G.K.N. Centrax Gears Ltd v Matbro Ltd
| Jurisdiction | England & Wales |
| Judge | THE MASTER OF THE ROLLS,LORD JUSTICE STEPHENSON,LORD JUSTICE BRIDGE |
| Judgment Date | 14 April 1976 |
| Judgment citation (vLex) | [1976] EWCA Civ J0414-1 |
| Date | 14 April 1976 |
| Court | Court of Appeal (Civil Division) |
[1976] EWCA Civ J0414-1
The Master Of The Rolls (Lord Denning)
Lord Justice Stephenson
Lord Justice Bridge
In The Supreme Court of Judicature
Court of Appeal.
On Appeal From Lord Justice Shaw
MR. C.S. STAUGHTON Q.C., MR. E.H. LAUGHTON SCOTT Q.C. and MR. H. BENKETT (instructed by Messrs Wedlake, Bell & Co., agents for Messrs Pearless, de Rougement & Co., East Grinstead) appeared on behalf of the Appellants.
MR. W. BUDD Q.C. and MR. A. WILSON (instructed by Messrs Roger Fisher & Co., High Wycombe, agents for Messrs Sylvester Amiel & Co.) appeared on behalf of the Respondents.
This case is about fork lift trucks. It took thirty-seven days before an Arbitrator and another five days before the Judge. It now comes to us.
Matbro Limited have their manufactory in Horley in Surrey. For many years now they have manufactured there fork lift trucks. These are one of the essentials in modem factory equipment. They move large weights to and fro, lift them high, sideways and so forth.
Between 1964 and 1971 they got out two new models. One was called a Yard model and the other called a Compact model. All had the same engines, but some were bigger than others because they had to carry bigger loads. This case divides them into two categories, one which carried a load of 8,000 lbs., and another one which carried heavier loads.
In order to produce these fork lift trucks Matbro had to get axles to drive them. They were approached by a firm called Centrax Limited which is now a subsidiary of the big complex of Guest, Keen and Nettlefold, GKN. Centrax made these axles at their works at Newton Abbot in Devon. The axles were designed in the U.S.A. by a United States firm called Rockwell Standard Company who specialised in them. They supplied the know-how and specification to Centrax who manufactured the axles in this country tinder licence from Rockwell. Rockwell told Centrax that the safe axle load was 14,000 lbs.; and that the axles should not be required to carry a heavier load.
I am afraid that Centrax then made a big mistake. They got an order for axles from Matbro but they did not tell Matbro that the safe load was only 14,000 lbs. Onthe contrary Matbro asked specifically what load the axle was capable of accepting. In reply Centrax told Matbro it would take 17,500 lbs. whereas the safe margin limit was only 14,000 lbs.
This mistake was carried a step further. In the Condition of Sale Centrax made a reservation about the warranty of fitness. They said that they only gave a full warranty if there had been an application recommendation which they had accepted in writing. In November, 1965 Centrax gave their acceptance for the smaller models. The applications showed the weights 15,870, 19,030, 14,700 and 17,765 lbs. Yet Centrax gave acceptance for them, although the weights shown were far in excess of 14,000 lbs.
Over the years, from 1964 to 1971, Centrax supplied Matbro with hundreds of axles. These were fitted by Matbro into the fork lift trucks which they were manufacturing and supplying to their customers. These axles were not up to the job. They were the cause of an infinity of troubles to the customers. They broke down. They had to be modified and so forth. Matbro made many complaints. In answer to these complaints, Centrax asserted - quite wrongly - that the axles were sound and safe for the work. They said that this axle was a proven product and one which the Rockwell Standard Company were fitting to comparable machines; and that the Rockwell Standard Company had decided that the safety factor was acceptable. The Arbitrator makes this striking comment:
"This statement by Centrax, which was calculated to allay the misgivings of Mr. Mathew (of Matbro) was notonly quite irreconcilable with the views and opinions previously conveyed to Centrax by Rockwell Standard but also was positively misleading."
On the faith of that assurance Matbro went on placing orders for the axles. They put them into the vehicles and so forth. The Arbitrator goes on to say:
"However, failures of the half shaft, final drive shaft and the ring gear continued with varying frequency and the consequent increased call for replacements led to a shortage of spares which in time not only held up production by Matbro but led to further dissatisfaction on the part of customers already incensed by the frequency of breakdowns of their Matbro fork lift trucks. All this was brought to the attention of Centrax by Matbro."
