AIC Ltd v ITS Testing Services (UK) Ltd (The Kriti Palm)
| Jurisdiction | England & Wales |
| Judge | Buxton,Rix L JJ,Sir Martin Nourse |
| Judgment Date | 28 November 2006 |
| Court | Court of Appeal (Civil Division) |
| Date | 28 November 2006 |
[2007] EWCA Civ 1601
Court of Appeal (Civil Division).
Buxton and Rix L JJ and Sir Martin Nourse.
Jonathan Gaisman QC, James Brocklebank and Jessica Mance (instructed by Hill Dickinson LLP) for the appellant.
Nicholas Hamblen QC and Michael Ashcroft (instructed by Holman Fenwick & Willan) for the respondent.
The following cases were referred to in the judgments:
Akerhielm v De MareELR [1959] AC 789.
Angus v CliffordELR [1891] 2 Ch 449.
Arkwright v NewboldELR (1881) 17 Ch D 301.
Armstong v Strain [1951] 1 TLR 856.
Assicurazioni Generali SpA v Arab Insurance Group [2003] 2 CLC 242; [2003] 1 WLR 577.
Bell v Lever Bros LtdELR [1932] AC 161.
Bell v Peter Browne & CoELR [1990] 2 QB 495.
Biogen Inc v Medeva plcUNK [1997] RPC 1.
Bisset v WilkinsonELR [1927] AC 177.
Broadley v Guy Clapham & CoUNK [1994] 4 All ER 439.
Brown v RaphaelELR [1958] Ch 636.
C v Mirror Group NewspapersWLR [1997] 1 WLR 131.
Cave v Robinson Jarvis & Rolf [2003] 1 CLC 101; [2003] 1 AC 384.
Derry v PeekELR (1889) 14 App Cas 337.
Frisby v Theodore Goddard & Co (unreported, 7 March 1984, CA).
H (Minors), ReELR [1996] AC 563.
Haward v Fawcetts (A Firm)WLR [2006] 1 WLR 682; [2006] 3 All ER 497.
Hedley Byrne & Co Ltd v Heller and Partners LtdELR [1964] AC 465.
HIH Casualty and General Insurance Ltd v Chase Manhattan BankUNK [2003] UKHL 6; [2003] 1 CLC 358.
Hornal v Neuberger Products LtdELR [1957] 1 QB 247.
Johnson v Chief Constable of Surrey (unreported, 19 October 1992, CA).
Jones v Sherwood Computer Services plcWLR [1992] 1 WLR 277.
Kitchen v RAF AssociationWLR [1958] 1 WLR 563; [1958] 2 All ER 241.
Montrod Ltd v Grundkötter Fleischvertriebs GmbH [2002] CLC 499; [2002] 1 WLR 1975.
Niru Battery Manufacturing Co v Milestone Trading Ltd [2004] 1 CLC 647.
Sheldon v RHM Outhwaite (Underwriting Agencies) Ltd [1995] CLC 655; [1996] AC 102.
Shell UK Ltd v Enterprise Oil plcUNK [1999] 2 Ll Rep 456.
Smith v ChadwickELR (1884) 9 App Cas 187.
Smith New Court Securities Ltd v Scrimgeour Vickers (Asset Management) Ltd [1996] CLC 1958; [1997] AC 254.
Standard Chartered Bank v Pakistan National Shipping Corp (No. 2)UNK [1998] 1 Ll Rep 684.
Toepfer v Continental Grain CoUNK [1974] 1 Ll Rep 11.
Veba Oil Supply & Trading GmbH v Petrotrade IncUNK [2001] EWCA Civ 1832; [2002] CLC 405.
Williams v Fanshaw Porter & HazelhurstUNK [2004] EWCA Civ 157; [2004] 1 WLR 3185.
Deceit — Breach of contract — Negligence — Limitation — Deliberate concealment — Testing — Certificate of quality — Gasoline cargo — Cargo off specification at discharge port — Testing company had used wrong testing method at loadport — Claim by buyer of cargo against testing company — Whether defendant impliedly represented that certificate good and valid — Judge wrong to find deceit — No false representation made and no dishonesty — Whether claims for breach of contract and negligence in respect of certificate statute-barred — Judge entitled to hold that defendant had deliberately concealed results of retesting of samples — Duty to disclose retests and results — Retest results relevant to rights of action otherwise statute-barred — Action apart from deceit claim remitted to judge — Limitation Act 1980, s. 32(1)(b).
This was an appeal by an inspection company (ITS) against a judgment given against it for deceit ([2005] 2 CLC 490).
In 1996 ITS issued a certificate of quality in respect of a cargo of gasoline due to be loaded on the Kriti Palm for carriage to New York. The sample analysed was a composite sample derived, before loading of the vessel, from four separate shore tanks at the refinery of Mobil at Coryton in England. The certificate stated that the fuel, including its Reid vapour pressure (RVP), met specification. Unfortunately, in error ITS had tested the RVP by test method ASTM D323 rather than ASTM D5191 as required by the contract.
AIC had bought the gasoline from Mobil FOB the refinery and AIC and Mobil had jointly instructed ITS. The inspection clause of the sale contract provided for quality and quantity to be determined at the loadport.
AIC sold the cargo on the Kriti Palm ex ship basis New York harbour. The on-sale was to Galaxy. On testing at the discharge port the RVP of the cargo was found to be off specification. The loadport samples were retested and found to be off specification.
