John Holt & Company (Liverpool) Ltd and Another v Caterpillar (NI) Ltd (Previously Called FG Wilson (Engineering) Ltd)
| Jurisdiction | England & Wales |
| Judge | Mr Justice Cooke,Mr Justice Popplewell |
| Judgment Date | 13 December 2013 |
| Neutral Citation | [2013] EWHC 4197 (Comm),[2012] EWHC 2477 (Comm) |
| Docket Number | 2011 Folio 862,Case No: 2011/1373 |
| Court | Queen's Bench Division (Commercial Court) |
| Date | 13 December 2013 |
[2012] EWHC 2477 (Comm)
The Hon. Mr Justice Popplewell
Case No: 2011/1373
IN THE HIGH COURT OF JUSTICE
COMMERCIAL COURT
QUEEN'S BENCH DIVISION
Royal Courts of Justice
Strand, London, WC2A 2LL
Charles Hollander QC and Jasbir Dhillon (instructed by Walker Morris LLP) for the Claimant
Stephen Cogley QC and Jeremy Richmond (instructed by DLA Piper UK LLP) for the Defendant
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. Hearing dates: 23,24,25 & 26 July 2012
Introduction
This is the hearing of an application by the Claimant ("FG Wilson") for summary judgment in respect of the whole of its claim; and the trial of a preliminary issue as to whether a clause contained in FG Wilson's standard terms and conditions, satisfies the test of reasonableness under the Unfair Contract Terms Act 1977. The relevant clause provided "Buyer shall not apply any set-off to the price of Seller's products without prior written agreement by the Seller" ("the no set-off clause").
FG Wilson is a Northern Irish company carrying on business as a manufacturer and seller of generator sets and spare parts worldwide, together with associated services. It is a wholly owned subsidiary of an American company, Caterpillar Inc. The Defendant ("Holt Liverpool") is an English company, whose business consists predominantly of purchasing generators and spare parts from FG Wilson for export to Nigeria. The sales in Nigeria are made by Holt Liverpool's majority owned subsidiary, John Holt plc ("Holt Nigeria"), a company incorporated in Nigeria. I shall refer to Holt Liverpool and Holt Nigeria collectively as Holt, save where it is necessary to distinguish between the two.
The claim is for approximately US$ 12 million as the sum allegedly due in respect of generators and spare parts supplied by FG Wilson to Holt Liverpool, together with associated services and licences. There is also a claim for contractual interest for late payment of invoices.
In a separate Commercial Court action, Holt claims in excess of US$ 53 million from FG Wilson as damages for alleged breaches of a distributor agreement relating to the import of generators into Nigeria. The trial of that action is listed to commence in April 2013. The essence of the claim in those proceedings ("the Holt 1 Claim") is that by supplying generators to others within Nigeria over a period going back a number of years, FG Wilson was in breach of exclusivity obligations owed to Holt.
The preliminary issue falls to be dealt with at the same time as the summary judgment application because it is FG Wilson's case that the no set-off clause is a complete answer to the defences advanced by Holt Liverpool. As Lord Donaldson of Lymington MR observed in Stewart Gill Ltd v Horatio Myer & Co Ltd [1992] QB 600, 604G-H, if a no set-off clause is to be effective at all, its enforceability must be determined at an early stage of the litigation, either upon an application for summary judgment or upon the hearing of a preliminary issue. Accordingly, on 30 March 2012, Deputy Judge Stephen Males QC ordered the trial of a preliminary issue as to whether the no set-off clause satisfies the requirement of reasonableness for the purposes of the Unfair Contract Terms Act 1977.
The Claims
The generators supplied by FG Wilson to Holt Liverpool which form the subject matter of the claim were in one or other of two forms. Some were fully assembled generators which were delivered at FG Wilson's factory in Larne, Northern Ireland, as finished products, requiring only commissioning after transport to Nigeria. These were known as "Completely Built Up" generators and referred to as "CBUs". Other generators were sold in unassembled kit form, again delivered at FG Wilson's factory in Larne, which were then to be assembled by Holt Nigeria after arrival in Nigeria. These were known as "Completely Knocked Down" generators and referred to as "CKDs". As well as complete generators, Holt Liverpool purchased spare parts from FG Wilson, because it was part of Holt Nigeria's business to service and repair generators for their customers. In relation to the CKDs, FG Wilson provided and charged for training services to enable Holt Nigeria personnel to be able to assemble the kits, and granted software licences for electronic tools used for servicing the generators.
