Mackays Stores Limited V. Toward Limited
| Jurisdiction | Scotland |
| Judge | Lord Drummond Young |
| Neutral Citation | [2008] CSOH 51 |
| Docket Number | CA53/05 |
| Date | 28 March 2008 |
| Court | Court of Session |
| Published date | 28 March 2008 |
| OUTER HOUSE, COURT OF SESSION [2008] CSOH 51 | |
| CA53/05 | OPINION OF LORD DRUMMOND YOUNG in the cause MACKAYS STORES LTD Pursuers; against TOPWARD LTD Defenders: ________________ |
Pursuers: Connal, Q.C., Solicitor, Morton, Solicitor; McGrigors
Defenders: Currie, Q.C., Fairley; Semple Fraser LLP
28 March 2008
[1] The pursuers have raised the present action against the defenders for payment of the sum of £270,210.07. The basis for the claim is that that sum was paid by the pursuers to the defenders in error, and its repayment is sought on the ground of the condictio indebiti.
[2] The action arises out of transactions between the parties for the supply of goods by the defenders to the pursuers. Prior to 1999, when the pursuers paid the defenders for goods they deducted a discount of 10% from the price; that was provided for in the pursuers' Terms and Conditions of Supply, which governed the parties' dealings. In 1999, however, the parties entered into a special arrangement relating to goods sourced from Turkey; for those goods the defenders were paid the cost of the goods plus a mark up of 10%, and no discount was deductible. It was rapidly discovered that these arrangements were unsatisfactory for the defenders because the volume of orders placed was insufficient to give them an adequate return. Consequently the parties moved away from the arrangement, and in 2000 it came to an end. Supplies of goods continued, and the pursuers paid the price of those goods in full, without any deductions. In 2004 the pursuers noticed that they had not been discounting the sums paid by them to the defenders. They claimed that this was the result of an error: following the end of the Turkish arrangements the discount provisions contained in their Terms and Conditions of Supply once again applied to the parties' dealings, and consequently they had failed to make deductions to which they were entitled. The pursuers claimed payment of the amount of discount that, they alleged, ought to have been deducted from the sums paid during the period from 2002 to 2004. In due course they raised the present action for repetition of that amount.
[3] The action was appointed to a proof before answer. At the proof evidence was taken from witnesses who represented both parties (although all the witnesses were in fact led by the pursuers); the pursuers were represented by Mr John Heaviside, their product sourcing director at the relevant time, Mr Paul Vann, their chief executive, Miss Susan Swannie, who had been their brand director, and Mr James Bell, their financial controller; and the defenders were represented by Mr Meir Uzan, their managing director and principal shareholder. I found all of the witnesses to be generally credible. I found Mr Vann and Miss Swannie to be reliable, although their recollection was not clear about certain matters. Mr Bell was, I thought, a good witness and reliable on the matters about which he spoke. Mr Uzan's evidence was lengthy and somewhat repetitive, and at times perhaps expressed more strongly than was necessary. Nevertheless, I consider that his account of events was straightforward and consistent. I have greater reservations about Mr Heaviside's evidence; my impression was that his evidence was based on assumptions about events rather than a recollection of what actually happened. He also showed reluctance to answer certain questions put in cross-examination. Nevertheless, I do not reject his evidence outright; I have merely treated it with some care, in particular in relation to the events that occurred when the Turkish arrangements came to an end.
[4] I intend to narrate the events that gave rise to the claim, as established by the evidence. Thereafter I propose to consider the three critical issues that arose between the parties. These were: first, whether at the time when the Turkish arrangements came to an end there was any express agreement that the parties would revert to deduction of a 10% discount from the price of goods; secondly, whether the pursuers' claim satisfies the requirements of the condictio indebiti, in particular the requirement that the sum whose repetition is sought should not have been due; and thirdly, whether equitable considerations require that the pursuers should be refused repetition.
Narrative of events
[5] The pursuers are retailers of clothing, which they sell through approximately 270 stores. The defenders, who trade under the name Kim Fashions, are importers and wholesalers of clothing. From the late 1980s onwards the defenders supplied the pursuers with ladieswear. The terms of the contracts between the parties were contained in a document issued by the pursuers known as their Terms and Conditions of Supply. Revised versions of this document were issued from time to time. A revision appears to have been issued to take effect from 1 January 1999 (no 6/88 of process), but no copy of any revision bearing that date was lodged in process. It was ultimately agreed, however, that the version of the pursuers' Terms and Conditions of Supply that was applicable in 1999 was a revision produced in October 1998 (no 6/87 of process), and the parties' legal submissions proceeded on the basis of that document.