ITS retested its retained samples by the right method and the result was off specification. Nevertheless ITS told AIC that it would be standing by the certificate.
The judge found that ITS was thereby rendered liable to AIC in the tort of deceit and therefore that ITS was liable for all the financial consequences of AIC's reliance on the certificate in unsuccessful litigation with Galaxy. He found that implicit in what ITS said was a representation that the certificate was good and valid, or good and reliable, and that, by reason of its knowledge of the retest results, ITS was reckless as to the truth of that implied representation, which was probably wrong.
ITS appealed on the basis that the judge's finding of deceit was wrong.
AIC had commenced proceedings more than six years after the issue of the certificate and the conversation on which it relied and its claims in respect of any of its other causes of action for breach of contract or duty, apart from deceit, were statute barred unless it could bring itself within s. 32(1)(b) of the Limitation Act 1980 on the basis that a fact relevant to its right of action, namely the retest results, had been deliberately concealed.
The judge concluded that there had been deliberate concealment of the retest results.
Held, allowing the appeal in part:
1. The judge had not been entitled to conclude that there had been a false representation by ITS that the certificate remained a good and valid certificate. The representation found was imprecise and, in an action in deceit, unfairly so. In the conversation on which AIC relied ITS was expressly saying that it did not know whether or not, whatever the certificate said, the fuel had been within specification or would have been shown to have been within specification if tested by the right test. If that was what ITS was saying expressly, it was impossible to derive any implied representation that the certificate was good and reliable or good and valid in any meaning of those terms relevant to AIC's complaint in deceit. That interpretation was consistent with how AIC understood the conversation at the time, namely that ITS stood by the certificate even though it could not be certain that the cargo met the contractual specification. Nor had there been any dishonesty on the part of ITS. Nor was there any deceit through failure to correct a previous statement. Accordingly the deceit claim failed.
2. (Per Buxton LJ and Sir Martin Nourse; Rix LJdissenting) ITS made a deliberate decision not to disclose the fact of the retests and the results thereof to AIC and Mobil in circumstances in which the retests and the results thereof should have been disclosed to AIC and Mobil, and ITS knew that the retests and the results thereof should have been disclosed to AIC and Mobil. ITS was aware that it was under such a duty and made a deliberate decision not to disclose the retests and the results thereof. The existence of the duty was based on the simple common sense of the notion that a certifier who had acquired knowledge of a material inaccuracy in his certificate was obliged to disclose it. The retests were relevant to AIC's rights of action that were otherwise statute-barred. (Cave v Robinson Jarvis & Rolf[2003] 1 CLC 101, Williams v Fanshaw Porter & HazelhurstUNK[2004] EWCA Civ 157andJohnson v Chief Constable of Surrey (unreported, 19 October 1992, CA) applied.)
3. The claim in deceit was dismissed; and the remainder of the action was remitted to the trial judge.
Rix LJ:
| Index | Paragraph |
| 1. Introduction | 1–19 |
| 2. The essence of ITS's case | 20–22 |
| 3. The essence of AIC's case | 23–27 |
| 4. The dispute | 28 |
| 5. The effect of the certificate | 29–44 |
| 6. The parties | 45–48 |
| 7. The inspection contract | 49–52 |
| 8. Events at the loading port | 53–60 |
| 9. Events at the discharge port, and their consequences | 61–68 |
| 10. The Cooper retest (and further events of 16 April) | 69–82 |
| 11. 17 April: Mr Rackham briefs Mr Lucas. What Mr Lucas knew | 83–95 |
| 12. 17 April: the telephone conversation. What Mr Lucas said | 96–122 |
| 13. The follow up correspondence | 123–129 |
| 14. The premium parcel RVP | 130–131 |
| 15. Other witnesses of the telephone conversation | 132–145 |
| 16. After the telephone conversation | 146–153 |
| 17. AIC's Swiss and Galaxy's English litigation | 154–163 |
| 18. The expert evidence | 164–168 |
| 19. International and ITS internal guidelines | 169–186 |
| 20. ITS's practice and duties with regard to sample retention | 187–192 |
| 21. Mr Lucas's evidence | 193–205 |
| 22. The judge's findings about Mr Lucas | 206–215 |
| 23. A third element | 216–218 |
| 24. Mr Chalmers' evidence | 219–245 |
| 25. The judge's findings as to Mr Chalmers | 246–249 |
| 26. The issues considered by the judge | 250 |
| 27. Deceit: the law | 251–260 |
| 28. Deceit: the representation | 261–280 |
| 29. Deceit: dishonesty | 281–293 |
| 30. A third element; and the respondent's notice | 294–300 |
| 31. Deliberate concealment | 301–314 |
| 32. Section 32(1)(b) | 315–325 |
| 33. The four tests | 326–327 |
| 34. (1) Did ITS owe a duty to disclose the relevant information? | 328–351 |
| 35. (4) Was the information relevant to AIC's right of action? | 352–362 |
| 36. (2) and (3): consciousness of duty and deliberate decision to conceal | 363–366 |
| 37. Section 32(2): a fallback case | 367–369 |
| 38. Continuing duties | 370–374 |
| 39. Causation, remoteness and loss | 375 |
| 40. Conclusion | 376–377 |
| 41. Annex A: The transcript of the 17 April telephone... |
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