Baird Textile Holdings Ltd v Marks & Spencer Plc
| Jurisdiction | England & Wales |
| Judge | Sir Andrew Morritt V-C,Judge,Mance L JJ |
| Judgment Date | 28 February 2001 |
| Court | Court of Appeal (Civil Division) |
| Date | 28 February 2001 |
Sir Andrew Morritt V-C, Judge and Mance L JJ.
Court of Appeal (Civil Division).
Contract — Estoppel — Retailer terminated non-contractual trading relationship with supplier — Whether supplier entitled to reasonable notice of termination by way of implied contract or estoppel by convention — CPR, r. 24.2.
These were an appeal and cross-appeal from a judgment of Morison J dismissing the claimant's claim so far as it was based on contract but directing that it should proceed to trial so far as it was based on estoppel.
The claimant, “Baird”, had been one of the principal suppliers of garments to the national retailer, “M & S”, for 30 years. In accordance with the wish and practice of M & S there was no contract between the parties. In October 1999 M & S without warning terminated all supply arrangements between them with effect from the end of the then current production season. Baird issued proceedings against M & S contending that M & S was prevented by an implied contractual term and/or estoppel from terminating the arrangements without reasonable notice. Baird claimed loss of profits and costs incurred during a reasonable notice period, said to be three years. M & S applied for summary judgment on the ground that Baird's claim had no reasonable prospect of success on either basis. Morison J held that the claim for an implied contract could not succeed on grounds that such an implied contract was not necessary, Baird's pleaded case acknowledged that M & S deliberately refrained from concluding any express agreement, and the terms would be too imprecise to be capable of enforcement. The judge held that the claim to an estoppel by convention should not be dismissed without a trial. Baird appealed and M & S cross-appealed.
Held, dismissing Baird's appeal and allowing M & S's cross-appeal:
1. The judge was right to find that a contract would only by implied from conduct if the implication was necessary. (The AramisUNK[1989] 1 Ll Rep 213, Blackpool and Fylde Aero Club Ltd v Blackpool Borough CouncilWLR[1990] 1 WLR 1195, Wilson v Partenreederei Hannah BlumenthalELR[1983] AC 854andThe GudermesUNK[1993] 1 Ll Rep 311considered.)
2. The allegation that M & S abstained from concluding an express contract to regulate the parties' on-going relationship was not in the circumstances determinative.
3. The crucial issue was certainty, and the judge was right that the alleged obligation on M & S to acquire garments from Baird was insufficiently certain to found any contractual obligation because there were no objective criteria by which the court could assess what would be reasonable either as to quantity or price. The lack of certainty confirmed the absence of an intention to create legal relations. Baird did not have a real prospect of success on its claim in contract.
4. The allegation that M & S was estopped from denying that the relationship between Baird and M & S could only be determined by the giving of reasonable notice did not lead to the relief sought. For that purpose it was necessary to establish an obligation by estoppel that during the subsistence of the relationship M & S would acquire garments from Baird in quantities and at prices which were reasonable in all the circumstances. English law did not recognise the creation by estoppel of such an enforceable right. Such an obligation had to be sufficiently certain and the alleged obligation was not. (Woodhouse AC Israel Cocoa Ltd v Nigeria Produce Marketing Co LtdELR[1972] AC 741applied.)
5. Furthermore an estoppel by convention could not create a cause of action. (Amalgamated Investment & Property Co Ltd v Texas Commerce International Bank LtdELR[1982] QB 84applied.)
6. The fact that the law of estoppel might be developed or corrected by the House of Lords was not a compelling reason under CPR, r. 24.2 for a trial in this case.
The following cases were referred to in the judgment:
Abrahams v Herbert Reiach LtdELR [1922] 1 KB 477.
Amalgamated Investment and Property Co Ltd v Texas Commerce International Bank LtdELR [1982] QB 84.
Aramis, TheUNK [1989] 1 Ll Rep 213.
Australian Blue Metal Ltd v HughesELR [1963] AC 74.
Barrett v Enfield London Borough CouncilELR [2001] 2 AC 550.
Basham, ReWLR [1986] 1 WLR 1498.
Blackpool and Fylde Aero Club Ltd v Blackpool Borough CouncilWLR [1990] 1 WLR 1195.
Bristol and West Building Society v TurnerUNK [1991] 2 EGLR 52.
Carmichael v National Power plcWLR [1999] 1 WLR 2042.
Central London Property Trust Ltd v High Trees House LtdELR [1947] KB 130.
Combe v CombeELR [1951] 2 KB 215.
Commonwealth of Australia v VerwayenUNK (1990) 170 CLR 394.
Crabb v Arun District CouncilELR [1976] QB 179.
Derby v Weldon (No. 3)UNK [1989] 3 All ER 118.
De Tchihatchef v Salerni Coupling LtdELR [1932] 1 Ch 330.
Elli, TheUNK [1985] 1 Ll Rep 107.
First Energy (UK) Ltd v Hungarian International BankUNK [1993] 2 Ll Rep 194.
