M & J Polymers Ltd v Imerys Minerals Ltd [QBD (Comm)]
| Jurisdiction | England & Wales |
| Judge | MR JUSTICE BURTON,Mr Justice Burton |
| Judgment Date | 29 February 2008 |
| Neutral Citation | [2008] EWHC 344 (Comm) |
| Docket Number | Case No: 2006 Folio 1050 |
| Court | Queen's Bench Division (Commercial Court) |
| Date | 29 February 2008 |
[2008] EWHC 344 (Comm)
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION COMMERCIAL COURT
Royal Courts of Justice
Strand, London, WC2A 2LL
Mr Justice Burton
Case No: 2006 Folio 1050
Mr Matthew Parker (instructed by Messrs DLA Piper UK LLP Sheffield) for the Claimant
Mr Peter Brunner (instructed by Messrs Stephens & Scown) for the Defendant
Hearing dates: 4, 5, 6, 7, 11, 12, 13, 1415 February 2008
Approved Judgment
I direct that pursuant to CPR PD 39A para 6.1 no official shorthand note shall be taken of this Judgmentthat copies of this version as handed down may be treated as authentic.
The Defendant company, Imerys Minerals Ltd, was formerly known as English China Clays, which group was acquired by the Imerys Group in April 1999. The Claimant company, M & J Polymers Ltd, had been supplying dispersants, which are chemicals used in the breakdown of clayother materials, to English China Clays since 199From 1999, the Claimant company continued to supply Imerys,the most recent contractual arrangements between them, made in July 2003, were to expire in December 2004. Imerys decided to put out a proposed new contract for tender in September 2004, but in the event negotiations for a new contract began direct in October between Mr Michael Yates, the foundermanaging director of the Claimant,M. Christophe Brode-Roger, the director of purchasing for Imerys Paper Europe,subsequently also with his superior M. Christophe Daulmerie, general manager of pigments for the Europe division,continued until January 2005.
The new supply contract, dated 25 January 2005, was signed on 26 January 2005. It related to the supply by the Claimant to the Defendant of 4 dispersants, Jaypol 1183 (“1183”), Jaypol BTC2 (“BTC2”), Jaypol 1160 (“1160”) and, insignificantly, Jaypol 1140. 1183, BTC21140 are carbonate dispersants, used to liquidise high solids suspensions of ground marble, for the purpose of producing paper coatings required to enable high quality printing. 1160, which will feature significantly in this judgment, is a kaolin dispersant, which is used to similar effect in relation to suspensions of kaolin (often referred to as clay), again for the purpose of producing paper coating. The 1160 is used in two processes, first in the refining of the kaolinthen in slurrying, the production of a liquid slurry to be used for coating high quality paper. An essential ingredient in all the dispersants as produced by the Claimant company is acrylic acid, which was in short supply by the end of 2004, but which, due to its well established contacts, the Claimant company was in a position to access.
The supply agreement as finally negotiated recited that:
“The Buyers want to ensure a regularreliable supply of the Productsthe Supplier agrees to guarantee such supply under the termsconditions of this Agreement.”
Subject to various provisions for termination, the agreement had a three-year minimum term. The clauses which are material to the outstanding issues to be dealt with in this judgment are as follows:
“Article 5: Stock Levelminimum purchase
5.3. During the term of this Agreement the Buyer will order the following minimum quantities of Products:
…
5.5 Take or pay: the Buyers collectively will pay for the minimum quantities of Products as indicated in this Article at 5.3 of Jaypol 1183, Jaypol BTC2Jaypol 1160 even if theytogether have not ordered the indicated quantities during the relevant monthly period.
…
Article 10: Warranty
10.1. Supplier warrants that the Product shall be (i) of the specifiedordered quality, (ii) free from defects, (iii) in strict accordance with any specifications or standards attached to this Agreement or to any Buyer Order(iv) free from anyall liensencumbrances.
…
10.3 The purpose for which the Product are required has been made known to Supplier expressly. Supplier, based on the then state of the art shall make sure that the Product [sic] are compatible for that purpose. However, the Buyer shall make sure that the Supplier's Product fit [sic] with its own application.