[6] In the clothing industry it is common to find that the payment terms provide for discounts on the prices that are quoted by the seller for the supply of goods. The pursuers' Terms and Conditions of Supply made provision for such discounts. Initially they specified a 5% discount for prompt payment, that being payment within seven days after the receipt of the goods in the pursuers' warehouse in Paisley. In about 1990 the pursuers altered their trading terms, increasing the discount to 10%. That total discount was divided into two components, a prompt payment discount of 2.5% and a distribution discount of 7.5%. The amounts payable by the pursuers for goods supplied by the defenders were adjusted in accordance with those discount provisions. The amount of the discount was specified on the order forms used for each order of goods (of which no 6/101 of process is an example), and the fact that such discount was deducted was not in dispute between the parties.
[7] In about June 1999 the parties entered into an agreement in relation to the supply of goods manufactured in Turkey. The principal terms of the agreement are set out in a letter dated 30 June 1999 from Mr Roddy Murray, the pursuers' then finance director, to Mr Uzan (no 6/89 of process). The arrangement was that, when goods were ordered by the pursuers from the defenders, the defenders supplied costings for those goods based on the cost and utilization of fabric and the cost of manufacture. The defenders received a profit margin of 10% of those costs, and a fee of 56 US cents per garment for quality control inspection. Payment was to be made nett of any settlement or distribution discount 14 days after goods were received and recorded in the pursuers' warehouse. Costings and payment were to be in US dollars. There was a dispute in the evidence as to whether these arrangements applied to all goods sourced from Turkey or only to goods sourced from one particular manufacturer in Turkey; Mr Uzan's evidence was that they applied to all such goods, whereas Mr Heaviside stated that they were confined to one manufacturer. In the event I do not think that this point is critical, but it is notable that Mr Murray's letter of 30 June 1999 refers to "the general terms under which... we can conduct future business between our companies for goods manufactured in Turkey". That wording supports Mr Uzan's evidence; if the intention had been to confine the arrangements to a single manufacturer that would in my view have been stated in a letter of this nature. Moreover, Miss Swannie referred to the special arrangement regarding Turkey, not in relation to one manufacturer. That too supports Mr Uzan's evidence. I accordingly conclude that the arrangements applied to all goods manufactured in Turkey. The defenders supplied the pursuers with goods sourced in other countries, but the special arrangements did not apply to those goods.
[8] The parties' agreement was varied to some extent in the course of its operation; these variations were not in writing. In particular, certain prices were switched from US dollars to Sterling, and the transport arrangements were varied. Originally goods were shipped FOB Bursa, a town in western Turkey, with the result that the pursuers were responsible for transport. This was varied, however, in such a way that the pursuers became responsible for transport to the United Kingdom. Mr Uzan was not happy with these changes, which may have contributed to his eventual discontent with the arrangements.
[9] Miss Swannie, who was the pursuers' brand director, was in charge of the buyers responsible for ordering goods from the defenders. She gave evidence about the practical operation of the arrangements. The defenders provided the pursuers' buyers with costings for the goods, and the buyers would look at these and suggest how the cost could be lowered. When the costings were at a satisfactory level an order was placed, and the defenders received a profit margin of 10% of the cost of the goods. Fairly soon, however, the system of paying the defenders their costs plus 10% came to an end. Miss Swannie stated that she did not think that the new system worked because the parties would have to do a lot of business if the defenders were to make money. Unless the right products were available, however, her buyers could not place orders with the defenders. Miss Swannie stated that she thought that the new system stopped working "quickly". Her teams stopped asking for open costing sheets, and the system "gradually ground to a halt". She did not recall that the pursuers had ever said "stop now"; all that happened was that the buying teams stopped working on the basis of open costings. Business continued...
To continue reading
Request your trial
-
Analysis
...in Mackays Stores Ltd v Topward Ltd11[2008] CSOH 51.were clothes retailers who, over a period of years, purchased merchandise from the defenders, a clothes supplier. Under their terms of business the pursuers had been entitled to a 10% discount on all sums owed to the defenders which they h......