Up till now I have been speaking of the United Kingdom customers of Matbro. But Matbro also supplied fork lift trucks to customers overseas. They had in the United States a "catastrophic experience" with a company called Gulf Coast Aluminium which had a big plant in Louisana for transporting carbon blocks. The company bought fifty or more fork lift trucks from Matbro. They were a colossal failure. Eventually the Gulf Coast plant was threatened with having to close down. The Company brought claims for damages against Matbro because of all the failures of the fork lift trucks.
What was the cause? Rockwell went into it. In May, 1971 they reported to Centrax that the failures of the trucks at Gulf Coast Aluminium "were due primarily to torsional overload because of the high axle loading", and they said they could not approve these trucks.
So there it is, it is proven that these fork lift trucks broke down repeatedly, time after time, because they were not up to the work for which they were recommended.
Now I come to the decisive finding of the Arbitrator.
"It was a basic term of the contracts of sale between the parties that the axle should be of such strength, design and manufacture as to be able to operate under a total maximum load of 18,500 lbs. The axle supplied by Centrax was not designed to work under a total maximum load of over 14,000 lbs. and as such did not comply with Matbro's fundamental requirements,"
So there it is, there was, on the findings of the Arbitrator, a most serious breach by Centrax, a breach made all the worse by the fact that their own licensors in America, Rockwell, had told them time and again that the safe load for the axle was 14,000 lbs, Centrax did not pass that information on to Matbro but on the contrary led Matbro to think they could be loaded up to 17,500 lbs. or more.
Now for the damages, the Arbitrator found: "Matbro suffered loss and incurred expenses in that: (a) They had to repair fork lift trucks that had broken down; (b) then they had to modify the trucks by adding a strengthening tie-bar", and they incurred expense at the Gulf Coast Aluminium plant in settling the claim, and "They lost orders for fork lift trucks both at home and overseas and as a result their turnover was decreased and their reputation was temporarily tarnished". He then went on to say, "I am satisfied that orders for at least 110 machines athome, 31 machines in Europe and 50 machines for … America were lost and that the damage thereby sustained from the resultant decrease in turnover is a direct consequence of the breach of contract on the part of Centrax."
The Arbitrator assessed damages on the various items: but the big figures were those: for the loss of orders at home for 110 machines he gave a figure of £115,912; and for the loss of orders overseas for 81 machines he gives a total of £34,141. And adding those two items (that is loss of orders) on the smaller items the grand total which he gave against Centrax was £167,934.70p., together with interest.
That award having been made Centrax asked the Arbitrator to state his award in the form of a special case for the determination of the High Court under the provisions of the Arbitration Act. He so stated his award. It covers thirty-five pages. But Mr. Justice Shaw, after hearing argument, made an order remitting the whole matter once again to the Arbitrator - to reconsider a great part of his award - because he thought that injustice may have been occasioned by the findings of the Arbitrator.
Now there is an appeal from the Judge to us, asking us to restore the award of the Arbitrator.
Although many, many points were canvassed in the court below, fortunately they have been reduced before us to five main points. There is first a point of law. It is on the loss of orders from customers. The Arbitrator did not award damages for loss of reputation of Matbro, but he did give damages for loss of orders. He found that the existing customers of Matbro were dissatisfied andincensed and on this accord did not give repeat orders which they would have done if there had been no breach of contract and he awarded Matbro the loss of profits on those sales. Mr. Budd submitted that this was erroneous in point of law. He had in his favour the observations of Lord Justice Scrutton in Simon -v- Pawsons and Leafs (1932) 38 Commercial Cases, 151, at page 157: "In a considerable experience of contracts of sale of goods I do not remember cases of claim for loss of repeat orders from the customer". Lord Justice Scrutton said he preferred the reasoning in the Irish case of Fitzgerald -v- Leonard (1893) 32 Irish Reports to that of Mr. Justice Coleridge (as he then was) in Cointat -v- Myham (1913) 2 King's Bench, 220. It would seem therefore that Lord Justice Scrutton was of the view that damages were not recoverable for loss of repeat orders. It is only with hesitation that I venture to differ from Lord justice Scrutton. But we had the matter fully argued before us and I must say I take a different view. It is supported by several cases cited to us. There is first an American case, Swain -v- Sohleffelin, reported in 1892. An ice cream merchant sold ice cream but he added some colouring matter which contained arsenic. When people fell...
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