customary declarations which, apart
from the above declaration, are included verbatim in the second
report. Having heard Mr Clements, I am satisfied that the
omission was not deliberate. But his reports should not have
contained the flaws that I have identified.
____________________
216 CT 1/65.
727
577. Professor Pethrick's first report referred to a number of

papers. But what was later said to be the most significant article
- "The Critical Molecular Weight for Resisting Slow Crack
Growth in a Polyethylene" - was neither referred to in his
reports nor attached to them. The documents he handed in at the
beginning of his evidence, whilst in part merely illustrative, also
referred to Mc, said to be of great importance but entirely
unheralded. Mc was said to have been introduced only in
response to the cross examination of Mr Clements, but, if it had
the significance sought to be attached to it, I am surprised that it
was not referred to before.
578. The reports of the forensic accountants were inordinately
large. The volume of Mr Jensen's reports and, in particular their
labyrinthine attachments, was such that I found them at times
bewildering, with one schedule referring to several other
schedules often without any clear guide in the body of the
report as to which conclusion the several attachments were
designed to support and how. It was only with difficulty, and
after considerable questioning on my part, that I found it
possible to identify what calculations in the appendices
supported the propositions in the text. The appendices, as well
as being enormous, had references (eg "Tab E1") in such small
font or so faintly photocopied as to make it difficult to discern
which attachment was which, not least because the tabs had
been removed from the copy for the court (but not that for
counsel). Swathes of the appendices had no apparent relevance
or one which could only be discerned by a process of forensic
archaeology. I should record, however, that, after the conclusion
of the evidence, Mr Jensen helpfully supplied me with a copy of
his first report in which his monetary assessments were
annotated to the Trial Bundles.
579. The second observation is to express my appreciation of
the very high quality of the advocacy on both sides and of the
standard of preparation of the material by the solicitors for the
parties.

Balmoral V Borealis

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[2006] Vol.

LLOYD'S LAW REPORTS

QUEEN'S BENCH DIVISION

tities of polyethylene which had been manufactured using a polymer

LLOYD'S LAW REPORTS

Ipswich Plant Hire Ltd [1975] QB 303, distinguished.

LLOYD'S LAW REPORTS

Amiri v BAE Systems (CA) [2003] 2 Lloyd's Rep. 767;

LLOYD'S LAW REPORTS

Bacardi-Martini Beverages Ltd v Thomas Hardy Packaging Ltd

Mr Justice CHRISTOPHER CLARKE:

Sections 14(2) and (3) of

The expert evidence

Conclusions on fitness for

The contractual dispute

The Unfair Contract Terms

LLOYD'S LAW REPORTS

3. Balmoral manufactures, amongst other things, storage tanks

LLOYD'S LAW REPORTS

cooling and (iv) cooling, 5 so that at any one time there is a

higher than what was to be expected from rotomoulded tanks.

5 At this stage the mould is cooled by fans.

LLOYD'S LAW REPORTS

The contractual dispute

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early 1996, no inquiry was made by them about creep rupture

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tonnes in January 1995. Balmoral's purchase order contained no

31. On 28 February 2005 Mr Cartwright visited Balmoral and

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be returned**". Borealis' invoices continued to set out Borealis'

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what borecene was, and was being marketed as generally (see

up a trial of borecene with Borealis. In the event the joint test

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characterised by a very narrow molecular weight distribution,

Manager, were the persons principally concerned on behalf of

LLOYD'S LAW REPORTS

the bottom left hand corner of Balmoral's orders read:

measured the wall thicknesses.28 He was "primarily trying to get

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The parties agree to comply to Borealis' payment terms and

64. On 15 May Mr Forbes of Balmoral wrote to Mr Caygill at

70. Balmoral purchased a variety of types of borecene from

LLOYD'S LAW REPORTS

pigment in different ways. In broad terms the borecene

differential cooling across the wall thickness of the polymer, 34

Warping and blooming

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may cause stresses over the structure or lead to embrittlement of

had not notified them of the problem in sufficient time to allow

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average) for all sections measured. Borealis explained that

2001 Mr Halvorsen observed what he regarded, and describes

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that if MFR 6 material was used there could be a 31 per cent

properties, on some pigments for specific customers and on the

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Borealis Coordination Center N.V.

Cheques and remittance advices with full sales invoice

Fin. Service Center

LLOYD'S LAW REPORTS