…
Article 16: Termination
…
16.3 The Buyer may at its option terminate this Agreement with immediate effectwithout incurring any liability to the Supplier in the event that the Supplier (i) delivers Product which fail [sic] to meet the significant specification requirements (physicalchemical properties) on more than two occasions in any given three month period, provided Supplier is informed timely [sic] of such breachessuch breaches are confirmed by an independent analytical laboratory …”
The supply contract was purportedly terminated by the Defendant in May 2006 by a notice which was treated by the Claimant as an unlawful repudiation of the contract, which repudiation the Claimant accepted on 19 May 2006. These proceedings have followed, in which the Claimant company has been represented by Matthew Parker of Counselthe Defendant company by Peter Brunner of Counsel. Both Counseltheir solicitors have worked hardsuccessfully to render the issues manageablecomprehensible,in particular, with the assistance of accountancy experts who have not in the end needed to be called, all factual issues as to quantum have been most helpfully agreed.
In circumstances which I shall explain, there are now only three issues for me to resolve in this judgment:
i)Whether the 1160 dispersant delivered by the Claimant in 2005 was fit for its purposewhether the Defendant company was entitled to refuse to accept any further deliveries of it as from 31 August 2005 (“the 1160 issue”).
ii) Whether the sums due to be paid by the Defendant to the Claimant in respect of the period prior to what is now accepted to have been the repudiatory breach by the Defendant in May 2006 are recoverable in debt, in respect of the price of the minimum quantities of dispersants pursuant to the “take or pay” clause set out in paragraph 4 above, or by way of damages (the “penalty issue”).
iii) Whether there was a shortfall in orders placed by the Defendant for 1183 in the month of January 2005,if so in what amount (the “January orders issue”).
Before I deal with these three surviving issues, it is necessary to set out the six issues, all of which were in play during the course of this hearing, but which before the end of it had been abandoned by the Defendant. They were as follows:
i) Three fraudulent misrepresentations. The Defendant company pleadedalleged as against Mr Yates of the Claimant company three fraudulent misrepresentations (a) as to the underlying cost of raw materials, said to be a relevant factor in the agreement of the price (b) as to whether the Claimant company had or had not entered into a contract with its suppliers for the acquisition of acrylic acid (c) as to the term of such acid supply contract. Substantial damages for deceit were claimed in respect of each of these three fraudulent misrepresentations, which were also relied upon as retrospectively discharging the Defendant company from liability in respect of its (not then admitted) repudiation.
ii) Agreed variation. The Defendant asserted an oral variation by Mr Yates so as to excuse them from what was otherwise a very substantial shortfall in orders for BTC2 in JanuaryFebruary 2005.
iii) Further oral variation. Again an alleged oral agreement by Mr Yates was relied upon in August 2005 so as to excuse a substantial shortfall in the placing of orders for 1183 between AugustDecember 2005.
iv) Implied term/variation/estoppel. The Defendant asserted a case excusing them in respect of the shortfall in the placing of orders in January 2005, in respect of 1183 (in the alternative to the January orders issue), BTC2 (in the alternative to (ii) above)1160.
v) May 2006 termination. The Defendant asserted that it was entitled to terminate the contract by its notice in May 2006 referred to in paragraph 5 above pursuant to a clause, Article 5.6, described as the “meet or release clause”. This would have discharged them from any liability under the contract from May 2006 until the expiration of the minimum 3-year term in December 2007.
vi) Mitigation of loss. The Defendant made a positive case that the Claimant failed to mitigate its loss resulting from its (then unadmitted) repudiation, based upon the Claimant's failure to sell the Defendant dispersant after May 2006, at the lower price specified in the meet or release clause or at all.
All of these defences or counterclaims were abandoned at various stages during the hearing. Mr Parker of Counsel places significance on the fact that some in particular of these allegations were ever made or pursued or persisted in as a significant factor in assessing the credibility of the Defendant company, which is material to the resolution of the outstanding 1160 issue. In particular:
As to (i): The allegations of fraud against Mr Yates were, I am entirely satisfied, wholly unfounded. They were pursued through cross-examination of Mr Yates, which he dealt with with complete integrity,up until just prior to the calling of M. Brode-Roger for the Defendant company, who would have been, as had been M. Daulmerie, severely taken to task in cross-examination, but in the event was not called at all.
As to (ii): The allegation of the oral agreement in respect of the January/February BTC2 orders was again clearly unfounded,once again Mr Yates was cross-examined on the basis of there being such an oral agreement,by virtue of its abandonment M. Brode-Roger did not go into the witness box to support it. Had he done so there were documents, particularly his own email of 14 March 2005, which he would have had great difficulty in explaining as anything other than inconsistent with the existence of such an alleged oral variation.
As to (v): The case put forward to justify the purported notice...
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