Nedlloyd Lines UK Ltd and Another v Cel Group Ltd
| Jurisdiction | England & Wales |
| Judge | Lady Justice Hale,Lord Justice Waller |
| Judgment Date | 18 December 2003 |
| Neutral Citation | [2003] EWCA Civ 1871,[2003] EWCA Civ 1716 |
| Docket Number | Case No: A2/2003/0670 |
| Court | Court of Appeal (Civil Division) |
| Date | 18 December 2003 |
[2003] EWCA Civ 1716
Lord Justice Waller
Lady Justice Hale
and
Lord Justice Carnwath
Case No: A2/2003/0670
IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE QUEEN'S BENCH DIVISION
MR JUSTICE ANDREW SMITH
Royal Courts of Justice
Strand,
London, WC2A 2LL
Alexander Layton QC (instructed by Davies Arnold Cooper) for the Appellant
Richard Lord QC (instructed by Prettys) for the Respondent
The defendants appeal against the order of Andrew Smith J made in the Queen's Bench Division on 19 February 2003, giving judgment for the claimants on their claim for damages for breach of contract. He also awarded damages of £725,260 for part of the claim and ordered an inquiry into a claim for loss of cash flow but we are not concerned with questions of quantum. The issue is whether, having granted the claimants the exclusive right to supply them with transport services for a three year period, it was a breach of contract for the defendants voluntarily to merge their business with another group in such a way that their transport requirements could no longer be separately identified.
The facts
The claimants ("CEL") are the holding company for a group of companies in the container road haulage and related businesses. The defendants ("NLL") were the UK subsidiary of the Nedlloyd Group, a shipping line. They entered into a written agreement dated 18 July 1996 whereby CEL would provide road haulage and transportation services for NLL for a three-year period beginning 1 January 1996. The judge held that that contract gave CEL the exclusive right to provide such services for NLL. Though hotly disputed at trial, that is no longer in dispute.
The context to that agreement is set out in detail by the judge. There had for some years been a joint venture between NLL and CEL to undertake all NLL's haulage requirements (with limited exceptions) within the United Kingdom (apart from Northern Ireland) through subcontractors. For various reasons, NLL wished to renegotiate their arrangements. The negotiations started in 1994. A letter of intent from the Nedlloyd Group dated 26 August 1994 attached a draft agreement which stated:
"The TU [Transport Unit] will provide container transport by truck and rail within the United Kingdom excluding Northern Ireland and NEDLLOYD will undertake to forward all their overland transport requirements in this area for execution by the TU for the duration of the Agreement …"
CEL confirmed that this represented the intentions of the parties. A new draft was sent on 19 December 1994 which contained the following recital:
"CEL are haulage and transport operators and NLL wish to grant to CEL the exclusive right to provide overland haulage and transportation services … within the United Kingdom excluding Northern Ireland on the following terms and conditions …"
No formal agreement was concluded then and negotiations 'went off the boil' while the joint venture continued as before.
In December 1995 NLL proposed that CEL should make available a 'dedicated fleet' of 35 vehicles in order to provide a particularly high standard of service to NLL's most valued customers. CEL's response was that they could not be expected to invest in a dedicated fleet on the basis of a letter of intent or a contractual commitment terminable at short notice. Nevertheless they did agree to provide a dedicated fleet and to guarantee to provide available traction for all orders received by stated deadlines. Apart from the dedicated fleet of 35 vehicles, NLL's requirements would continue to be met by contracting the work out, either to individual owner-drivers or to sub-contracting companies.
Drafts of the proposed agreement continued to be exchanged until it was finalised in July 1996. The recital was in identical terms to that quoted in paragraph 3 above. Under clause 1, the agreement was deemed to have commenced on 1 January 1996 and was to continue until 31 December 1998. Under clause 2, the organisation of 'the services required under this agreement' were to be as agreed between the parties. Clause 3 provided for the price of 'the services' to be as set out in Schedule A, and made special provision in the event of an increase in fuel duty surcharge.
Clause 4 dealt with the 'haulage base' as follows:
"The road haulage fleet which will provide the services shall consist of three separate but conjoint sections, namely the 'Dedicated Fleet', the 'Owner Driver Fleet' and the 'Subcontractor Base'. The sections shall be described as follows:
(a) THE DEDICATED FLEET
(i) The Dedicated Fleet shall consist of a minimum of thirty vehicles which shall be supplied by CEL, and dedicated specifically and exclusively to the provision of the NLL services unless agreed to the contrary from time to time by NLL. Within six months of the date hereof CEL hereby covenant with NLL that the Dedicated fleet shall be further enlarged by the additions of further dedicated vehicles of not less than five, or more than ten, in number and further:
(ii) In the event that on any particular day or days NLL shall not require the services of any of the vehicles in the dedicated fleet (as defined in Clauses 4(a)(i) and 4(a)(ii) hereof), NLL shall pay a daily sum to CEL of £160 for each and every one of those vehicles which are surplus to NLL requirements on that day.
(iii) The Dedicated Fleet shall be primarily (but not exclusively) designated to provide the services to accounts designated by NLL as 'Nedlloyd VIP', 'Nedlloyd Premier' and "'Nedlloyd Vulnerable' Accounts". A list of accounts designated under these headings in the sole discretion of NLL, shall be provided to CEL by the Operations Manager of NLL at the commencement of this Agreement and regularly updated thereafter.
