Perestrello e Companhia Limitada v United Paint Company Ltd
| Jurisdiction | England & Wales |
| Judgment Date | 13 December 1968 |
| Judgment citation (vLex) | [1968] EWCA Civ J1213-4 |
| Court | Court of Appeal (Civil Division) |
| Date | 13 December 1968 |
[1968] EWCA Civ J1213-4
Lord Donovan
Lord Justice Harman and
Lord Justice Widgery
In The Supreme Court of Judicature
The Court of Appeal
(Civil Division)
(From: Mr. Justice Thesiger - London)
Mr. R.A. MacCRINDLE, Q.C. and Mr. GERALD DAVIES (instructed by Messrs. Reynolds, Porter & Co.) appeared on behalf of the Appellants (Plaintiffs).
Mr. MONTAGUE WATERS, Q.C. and Mr. WILLIAM POULTON (instructed by Messrs. Randall, Rose & Co.) appeared on behalf of the Respondents (Defendants). (Cross-Appellants).
LORD DONOVANS: The judgment I am about to read is the judgment of the Court.
After a hearing lasting several days in October last Mr. Justice Thesiger adjourned this case generally. He arrived, however, at certain conclusions before doing so. First,' that the defendants had committed a breach of contract. (This was conceded though the defendants disputed certain of its alleged terms). Secondly, that the Statement of Claim as it stood did not permit the plaintiffs to claim and prove damages for loss of profits. Thirdly, that leave to amend the Statement of Claim so as to enable this to be done should be refused, fourthly, that the defendants were obliged under the contract to supply the plaintiffs with such reasonable quantities of certain material as the plaintiffs might order from time to time at the contract price. And fifthly, that this obligation under the contract continued for a term of five years, or alternatively was terminable by not less than five years' notice.
These issues affect the assessment of damages; and the learned judge adjourned the case generally so that his conclusions might be tested by interlocutory appeals by each side. On hearing these appeals we ordered that the plaintiffs' appeal be dismissed with costs; and that the defendants' cross-appeal be allowed in part with one-half of the costs. We now give our reasons.
First: The plaintiffs' application to amend the Statement of Claim.
The facts must be briefly summarised. The plaintiff company is a Portuguese concern formed in Portugal in 1961 with a capital of some £1,250 to carry on, among other things, the business of sellers of paint. The defendant company makes and sells paint. Among other things it makes a base product by means of a secret process, which, when mixed with sand and water, produces a material said to be very suitable for the interior and exterior protection and decoration of buildings. The defendant company calls it "Unistuc Liquid Stone" or "Unistuc" for short. In 1963 the twoconcerns entered into a contract partly oral and partly in writing. The defendants were to supply the plaintiffs with the base product, and with plant and technical assistance to enable them to turn it into Unistuc and sell it in Portugal and in Portuguese overseas possessions. This contract did not quantify the amounts to be supplied nor state the date when it should start nor its duration.
Shortly afterwards a document headed "Agreement" and dated the 6th June, 1963, was signed by the parties, whereby the defendants (therein mistakenly called "The Licensee") agreed to supply the plaintiffs with all technical data and information regarding the manufacture and production of Unistuc, and to allow the plaintiffs to use the name and style, trade-marks etc. belonging to the defendants, and pertaining to Unistuc. The plaintiffs agreed to keep this information secret, and to pay to the defendants £5 per ton on the total weight of Unistuc produced by the plaintiffs. On the face of it this was something different from the contract to supply the base material only. Now the plaintiffs were going to be told how the base material was made so that they could make it themselves. This agreement - called in argument "the Licence Agreement" - was to last five years. It figures more prominently in another aspect of the case.
Later in 1963, before the defendants had done anything under the contract, or under the Licence Agreement, they made certain enquiries, and in consequence became, rightly or wrongly, suspicious of the financial stability of the plaintiffs. They therefore repudiated the contract and the present proceedings resulted. This repudiation seems to have been treated by the parties as necessarily extending to the Licence Agreement. Indeed the two were treated as one, and the plaintiffs' argument in the court below and here proceeded on that footing.