First National Bank plc v ThomsonELR [1996] Ch 231.
Gillett v HoltELR [2001] Ch 210.
Gudermes, TheUNK [1993] 1 Ll Rep 311.
Habib Bank Ltd v Habib Bank AG ZurichWLR [1981] 1 WLR 1265.
Hamid v Secretary of State for the Home Department [1993] Imm AR 216.
Henrik Sif, TheUNK [1982] 1 Ll Rep 456.
Hillas & Co Ltd v Arcos Ltd (1932) 147 LT 503.
Holiday Inns Inc v Broadhead (1974) 232 EG 951.
Hughes v Metropolitan Railway CoELR (1877) 2 App Cas 439.
Johnson v Gore Wood & CoWLR [2001] 2 WLR 72.
Jones v WatkinsUNK (unreported, 26 November 1987, CA).
Karen Oltmann, TheUNK [1976] 2 Ll Rep 708.
Kleinwort Benson Ltd v Lincoln City Council [1999] CLC 332; [1999] 2 AC 349.
McIlkenny v Chief Constable of the West MidlandsELR [1980] QB 283.
Paula Lee Ltd v Robert Zehil and Co LtdUNK [1983] 2 All ER 390.
Plimmer v WellingtonELR (1884) 9 App Cas 699.
Sanders v MacleanELR (1883) 11 QBD 327.
Shearson Lehman Hutton Inc v Maclaine Watson & Co LtdUNK [1989] 2 Ll Rep 570.
Spence v Shell UK LtdUNK [1980] 2 EGLR 68.
Spiro v LinternWLR [1973] 1 WLR 1002.
Taylors Fashions Ltd v Liverpool Victoria Trustees Co LtdELR [1982] QB 133.
Troop v GibsonUNK [1986] 1 EGLR 1.
Waltons Stores (Interstate) Ltd v MaherUNK (1988) 164 CLR 387.
Western Fish Products Ltd v Penwith District CouncilUNK [1981] 2 All ER 204.
Willoughby v EcksteinUNK [1936] 1 All ER 650.
Wilson v Partenreederei Hannah BlumenthalELR [1983] AC 854.
Woodhouse AC Israel Cocoa Ltd SA v Nigerian Produce Marketing Co LtdELR [1972] AC 741.
Richard Field QC (instructed by Herbert Smith) for the claimants.
Michael Brindle QC (instructed by Freshfields Bruckhaus Deringer) for the defendants.
Sir Andrew Morritt V-C:
1. Baird Textile Holdings Ltd (“Baird”) had been one of the principal suppliers of garments to Marks and Spencer plc (“M & S”) for 30 years when, on 19 October 1999 M & S, without warning, determined all supply arrangements between them with effect from the end of the then current production season. On 10 January 2000 Baird commenced these proceedings against M & S contending that M & S was precluded by both contract and estoppel from determining such arrangements without reasonable notice. M & S applied under CPR, r. 24.2 for summary judgment against Baird on the ground that it had no reasonable prospect of succeeding on either claim. On 29 June 2000 Morison J dismissed the claim in so far as it was based on contract but directed that it proceed to trial in so far as it was based on estoppel. Each party appeals, with the permission of Morison J, from that part of his order which is against it. Accordingly the issues which arise are whether Baird has a real prospect of succeeding on its claim based on (1) contract, and (2) estoppel, or, if not, whether there is some other compelling reason why that claim or issue should be disposed of at a trial.
2. Before dealing with those issues it is necessary to describe the basis of the claims in some detail. M & S is a household name. It is primarily a clothing retailer. It operates through a large number of retail outlets in the UK and abroad. One of the secrets of its success in the provision of best value merchandise to its customers was buying direct from a few selected manufacturers. Where possible it selected manufacturers based in the UK. By these means it sought to achieve economies of scale whilst avoiding long and expensive supply lines. The commercial relationship between the selected manufacturers and M & S was close.
3. Sir Richard Greenbury joined M & S in 1953. He retired as chairman and chief executive in 1999. In his witness statement dated 11 April 2000 provided to Baird he said (para. 4.1):
“The special partner relationship which M & S developed with all its suppliers of goods and services was, from its inception some 70 years ago, a cornerstone principle of the company. Furthermore, it was at the very heart of the way we did business with our suppliers and a fundamental part of that philosophy was that M & S was going to carry on doing business with the manufacturer season after season, year after year. Continuity of production into the foreseeable future was the basis of all discussions and negotiations. Indeed it was clearly understood that once a major supplier to M & S, always a supplier — unless the manufacturer's performance was considered to be poor in which case high level meetings would be arranged to discuss the situation.”
4. The principal witness for M & S, its director for procurement, technology and logistics, Mr Joe Rowe, agreed. In para. 19 of his witness statement dated 21 February 2000 he said:
“M & S was developed by a principle of “partnership”. This was not a partnership in the legal sense, but more in the spirit of co-operation. The people involved in managing M & S and the suppliers had known each other for a long time, seeing their companies grow together. As a result, they were able to trust each other, converse freely and...
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