James Slater and Hamish Slater (A Firm) and Others v Finning Ltd

JurisdictionEngland & Wales
CourtHouse of Lords
JudgeLord Slynn of Hadley,Lord Steyn,Lord Griffiths,Lord Jauncey of Tullichettle,Lord Keith of Kinkel
Judgment Date04 July 1996
Docket NumberNo. 2.

[1996] UKHL J0704-2

House of Lords

Lord Keith of Kinkel

Lord Griffiths

Lord Jauncey of Tullichettle

Lord Slynn of Hadley

Lord Steyn

James Slater and Hamish Slater (a Firm) and Others
(Appellants)
and
Finning Limited
(Respondents) (Scotland)
1

OPINIONS OF THE LORDS OF APPEAL FOR JUDGMENT IN THE CAUSE

Lord Keith of Kinkel

My Lords,

2

This appeal turns on the true construction and application to the facts of the case of section 14(3) of the Sale of Goods Act 1979, which provides:

"Where the seller sells goods in the course of a business and the buyer, expressly or by implication, makes known — ( a) to the seller, or ( b) where the purchase price or part of it is payable by instalments and the goods were previously sold by a credit-broker to the seller, to that credit-broker, any particular purpose for which the goods are being bought, there is an implied condition that the goods supplied under the contract are reasonably fit for that purpose, whether or not that is a purpose for which such goods are commonly supplied, except where the circumstances show that the buyer does not rely, or that it is unreasonable for him to rely, on the skill or judgment of the seller or credit-broker."

3

The pursuers and appellants are owners of a motor fishing vessel "Aquarius II," which they acquired second hand in 1981. The vessel was equipped with a 12 cylinder diesel engine (D398) manufactured by the Caterpillar Tractor Co., having a horsepower of 750. In 1985 the appellants decided to have the overall length of the vessel increased, so as to produce greater fish carrying capacity. The work to achieve this was carried out at a yard in Skagen, Denmark. At the same time the appellants decided to uprate the power of the engine from 750 to 850 hp, and the necessary work was carried out by Caterpillar engineers in Denmark. The vessel then returned to her home port of Fraserburgh. In September 1985 the appellants called in the defenders and respondents, who are suppliers of marine diesel engines and components manufactured by Caterpillar, because the power of the vessel's engine did not appear to have been increased. The respondent's engineer did some work on the engine and advised that it should shortly be overhauled as it was using too much oil. In March 1986 an overhaul was carried out by the vessel's own engineers, assisted by one other man. Various components were replaced and others were checked and adjusted. Later the vessel's main engine bearings failed while she was at sea and on her return to port the respondents were again called in. It was found that the crankshaft required to be replaced, and the respondents' representative advised that the camshaft should also be replaced, since it was worn to some extent and replacement could conveniently be carried out while the engine was lifted out for replacement of the crankshaft. The appellants agreed, and the respondents arranged for the supply of a new camshaft from Caterpillar. The old camshaft was numbered 5L2880 (5L). The new camshaft which Caterpillar supplied was numbered 1W1854 (1W), a re-designed model which had been introduced by Caterpillar for the D398 engine in February 1982. The re-designed model had a different profile of the exhaust cams, which Caterpillar said reduced the contact stress on the cams and would lower the rate of wear and extend the service life of the camshaft. They also said that the change in design had no effect on engine performance and that the new camshaft could be used in place of the former camshaft in all earlier engines. In May 1986 the new 1W camshaft was fitted to the engine, which was reinstalled with its new crankshaft also. At the same time the gearbox was realigned by another company. Satisfactory sea trials were held and the vessel went on fishing trips but noises were heard coming from the engine, which had at the time been running for about 50 hours, and the vessel put back to Fraserburgh. The respondents were again called in, and it was found that No. 6 exhaust cam lobe was badly worn. It was decided to replace completely the newly installed camshaft and followers, and this was done with another 1W model, the work being completed on 11 June 1986. Further trouble was encountered shortly afterwards, and the followers on No. 9 and No. 11 exhaust valves, which were found to be worn, were replaced. There was a trouble-free period from the end of July till towards the end of November 1986, but then further tapping noises were heard and the vessel returned to Fraserburgh. The respondents again attended and found that No. 4 exhaust follower was badly worn. It was replaced, but then it was decided again to replace the whole camshaft with its followers and cam blocks, again with the 1W model. Extensive vibration tests were carried out in an endeavour to trace the cause of the trouble. Aquarius II set off for another fishing trip in the English Channel in January 1987 but after about four weeks at sea noises were again heard coming from the engine, and she put into Plymouth. Representatives from the respondents attended, and also Mr. James Carnegy, a marine surveyor from Aberdeen. No. 6 exhaust valve was found to be worn. Mr. Carnegy considered that it would be unsafe for the vessel to put to sea. A number of meetings were held with representatives of all interested parties, including Caterpillar, but no agreement was reached as to the cause of the trouble. The respondents offered a complete overhaul of the engine free of charge, but the appellants insisted that a new engine would be the only satisfactory solution. Aquarius II was towed to Great Yarmouth, where a new Caterpillar engine of a different design was installed.

