Bim Kemi AB v Blackburn Chemicals Ltd (No. 4)

JurisdictionEngland & Wales
JudgeLord Justice Longmore,Lord Justice May,Lord Justice Kennedy
Judgment Date10 November 2004
Neutral Citation[2004] EWCA Civ 1490
CourtCourt of Appeal (Civil Division)
Date10 November 2004
Docket NumberCase No: 2004 0374 A3

[2004] EWCA Civ 1490

[2004] EWHC 166 (Comm)

IN THE SUPREME COURT OF JUDICATURE

COURT OF APPEAL (CIVIL DIVISION)

ON APPEAL FROM THE HIGH COURT OF JUSTICE (Commercial Court)

(Hon Mr Justice Cooke)

Royal Courts of Justice

Strand, London, WC2A 2LL

Before:

Lord Justice Kennedy

Lord Justice May and

Lord Justice Longmore

Case No: 2004 0374 A3

Between:
Blackburn Chemicals Ltd
Appellant
and
Bim Kemi AB
Respondent

ALASTAIR WILSON Esq QC and JONATHAN D C TURNER Esq (instructed by Taylors, BB1 7JN) for the Appellant

ANDREW ONSLOW Esq QC and MARK HOSKINS Esq (instructed by Jeffrey Green Russell W1S 1RG) for the Respondent

Lord Justice Longmore
1

Introduction

In 1994 Bim Kemi AB ("Bim") and Blackburn Chemicals Ltd ("Blackburn") made an agreement in relation to products which they respectively produced and marketed. It was agreed, inter alia, that Blackburn would "source" lint control products only from Bim and that Bim would "source" antifoams only from Blackburn. It was further agreed that Blackburn would have an exclusive right of sale in Great Britain and Eire while Bim would have first an exclusive right of sale in Sweden and secondly an exclusive right of sale in Denmark, Norway and Finland for a 3 year period which could be continued if Bim attained 20% of the available market in any agreed product range. Other provisions were agreed in relation to markets outside the exclusive regions.

2

Disagreements arose between the parties and matters came to a head in December 1998 when Blackburn refused to supply Bim with any further deliveries of a product known as BS 470. Bim claimed damages from Blackburn in the sum of two years loss of profit on the sales of BS 470 which Bim said they could and would have made. Blackburn denied that any agreement had been made in 1994 or any other time but asserted that, if that was wrong, Bim was in repudiatory breach of the agreement because Bim had wrongfully sold antifoam products of its own in Scandinavia instead of sourcing Blackburn's products. Blackburn also made independent claims for damages against Bim for breaches of not only the 1994 agreement, if it existed, but also an earlier agreement of 1984.

3

The trial of these issues began on 26th November 2001. On 30th January 2002 Langley J held first that there was indeed an agreement made in 1994 on the terms of a fax dated 20th December 1993 and secondly, contrary to Blackburn's submissions, that it was Blackburn (not Bim) who were in repudiatory breach and that Bim were, therefore, entitled to bring the contract to an end. He held further that Bim was also in breach (inter alia) because they had indeed sold antifoams other than BS 470 in Scandinavia so that Blackburn could make a claim for damages suffered as a result of such breaches of the sourcing obligations in the 1994 agreement.

4

On 13th February 2003 the Court of Appeal confirmed that there was a contract made in 1994 on the terms of the fax of 20th December 1993 but decided that it was Bim (not Blackburn) who was in repudiatory breach and that Blackburn had been entitled to accept that repudiation as terminating the contract on 22nd December 1998. Argument on the consequences of that decision and on costs was deferred. Blackburn were, accordingly, held to be entitled to damages for Bim's wrongful repudiation and also to damages for Bim's breaches of the sourcing obligations in the 1994 agreement. The Court of Appeal also held that Bim had not by the end of 1996 obtained 20% of the available market in Denmark, Norway and Finland in any relevant product range. Bim had not, therefore, been entitled to exclusive sales rights in these territories after 1st January 1997. On 24th June 2003 after a petition by Bim to appeal to the House of Lords had been dismissed, the Court of Appeal made a final order declaring that Blackburn was entitled to damages for specified breaches by Bim and for Bim's repudiation.