(iv) …
(b) THE OWNER DRIVER FLEET
(i) The Dedicated Fleet shall be supplemented by The Owner Drive Fleet ("OD Fleet") which shall consist (unless agreed by mutual consent) of not less than forty 'owner-driver' vehicles, such term being construed in accordance with general commercial practice.
(ii) NLL shall have the unfettered right of veto on an owner-driver being included on the OD Fleet list, and further shall have the right to demand, in its sole discretion, immediate removal of any owner-driver from the OD Fleet list, such demand be acceded to by CEL forthwith.
(c) THE SUBCONTRACTOR BASE
(i) The Dedicated Fleet and the OD Fleet shall be supplemented by a Subcontractor Base ("SCB"). Vehicles in the SCB are to fulfil the balance of the services required by NLL under this Agreement other than those carried out by the Dedicated Fleet or OD Fleet.
(ii) The vehicles in the SCB shall be selected and approved jointly by CEL and NLL with regular reviews regarding cost efficiency and performance.
(iii) NLL shall have the unfettered right of veto on any vehicle being included in the SCB, and further shall have the right to demand, in its sole discretion, immediate removal of any vehicle from the SCB, such demand to be acceded to by CEL forthwith.
By Clause 5, 'Performance', CEL undertook to provide the haulage services required within defined performance criteria. Clause 6 provided for the penalties payable by CEL in the event of default beyond the agreed non-performance parameters. By clause 7, 'Availability', CEL warranted to fulfil without exception all requests for services received by stated deadlines and NLL undertook to use every endeavour to ensure that services required were notified on a timely basis. CEL undertook to use every endeavour to provide services requested even if notified late. Clause 8 provided for the penalties payable by CEL in the event of default in the availability warranted in clause Clause 9 provided that the agreement ended on 31 December 1998; and also that NLL would be able to terminate if default in either performance or availability above the agreed limits continued for more than 20 days.
Among the other clauses may be noted Clause 11, 'Profit share', which provided for CEL to reimburse to NLL any profits over 7 per cent per annum. Clause 13 provided that payment was due 28 days from the date of invoice. This gave CEL a cash flow advantage in dealing with owner-drivers and subcontractors who were paid later. Clause 20 provided that the Agreement constituted the whole agreement between the parties. Clause 22, 'Force majeure', provided that both parties should be released from their obligations under the contract in the event of national emergency and the like.
At the end of 1996 the Nedlloyd Group merged with the P & O group. P & O had their own haulage business, P & O Roadways Ltd. At first things continued as before, but beginning in May 1997, NLL's business was merged with P & O's and it was no longer possible to separate it out. There ceased to be any discrete NLL business and CEL were not afforded exclusive haulage rights in respect of any part of the merged business. Although CEL continued to do work for the merged group, this was not at the level anticipated when the contract was made. There was still enough work to keep the dedicated fleet busy, but the flow of orders for the owner-driver and sub-contractors' vehicles was much reduced. This had in fact been more profitable for CEL than the dedicated fleet. Hence these proceedings.
The judge's decision
The contract contained no express term that NLL would stay in business or continue to have haulage requirements over the three-year period. Having held that the contract did indeed give CEL the exclusive right to provide haulage services for NLL, the judge went on to hold that there was an implied...
To continue reading
Request your trial
-
Fujitsu Services Ltd v IBM United Kingdom Ltd
...of the workshare provisions. 64 Reliance is placed on Alghussein Establishment v Eton College [1988] 1 WLR 587 and CEL Group Ltd v Nedlloyd Lines UK Ltd and another [2004] 1 Lloyd's Law Reports 381 for the proposition that a construction ought to be placed on clause 20.7 that prevents IBM f......
-
Deutsche Bank AG v Highland Crusader Offshore Partners LP
...Entertainment Ltd v Handmade Films (Distributors) Ltd (unreported) 11 July 1989, Hobhouse JCEL Group Ltd v Nedloyd Lines (UK) Ltd [2003] EWCA Civ 1716; [2004] 1 All ER (Comm) 689; [2004] 1 Lloyd’s Rep 381, CAContinental Bank NA v Aeakos Cia Naviera SA [1994] 1 WLR 588; [1994] 2 All ER 540; ......
-
Ukraine (Represented by the Minister of Finance of Ukraine acting upon the instructions of the Cabinet of Ministers of Ukraine) v The Law Debenture Trust Corporation P.L.C.
...and the need to look at the terms of the particular contract in question, is a point which was also made by this court in CEL Group Ltd v Nedloyd Lines UK Ltd [2003] EWCA Civ 1716; [2004] 1 Lloyds Rep. 381, per Hale LJ at [15] and per Waller LJ at 208 Adopting the approach of the Supreme ......
-
North Star Shipping Ltd and Others v Sphere Drake Insurance Plc and Others
...to pay premium under a previous policy is in itself not material to the risk under a hull and machinery policy. In The Martin P [2004] 1 Lloyd's Rep 388 at paragraph 228 Mr Richard Siberry QC, sitting as a Deputy High Court Judge held as follows: "My conclusion is that late payment or failu......
-
Are Older Workers Past Their Sell‐by‐Date? A View from UK Age Discrimination Law
...Equality Act 2010, s 119(4).108 [1997] ICR 275, 283 per Smith J and approved in Vento vChief Constable of West Yorkshire Police(2003) EWCA Civ 1871.Are Older Workers Past Their Sell-by-Date?© 2015 The Author. The Modern Law Review © 2015 The Modern Law Review Limited.202 (2015) 78(2) MLR co......