Globe Motors, Inc. and Others v TRW Lucas Varity Electric Steering Ltd and Another

JurisdictionEngland & Wales
CourtQueen's Bench Division (Commercial Court)
JudgeHis Honour Judge Mackie,Judge Mackie
Judgment Date11 Nov 2014
Neutral Citation[2014] EWHC 3718 (Comm)
Docket NumberCase No: FOLIO 2011-645

[2014] EWHC 3718 (Comm)

IN THE HIGH COURT OF JUSTICE

QUEEN'S BENCH DIVISION

COMMERCIAL COURT

Royal Courts of Justice

Strand, London, WC2A 2LL

Before:

His Honour Judge Mackie QC

Case No: FOLIO 2011-645

Between:
(1) Globe Motors, Inc.
(2) Globe Motors Portugal-material Electrico Para a Industria Automvel Lda
(3) Safran USA Inc
Claimants
and
(1) TRW Lucas Varity Electric Steering Limited
(2) TRW Limited
Defendants

Mr Paul Lowenstein QC and Mr Rajesh Pillai (instructed by Baker & McKenzie LLP) for the Claimants

Mr Paul Downes QC and Ms Emily Saunderson (instructed by Wragge Lawrence Graham & Co LLP & Co) for the Defendants

Hearing dates:,6,10–13,17–21,24,25 and 31 March,1–3,7–10, 14 and 15 April 2014 and 10 – 12,17–19 and 26–27 June 2014

Approved Judgment

I direct that pursuant to CPR PD 39A para 6.1 no official shorthand note shall be taken of this Judgment and that copies of this version as handed down may be treated as authentic.

His Honour Judge Mackie QC

Judge Mackie QC:

1

This has been the trial of claims by the Claimants for breach of contract and negligent misstatement against the Defendants arising from an exclusive supply agreement dated 1 st June 2001 ("the Agreement") made between the First Claimant and the First Defendant. The claims which are for up to some $20 million are denied.

The parties

The parties

2–3

Simplified outline of the disputes between the parties

39–41

The Trial

4–7

The Agreement

8–13

Technical background—EPAS systems and platforms-Preliminary

13

Platforms, models and motors

16

The background facts—some of those which are undisputed or not much in issue

17

List of Issues

39–42

Approach to construction

42

Issues 1 to 4

47–84

Issues 5 to 9—factual disputes about the Gen 1 and Gen 2 motors-the broad picture 84–

92

The expert witnesses

67

Main differences between Gen 2 and Globe Gen 2

70

The 'could and would' case—the parties' submissions

87

Issues 5 to 17

84–115

Negligent Misstatement

114

Issues 19 to 25

115–129

Conclusion

129

2

The First Claimant ("Globe") designs and manufactures electric motors, including motors and leadframe assemblies. These are a component part of the electric power assisted steering system ("EPAS") fitted to cars, which sense drivers' input to the steering wheel and provide the necessary steering assistance.

3

The Second Claimant ("Porto") is a subsidiary of Globe incorporated for the supply of the motors to the Defendants under the Agreement. Globe says (but the Defendants deny) that following the execution of the Agreement, Porto became a party to it and/or performed part of the Agreement on Globe's behalf. It began to supply motors from about November 2002.

4

The Third Claimant ("Safran") was added as a Claimant by consent, having taken an assignment of the respective rights of Globe and Porto in this litigation.

5

The First Defendant ("TLVES") is an English company that supplies components to car manufacturers such as Renault, Fiat and Nissan. TLVES assembles EPAS systems from components it buys from third party suppliers, including Globe. The electric steering business of TLVES started with Lucas in the 1990s. Lucas merged with Varity Corporation in 1996. In about 1998 there was a joint venture between TRW Group (51%) and LucasVarity (49%) (for which purpose TLVES was incorporated). Finally TRW acquired Lucas Varity in 1999. This history is relevant as an aspect of the case involves differences of view between the European and US arms of the Defendants about the merits of Globe and its products.

6

The Second Defendant ("TRW Ltd"), which is the parent of TLVES, was added following a contested hearing by order dated 25 September 2013 after an intercompany Business Transfer and Agency agreement came to light. TRW Ltd denies that it can be liable for any breaches of the Agreement and asserts a limitation defence.

7

I will refer to the Claimants generally as "Globe" and to the Defendants as "TRW" except where the identity of a particular company matters.

Simplified outline of the disputes between the parties.