Although the sales by FG Wilson to Holt Liverpool were on terms ex works Larne, on some occasions FG Wilson made arrangements for the haulage from the factory to the port of shipment. On such occasions, FG Wilson paid the freight for the road transport and recharged Holt Liverpool.
FG Wilson's claim is for:
(1) US$ 9,874,117.97 in respect of CKDs;
(2) US$ 1,223,936.40 in respect of CBUs;
(3) US$ 605,945.95 in respect of spare parts for CKDs and CBUs;
(4) US$ 25,670.61 in respect of haulage charges;
(5) US$ 5,807.62 in respect of training services;
(6) US$ 2,861.67 in respect of software licences;
(7) US$ 448,115.41 in respect of late payment charges on 276 invoices; these invoices related to the sale of CBUs, CKDs and spare parts, haulage charges, training services and software licences, which were paid by Holt Liverpool, but paid late; the sum allegedly due and owing is calculated at the rate of 6.25%, being US prime + 3% which is the late payment interest rate provided for in FG Wilson's standard terms and conditions;
(8) contractual interest at the rate of 6.25% on the above sums which form the subject matter of its claim.
The nature of the dispute
The trading terms agreed between FG Wilson and Holt Liverpool allowed Holt Liverpool extended credit. The originally agreed payment terms were that the invoiced sums were to be paid on the 25 th day of the fourth month after the month in which the invoice was dated. There is a dispute, to which I shall return below, as to whether this was extended to the 25 th day of the fifth month after invoice or some subsequent date.
On 7 December 2009 FG Wilson emailed Holt Liverpool to say that invoices totalling about US$ 1.3m were overdue for payment. These were invoices issued in June 2009 which would have fallen due for payment on 25 November 2009 in accordance with terms for payment on the 25 th day of the fifth month after invoicing. The email asked for confirmation that payment had been organised, or for a reason for non-payment. The response from Holt Liverpool was that the consistent practice had been to settle the account on 180-day net monthly account terms, with agreement to pay interest on the excess period beyond the standard terms of the 25 th day of the fourth month after invoice. The invoices were therefore said to be intended to be paid as part of the December settlement.
What subsequently happened was that invoices which were due in January 2010, on any view of the relevant credit terms, were not paid. Accordingly, on 1 February 2010, following a meeting of FG Wilson's Credit Committee, FG Wilson notified Holt Liverpool by email that the latter's account had been placed on hold. This meant that no further orders would be accepted, and existing orders would not be shipped. The email asked for a repayment schedule by return, in order to bring the account back within the agreed trading terms.
There followed exchanges and discussions between the parties as a result of which trading was resumed at about the end of April or early May, on the basis of a repayment plan which would have brought Holt Liverpool back "into terms" in relation to outstanding and subsequent orders by December 2010. It is Holt Liverpool's contention that these discussions resulted in a binding agreement, which it refers to as the "Repayment Agreement", under which FG Wilson was bound to supply identified minimum quantities of product month by month.
By August 2010, however, Holt Liverpool was unable to meet these repayment terms. There followed subsequent negotiations for a further repayment plan, which ultimately foundered.
On 19 January 2011 FG Wilson sent an email purporting to exercise its rights under a retention of title clause in its standard terms and conditions. Holt Liverpool responded by email on the following day to the effect that all the goods had been delivered to Holt Nigeria, who had become the legal owner of the goods and paid Nigerian VAT.
On 11 March 2011 solicitors for FG Wilson wrote a letter before action in relation to the debt, amounting to US$ 12,628,428.73, and threatening proceedings if it was not paid within 7 days. A response from DLA Piper, solicitors acting for Holt Liverpool, was sent on 18 March 2011. It stated that, prior to receipt of the 11 March letter, DLA Piper had been instructed in relation to various issues arising out of the trading relationship. The letter of 18 March set out at some length Holt Liverpool's complaints which form the subject matter of the dispute in the Holt 1 Claim. Having done so, the letter continued under the heading "Your letter of 11 March 2011", stating:
"Our client accepts that monies are owed to FGW but until it has been able to review all of the individual invoices claimed shown in the schedule attached to your letter, no admissions are made as to whether the sum of $12,628,428.73 is accurate."
The Issues
FG Wilson submits that the invoices on which it claims fall to be paid as the contractually agreed price for goods and (in more minor respects) services. Holt Liverpool submits as follows:
(1) It has an arguable defence by way of set-off of:
(a) the Holt 1 Claim; and/or
(b) a claim for damages for breach of the...
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