Bacardi-Martini Beverages Ltd v Thomas Hardy Packaging Ltd
| Jurisdiction | England & Wales |
| Judge | Lord Justice Mance,Mr Justice Neuberger,Lord Justice Thorpe |
| Judgment Date | 30 April 2002 |
| Neutral Citation | [2002] EWCA Civ 549 |
| Docket Number | Case No: A3/2001/1834 |
| Court | Court of Appeal (Civil Division) |
| Date | 30 April 2002 |
[2002] EWCA Civ 549
IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE QUEEN'S BENCH
DIVISION (COMMERCIAL COURT)
(TOMLINSON J.)
Lord Justice Thorpe
Lord Justice Mance and
Mr Justice Neuberger
Case No: A3/2001/1834
Andrew Prynne QC, Charles Gibson QC & Geraint Webb (instructed by Messrs Eversheds) for the Appellants
Jonathan Marks QC & Kirsten Houghton (instructed by Osborne Clarke) for the
First Respondent
William Wood QC & Richard Lord QC (instructed by Messrs Covington & Burling) for the Second Respondent
Introduction
This appeal by Messer UK Limited ("Messer") and Terra Nitrogen (UK) Limited ("Terra") is from a judgment of Tomlinson J dated 12 th July 2001 in proceedings brought Bacardi-Martini Limited ("Bacardi") and Thomas Hardy Packaging Limited ("THP"). It relates to an incident involving the contamination of carbon dioxide by benzene which gave rise to a prior judgment of Tomlinson J. dated 9 th May 2001 in separate proceedings ("the Britvic proceedings") between Britvic Soft Drinks Limited, Bass Brewers Limited, THP and Brothers Drinks Limited as claimants and Messer and Terra as defendants. That judgment has itself been subject to an appeal to this court, in which we have given judgment under the reference [2002] EWCA Civ 548.
It was agreed before Tomlinson J. in the present proceedings that all his findings in the Britvic proceedings should be treated as binding in the present proceedings, and further that all the evidence given in the Britvic proceedings should stand as evidence in these proceedings. Reference may therefore be made to the judgment delivered on that appeal, as well as Tomlinson J's two full judgments below, for fuller outlines of the facts.
In short, however, Terra manufactured the carbon dioxide at its Severnside, Bristol chemical plant, and the cause of contamination was a leak, which enabled benzene to by-pass the reforming section of the plant where the benzene would normally have been removed. Terra supplied Messer, which resold to various customers. After some period during which the contamination went undetected, its discovery led to extensive recalling and destruction of finished drinks supplied to wholesalers and others. Benzene is in sufficiently high quantities a carcinogen, but in the quantities in which it was present in the finished drinks presented no health hazard. Public concern and the need to protect business made the recall necessary. The present proceedings relate to the purchase of carbon dioxide for incorporation into light alcoholic drinks (particularly Bacardi Breezer). THP acquired the carbon dioxide from Messer under a contract subject to Messer's standard terms, and incorporated it with water into bottled and packaged drinks using alcoholic concentrate, bottles, caps, labelling and printed trays supplied by Bacardi-Martini Limited ("Bacardi"). The judge found that, although THP acquired the carbon dioxide from Messer and had a possessory interest in the manufactured drinks until they were supplied to Bacardi, title to the concentrate, bottles, caps, labelling and trays throughout and in the drinks once manufactured belonged to Bacardi. Bacardi in fact had contractual arrangements with a closely associated firm, Westbay Distributors Limited ("Westbay"), as a result of which Westbay was invoiced with all the manufactured drinks and in the first instance incurred the loss which was suffered when such drinks had to be recalled and destroyed. However, Westbay was indemnified by Bacardi following such recall. The present proceedings were brought to recover loss occasioned by the recall and destruction.
The present proceedings were brought by Bacardi against THP, by THP against Messer and by Messer against Terra, in each case in contract. They led to claims by THP against Terra in tort and for contribution under the Civil Liability (Contribution) Act 1978, on the basis that, if THP was liable to Bacardi, THP as manufacturer was also liable to Bacardi in respect of the same damage. Finally, with Terra's encouragement (in order to resolve all potential claims), Bacardi itself made a claim in tort against Terra for its loss.