8

Globe says that in breach of the Agreement, from about 2005, TRW bought products (known as "Gen 2" products) from DEAS ( which I will sometimes refer to as "Emerson"), a competitor of Globe. (DEAS was itself bought by TRW in 2006). Globe says that TRW was contractually obliged to buy these products from Globe and that it has suffered loss and damage as a result of TRW's failure to do so. Globe says that the Agreement covers the Gen 2 products at least to the extent that they could and would have been produced by making engineering changes to the first generation ("Gen 1") products which it has the exclusive right to produce. TRW says that Gen 2 products are significantly different from the Gen 1 products, they represent a re-design, and they are not covered by the Agreement. Further Globe could not have produced motors that met the requirements for the DEAS Gen 2 products at all and/or within a reasonable time. Such products could not and would not have been produced as a result of engineering changes to the Gen 1 products. TRW also says that, in any event, the products under the Agreement were defined by steering system power and platform, and that the Gen 2 products were for systems with a different power rating and largely for a sub-platform (the B85) which was not covered by the Agreement, a claim which Globe disputes.

9

Globe also claims in negligent misstatement. It says that TLVES was negligent in grossly overestimating the estimated volume of products both before and at the time of entering into the Agreement, and Globe has suffered loss as a result. Globe says that TLVES knew at the time of the Agreement that Renault did not intend to purchase from TLVES any Gen 1 Motors for its P1 platform and that the true estimated volume of purchases by Nissan was as set out in a document dated 7 May 2001, rather than in the Agreement. TRW says that this is not the case.

10

There are various more minor claims including one by TRW of estoppel based on the alleged absence of complaint by Globe at the time of the alleged breaches.

11

Apart from the issue of liability TRW disputes the quantum of damages and also a claim by Globe for restitutionary damages which was largely abandoned at the end of trial.

12

The disputes between the parties are set out in a List of Issues. In retrospect that list turns out not to be in the most logical sequence but I shall follow the parties and deal with each in turn after setting out some introductory matters and the undisputed facts.

The Trial

13

The trial lasted 32 days in March, April and then June 2014. The parties produced many bundles of papers including 5625 "Key contemporaneous documents". The Court was fortunate that the entire documentation for the trial was put onto a computer system accessible to the parties and to me. Several laminated sheets were much used at the trial. Three of these are from the "Master Schedule" of Specifications prepared by Mr Arwine and dealt with in his Fourth witness statement. The fourth is a helpful chart of Platforms, models and motors prepared by Globe which is not agreed but was not much disputed by TRW.

14

The Claimants called evidence from the following witnesses of fact:

• Mr Steven McHenry, president and chief executive officer of Globe,

• Mr Derek Keegan, vice president (marketing and sales) of Globe,

• Mr Scott Arwine, vice president (engineering) of Globe,

• Mr Americo Pinto, finance and administration director of Porto, and,

• Mr Mike Fearon, former supply chain director at TLVES, who gave evidence for Globe but is now retired and employed by neither party.

15

The Defendants called:

• Mr Brendan Connor, who was the managing director of TLVES from 23 rd February 1998 until around September 2001,

• Mr Gerhard Schmitz, commodity purchasing manager steering motors for GmbH,

• Mr Hans Heckmann, who is no longer employed by TRW, but who was at the relevant time, senior commodity purchasing manager for electromechanics in Europe for TRW in Germany,

• Mr Jeffrey Coles, who is now retired, but who was an engineer working on automotive applications for TLVES and a Technology Leader at the relevant time. He also worked as a technology consultant to TRW in the litigation and throughout the trial,

• Mr David Penketh, who was an electronics project leader at TLVES from March 2001 to August 2003, and who is still employed by TRW,

• Mr Alexandre Perrin, now TRW's Global Account Director for Renault Nissan.

16

The Defendants tendered statements which were not challenged from Mr Marian Sedmak, who since November 2005 has been a financial manager for TRW Automotive (Slovakia) s.r.o, Mr Rocio Arizcuren, who has been a financial controller at TRW Automotive España S.L. since 2005 and Mr Adrian Robinson, global purchasing director of electronics at TRW.

17

The Claimants called expert engineering evidence from Dr Michael Sidman. The Defendants called Professor Ansgar Ackva.

18

The Defendants, but not the Claimants, tendered but then did not call expert accounting evidence, a report by Mr John Fisher of PwC, which in effect responds to the quantum evidence from Mr Keegan and Mr Pinto of Globe. The Claimants rely on parts of that report for their damages claim.

19

The trial was long. The parties found it necessary to examine in great detail in 2014 the dealings between Globe and TRW between 1996 and the signing of the Agreement in 2001 and then the events that followed. That came about for the first period because of the negligent misstatement claim advanced by Globe, the emphasis placed by TRW on the detailed factual matrix and the case of both on damages in general. For the later period it was...

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