4

The old engine was sold and eventually found its way to South Africa, where after an extensive overhaul by the Caterpillar dealer there it was installed in a vessel called "Ocean Spray." It appears that the overhaul did not include replacement of the camshaft or followers. Thereafter the Ocean Spray went on extensive fishing trips lasting on average 54 days and logged many thousands of miles without encountering any trouble with the camshaft. There was evidence that 1W camshafts installed in hundreds of other D398 engines had operated without giving any trouble.

5

The appellants raised the present action against the respondents in April 1989, concluding for payment of some £662,500 by way of damages on the ground of breach by the respondents of the condition contained in section 14(3) of the Act of 1979. The respondents counter-claimed for the sum of some £63,700 with interest in respect of goods and services supplied by them to the appellants and unpaid for.

6

A proof was heard before Lord Weir, who on 22 January 1993 assoilzied the respondents from the conclusions of the summons and gave judgment in their favour for the sum counter-claimed with interest, amounting in all to £82,826. After an elaborate review of the evidence, which included expert evidence on both sides, the Lord Ordinary concluded that the cause of the failure of the camshafts was excessive torsional resonance excited by some cause external to the engine and the camshafts themselves. The Lord Ordinary accepted the evidence of the witness Dr. Halleen, an employee of the Caterpillar Co., of which he said this:

"The effect of Dr. Halleen's evidence was that in his view whatever caused the torsional resonance to be excited and so leading to damage it was not the 1W camshaft, which were supplied by the defenders but that the cause had to be an external one. It is important to observe that there was no suggestion at any time that external forces could not have been responsible. The inability to establish what precisely was the external force is, in my opinion, immaterial. The mystery might have been unravelled if further examination of the engine and its associated parts had taken place before it had been removed from the Aquarius. This did not occur so the problem to that extent remains unsolved. But what has been established quite convincingly is that whatever the cause, it was not due to excitation coming from within the engine or any part of it which, added to the torsional frequency inherent in the engine, could have led to resonance and so to the failures. In particular, in my judgment, the fitting of these camshafts were not responsible for the failures which were observed."

7

Later, under reference to the terms of section 14(3), the Lord Ordinary said:

"The question which has to be borne in mind is, 'What was the specified purpose?' The purpose for which the camshafts and followers were supplied was for use as component parts of the engine of the pursuers' fishing vessel. No question arises as to the manner in which these parts were installed. This case is not concerned with a contract of services. There is no evidence that the defenders were told of any special circumstances concerning this engine which would have made the requirement for a new camshaft any different from that of any other D398 engine. The defenders supplied the pursuers with the camshaft and followers appropriate to this type of engine in 1986. The proper question is whether the inference can be drawn that they themselves were unfit for their intended purpose. The answer to that question is to be derived from my analysis of the evidence, and, in my opinion, the evidence demonstrates that the camshafts and their followers were in fact fit for their purpose. The damage observed in them time to time was not due to their unfitness to fulfil the purpose, but were the consequences of external factors. But for these factors, they would not have failed. That, in my judgment, is a complete answer to the pursuers' case."

8

The appellants reclaimed, and on 30 November 1994 the Second Division (Lord Justice-Clerk Ross, Lord Clyde and Lord Morison) refused the reclaiming motion and affirmed the interlocutor of...

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