Henry Kendall & Sons (A Firm) v William Lillico & Sons Ltd and Others

JurisdictionEngland & Wales
CourtHouse of Lords
JudgeLord Reid,Lord Morris of Borth-y-Gest,Lord Guest,Lord Pearce,Lord Wilberforce
Judgment Date08 May 1968
Judgment citation (vLex)[1968] UKHL J0508-1

[1968] UKHL J0508-1

House of Lords

Lord Reid

Lord Morris of Borth-y-Gest

Lord Guest

Lord Pearce

Lord Wilberforce

Henry Kendall & Sons (A Firm)
and
William Lillico & Sons Ltd. and Others
(Consolidated Appeals)
Holland Colombo Trading Society Limited
and
Grimsdale & Sons Limited
(Consolidated Appeals)
Grimsdale & Sons Limited
and
Suffolk Agricultural and Poultry Producers Association Limited
Lord Reid

My Lords,

In the summer of 1960 very large numbers of young turkeys died in what appeared to be an epidemic of an unknown disease. But the outbreaks were curiously patchy and the trouble was soon traced to feeding stuffs. Such birds are generally fed on mixtures of various ingredients. It was common to include up to about ten per cent. of ground nut extractions, and it was found that in the mixture fed to these birds there had been a proportion of ground nut extractions imparted from Brazil. Then it was found that much of this Brazilian food was contaminated by a poison Aflatoxin to amounts up to five parts per million. Then it appeared that owing to climatic conditions in Brazil spores of a fungus aspergillus flavus had caused a mould to grow on the ground nuts and secrete this poison. Ground nut extractions had for many years been imported from India. It has now been found that the Indian product sometimes contains some of this poison though generally in smaller amounts but in 1960 there was no reason to suspect that any ground nut extractions might contain this poison.

The plaintiffs Hardwick Game Farm had about 2,000 breeding pheasants. The eggs were collected and hatched and the young pheasants reared in much the same way as chickens or turkeys. A large number of them died in 1960 from this poison and it is not disputed that it was contained in compound feeding stuffs supplied by a local compounder referred to in this case as S.A.P.P.A. They sued S.A.P.P.A. and S.A.P.P.A. agreed to pay £3,000 damages. That settlement is admitted to have been reasonable and proper. But S.A.P.P.A. brought in their suppliers Grimsdale and Lillico and they in turn brought in their suppliers, Kendall and Holland Colombo. It has been held that Grimsdale and Lillico are liable to S.A.P.P.A. and that Kendall and Holland Colombo are liable to Grimsdale and Lillico. In the first appeal Kendall and Holland Colombo maintain that they are not liable. Lillico do not appeal. But Grimsdale in effect maintain in the second appeal that, if they cannot recover from Kendall and Holland Colombo, then S.A.P.P.A. cannot recover from them. I need make no further mention of Lillico and Holland Colombo and it will be clearer simply to have in mind the chain Kendall to Grimsdale to S.A.P.P.A. to the game farm.

Kendall and Grimsdale are both members of the London Cattle Food Traders' Association. Brazilian ground nuts had not been imported until 1959 but early in 1960 there were large shipments. Kendall had acquired a large quantity and while the goods were afloat Kendall sold a considerable quantity in the London Market to Grimsdale. Then Grimsdale sold a part of this to S.A.P.P.A. at the market at Bury St. Edmunds; S.A.P.P.A. took delivery shortly after the arrival of the goods in London.

The case raises a number of points and I shall first consider the position under the Sale of Goods Act, 1893, section 14. The relevant subsections are:

"(1) Where the buyer, expressly or by implication, makes known to the seller the particular purpose for which the goods are required, so as to show that the buyer relies upon the sellers' skill or judgment, and the goods are of a description which it is in the course of the sellers' business to supply (whether he be the manufacturer or not), there is an implied condition that the goods shall be reasonably fit for such purpose, provided that in the case of a contract for the sale of a specified article under its patent or other trade name, there is no implied condition as to its fitness for any particular purpose.