These proceedings led to judgment being given in favour of Bacardi against THP (by consent subject to the outcome of the appeal in the prior proceedings) for damages to be assessed, later agreed as £2,125,000 plus interest. The resolution of the appeal in the prior proceedings leaves this judgment untouched. Tomlinson J went on to give judgments in contract for THP against Messer and for Messer against Terra in the like sums. He dismissed THP's contribution claim and (although this does not appear expressly in the order as drawn up) Bacardi's tort claim against Terra. These claims were (as will appear) essentially alternative claims which the judge indicated that he would have accepted, had Messer succeeded in its defence to THP's contractual claim. We were told that THP was at the time uninsured and is unlikely to be able to carry loss to the extent claimed by Bacardi, unless this can in turn be passed on to Messer or Terra. Messer and Terra are both represented by Mr Andrew Prynne QC and have made common cause before the judge and before us.
The Contractual Claim
The first step in the contractual claim is determined by the judgment which we have given in the Britvic proceedings. In that judgment we held that Messer and Terra had failed to show that clauses 11.1 and 11.2 of Messer's standard conditions were reasonable within the meaning of the Unfair Contract Terms Act 1977. It follows that Messer's supplies of the carbon dioxide to THP were subject to implied undertakings of satisfactory quality and fitness for purpose of the carbon dioxide, which, in those circumstances, it is also common ground were broken. The next step requires examination of clauses 12.1 and 12.2 of Messer's standard terms which were incorporated in its contract for supply to THP and which read as follows:
"12.0 Limitation of Liability
12.1. Subject to any other limitation or exclusion of liability expressed elsewhere in this Contract, the liability of Messer, its employees and Agents to the Customer in respect of personal injury or direct physical damage to property (and losses, costs and expenses directly arising ftom such injury or damage), whether through negligence or otherwise, shall be limited to £500,000 in respect of any one incident, except that nothing in this Contract shall restrict Messer's liability to an injured person or his personal representatives for personal injury or death resulting from negligence.
12.2 Messer, its employees and Agents shall have no liability whatsoever in respect of losses, costs or expenses of a purely financial or economic nature (including, but not limited to, loss of profits, loss of use or other consequential loss), or any other loss or damage not covered in Clause 12. 1, unless such loss, cost, expense or damage be caused by Messer supplying Gas that is not of the purity warranted or by failure to deliver or by late delivery of Gas by Messer and unless such defective or late delivery or failure to deliver is notified within five days of the delivery or failure to deliver is notified within five days of the delivery or intended delivery, in which case Messer's liability shall be limited to the value of the quantity of Gas concerned (at Messer's selling price)."
The critical question is whether THP's claim against Messer is "in respect of ….. direct physical damage to property" within clause 12.1. If it is, then all losses, costs and expenses directly arising from such damage are also recoverable. Normally, since the terms of clause 12.1 offer a more expanded prospect of recovery than those of clause 12.2, one could expect Bacardi and THP to argue that clause 12.1 is wide enough to cover the present situation, and Messer and Terra to be arguing the contrary. In this case, however, Messer and Terra fear, and the judge held, that clause 12.2 cannot be shown to satisfy the requirement of reasonableness under s.6(3) and 11(2) of the Unfair Contract Terms Act 1977. It is therefore in Messer and Terra's interests to seek to bring the claim within clause 12.1, which is a provision that the judge considered to be reasonable (a conclusion against which Bacardi and THP do not appeal). In this connection, the judge held, and again there is no appeal on this point, that there was only one "incident" (the "Benzene incident" viewed as a whole) and so that there would be an overall limit of £500,000 to any contractual recovery by THP against Messer. Bacardi and THP nonetheless profess themselves to be relatively neutral on the application of clause 12.1, although suggesting that Messer's and Terra's analysis is wrong. Their relative neutrality arises, because, if the claim falls within clause 12.1 (as being "in respect of … direct physical damage"), then Bacardi and THP maintain that Terra is liable to Bacardi in tort and that Bacardi's tort claim and THP's contribution claim should succeed on that basis. Messer and Terra deny that this follows, and submit that Bacardi cannot in any event recover in tort damages indemnifying them against contractual liability for loss borne by Westbay.
THP's pleaded contribution claim is that there was direct physical damage to the mixed drinks, e.g. the Breezer, whereas Bacardi pleads that there was damage to the mixed drinks, the product, and/or to the...
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