5

So much is common ground. What is in dispute is whether Bim should be allowed to argue on the assessment of damages (which is still to take place) that the 1994 agreement is void for illegality by reason of the competition provisions of Article 81 of the EC Treaty ( ex Article 85 of the Treaty of Rome). This dispute (which has a complex procedural history) was expressly not resolved by the Court of Appeal which by its order of 24th June 2003 provided:-

"(10) Nothing in the form of this order shall prevent [Bim] from arguing [that] the 1994 Agreement is void for illegality and/or that [Blackburn] is precluded from recovering damages by reason of [Blackburn's] pleaded case that the 1994 Agreement was void for illegality, but nothing in this paragraph shall prevent [Blackburn] from arguing that the Claimant is no longer entitled to raise such an argument."

6

The question whether Bim should be entitled to argue that the contract is illegal came before Cooke J who on 6th February 2004 decided that Bim should be so entitled. He accordingly made an order dismissing Blackburn's application to strike out the relevant parts of what his order called Bim's "Defence to Blackburn's Statement of Case dated 11th August 2003".

7

Procedural History of the Article 81 (ex 85) Point

I can take this virtually verbatim from the detailed account given by Cooke J. The question of illegality surfaced about three months before the date fixed for the trial, when Blackburn sought to make amendments to its defence to plead, inter alia, that, if Bim had obtained 20% of the available market, so that it retained its right of exclusive sales in Finland after three years, there was a breach of Article 81 of the EC Treaty and the whole of the 1994 Agreement was thereby rendered invalid. Bim objected to that amendment because of the lateness of it, because it raised difficult and substantial issues and because those issues could not be fairly determined at the scheduled trial. Blackburn maintained that, as the plea was one of illegality, the Court had to consider it, whether pleaded or not, and that it was better that it should be pleaded out. Moreover, Blackburn stressed in its skeleton argument the connection to the existing proceedings in relation to investigation of market share because the Court had in any event to determine whether or not Bim had achieved 20% of the available market in the context of the existing dispute. Despite Bim's objection, Langley J gave permission to Blackburn to amend its Defence and Counterclaim and to plead and serve a Rejoinder and Reply to Defence to Counterclaim which included this plea, but he excluded the issues from the imminent trial. He gave Bim permission to make consequential amendments in the light of Blackburn's amendment, subject to the paragraph of the order in which he ordered a stay in the following terms:

"All further proceedings in respect of the pleas that the Agreement alleged by the claimant to have been made between the parties in 1994 was, if made, void under Article 85 of the Treaty of Rome or under the Restrictive Trade Practices Act 1976 shall be stayed until after the Trial of all other issues or further Order." (Nothing now turns on the reference to the Restrictive Trade Practices Act 1976 and it can be disregarded.)

8

The Article 81 plea which had been advanced by Blackburn is to be found in paragraph 6E of the Re-Re-Re-Re-Amended Defence and Counterclaim. Paragraph 6E reads as follows:

"Further or in the further alternative if (which is denied) the claimant or its subsidiary Cellkem achieved a 20% share of the market for Antifoaming agents in Finland or in Scandinavia, the exclusive supply and sourcing obligations and restrictions on re-sale outside allotted territories of the alleged Agreement (if made) were void under Article 85(2) of the Treaty of Rome, in that it was an agreement between competing undertakings …. which was liable to affect trade between member states of the EC (namely the UK, Sweden and Finland) to a not insignificant extent and which had as its object or effects the prevention, restriction or distortion of competition within the common market by restricting competition between the said undertakings in the supply of antifoaming agents, alternatively silicone based antifoaming agents in Finland or Scandinavia; and the remainder of the alleged Agreement, if made, was thereby invalidated ……."

9

When Bim came to plead to the other amendments made, not being bound (and probably not being entitled) to plead to the new paragraph 6E issue, it included the following in its own paragraph 6E:

"The claimant does not plead to paragraph …. 6E of the Defence. All proceedings arising from the allegations made in this paragraph have been stayed by the Order of Langley J dated 5th October 2001. If the …. [1994] Agreement was invalid for the reasons given by the defendant, the claimant reserves the right:

(i) to contend that the 1984 Agreement was also invalid:

(ii) to claim damages from the defendant for breach of Article 85(81) of the Treaty of Rome."

10

Self evidently Bim did not accept the validity of the Article 81 plea raised by Blackburn since it proceeded with its claim. In his witness statement, Bim's solicitor says that Bim had not taken specialist advice and literally had no case on the issue at that stage. Inevitably, however, notwithstanding the pressures of preparation for the hearing on other issues (and as Bim's own amendment shows) there would have to have been some consideration of this plea, since Bim would not wish to press on with what might turn out to be a futile claim. Bim made no positive case since it did not need to do so, but as appears from their evidence and as accepted by Blackburn, its stance was that if Blackburn was right in...

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