Conflicting arguments have been submitted about the meaning of almost every part of these subsections. If one puts aside for the moment the encrustations of authority their meaning appears to me to be reasonably clear. But, if a whole chapter of the law is compressed into one section of a code, one cannot expect its words to apply to unusual cases without expansion or adaptation. That is the task of the Court: but it is not in my view legitimate to substitute for the words of the code some general words used by an eminent judge in a particular case and treat them as a test of universal application. Where that has been done in other chapters of the law it has led to trouble, and there has been a tendency to do that here.

I take first subsection (2) because it is of more general application. It applies to all sales by description where the seller deals in such goods. There may be a question whether the sale of a particular article is not really a sale by description but that does not arise here: these are clearly sales by description. Then it is a condition (unless excluded by the contract) that the goods must be of merchantable quality. Merchantable can only mean commercially saleable. If the description is a familiar one it may be that in practice only one quality of goods answers that description —then that quality and only that quality is merchantable quality. Or it may be that various qualities of goods are commonly sold under that description—then it is not disputed that the lowest quality commonly so sold is what is meant by merchantable quality: it is commercially saleable under that description. I need not consider here what expansion or adaptation of the statutory words is required where there is a sale of a particular article or a sale under a novel description. Here the description ground nut extractions had been in common use.

The novel feature of this case is that whereas in 1960 there appears to have been thought to be only one quality of this product, subject to minor variations, it has now been discovered that particular parcels though apparently of the usual quality may really be of a very different quality because they are contaminated by minute quantities of a powerful poison. So the question at once arises—do you judge merchantable quality in light of what was known at the time of the sale or in light of later knowledge?

It is quite clear that some later knowledge must be brought in for otherwise it would never be possible to hold that goods were unmerchantable by reason of a latent defect. By definition a latent defect is something that could not have been discovered at the time by any examination which in light of then existing knowledge it was reasonable to make. But there is a question as to how much later knowledge ought to be brought in. In the present case it had become well known before the date of the trial that the defect was that these Brazilian ground nut extractions were contaminated by poison: but it had also become well known that, while this poison made the goods unsuitable for inclusion in food for poultry, it was generally regarded as proper to include such extractions in cattle food provided that the proportion included did not exceed 5 per cent. of the whole. The question is whether this latter fact should be taken into account in deciding whether these goods were of merchantable quality in 1960.

I think it would be very artificial to bring in some part of the later knowledge and exclude other parts. In this case it is quite true that there was a period, after the nature and effect of this contamination had been discovered but before it had become accepted that small quantities of contaminated goods could safely be included in cattle foods, during which contaminated ground nut extractions were virtually unsaleable. But suppose that in this case it had been discovered at an early stage that these goods' could be used for cattle food, so that there never was a period during which they were unsaleable. In that case I would not think it possible to take into account the nature of the defect but to exclude from consideration the effect which knowledge of the defect had on the market.

There is clear evidence that before the date of the trial Indian ground nut extractions so contaminated were sold under the ordinary description and were not rejected by the buyers when the contamination was discovered; a director of British Oil and Cake Mills who are by far the largest compounders in this country said that they bought these goods untested and then tested them. If they were found to be very highly contaminated they were destroyed: but otherwise they were included in feeding stuffs for cattle. This company apparently did not claim any relief on the ground that such goods were of defective quality or were of no use if highly contaminated. And it appears that other buyers who found poison in the goods which they bought did not try to reject the goods but merely asked for rebates on the price: they never got any rebates and the evidence is that they did not press their claims. So I think that it sufficiently appears that ground nut extractions contaminated to an extent not said to be different from the contamination of the Brazilian product were regarded as of merchantable quality under the ordinary description at the date of the trial.

I do not think that I am precluded from taking this view of the meaning of subsection (2) by any of the authorities.

A statement with regard to the meaning of section 14 (2) which has been commonly accepted is that of Lord Wright in Cammell Laird v. Manganese Bronze Co. [1934] A.C. 402. In that case the Respondents contracted to supply two specially designed ship's propellers. They first supplied propellers which were unsatisfactory and it was only at a third attempt that they supplied propellers which were satisfactory. Cammell Laird...

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