By a letter before action dated the 12th May, 1964, the plaintiffs' solicitors wrote to the defendants saying that their clients had lost £4,328 capital outlay on the required adaptation of their factory, plus the outlay on an advertising campaign:and in addition "a very considerable sum in respect of net profits" which could reasonably have been anticipated had the agreement (meaning the two agreements) been implemented.
The writ was issued by the plaintiffs on the 8th July, 1964. It was specially endorsed with particulars of special damage amounting to £4,228. 17s. Od., this being expenditure wasted by the breach of contract. There was no claim for loss of profits as foreshadowed by the above letter before action. The endorsement on the writ, after setting out particulars of the £4,228. 17s. Od., simply concluded; "And the Plaintiffs claim £4,228 and damages".
In their defence the defendants denied the alleged contract. Alternatively they alleged that if any such contract existed they were induced to enter into it by misrepresentations on the part of the plaintiffs. In summary, these were that the plaintiffs were financially sound, whereas in fact they were the reverse. Particulars of the alleged misrepresentations were given in the Defence, which then alleged that they were made knowing that they were untrue, or recklessly, not caring whether they were true or false. The defendants accordingly counterclaimed for rescission of the alleged contract.
Thenceforward throughout the remainder of the year 1964, and throughout 1965, 1966 and 1967, further and better particulars were demanded by each side and supplied. £100 was paid into court by the plaintiffs in November, 1964, as security for costs, and a further £900 in July, 1965, pursuant to orders made to that effect. In July, 1967, the defendants paid £400 into court, and in April, 1968, a further £3,600, making £4,000 in all, in satisfaction of the plaintiffs entire claim. The plaintiffs did not take these sums out. From time to time they amended their Statement of Claim. In June, 1968, the defendants amended their Defence by withdrawing all allegations of misrepresentation, and by withdrawing the consequential counterclaim. They were ordered to pay the appropriate costs on a common fund basis. Throughout the four years and more which had now elapsed since the issue ofthe writ, the plaintiffs' claim had remained the same, namely special damage for expenditure thrown away, "and damages". In December, 1967, the hearing of the action was fixed for the 7th October, 1968.
On the 23rd July, 1968, shortly after the withdrawal of the charges of fraud, the plaintiffs' solicitor wrote a letter to the defendants' solicitors beginning: "As you are aware, our clients' claim for damages is in respect of loss of profits which would have been earned during the five-year span of the Licence Agreement". They proceeded to say that this claim had now been quantified at £251,102. 17s. 2d. They enclosed a table setting out how this sum was made up. The defendants' solicitors replied that there was no such claim on the pleadings, and that to suggest that they were "aware" of such a claim was utterly without foundation. On the 2nd August, 1968, the plaintiffs applied to Master Jacob for leave to amend their Statement of Claim by adding the claim for £250,000 "more or less" loss of profits. Since the trial was fixed for early October he adjourned the application to the trial judge. It seems that on this application before Master Jacob, the plaintiffs sought further to amend their Statement of Claim by increasing the loss of profit to "£295,000, more or less". In September, 1968, a proposed further amendment quantified the loss of profit at £294,041. 7s. 11. On the 9th October, 1968 (the third day of the trial before Mr. Justice Thesiger) it was sought further to amend the Statement of Claim by reducing the expenditure thrown away by £500, bringing it down to £3,728. 17s. Od. (less than the amount - £4,000 - then in court) and reducing the claim for loss of profit to £249,988. 8s.5d. Shortly before this, on the 27th September, 1968, a document marked "A.l" was served by the plaintiffs' solicitors on the defendants' solicitors, purporting to show how the said loss was calculated. It contained 51 pages of explanations and figures. At the hearing a further document was served by the plaintiffs' solicitors. This document is "A.2". It also shows in 51 pages the make-up of the alleged loss of profits at the same figure of£249,988. 8s. 5d., but omits the explanations which were given in "A.l".
Before Mr. Justice Thesiger it was first argued that the plaintiffs did not require leave to amend their Statement of Claim. The alleged loss of profit was sufficiently pleaded by the claim for £4,228. 17s. Od. "and damages". These last two words, it was argued, were enough. The learned judge, after reviewing the authorities, held that they were not: and that there must be in the body of the Statement of Claim a specific allegation that there had been a loss of profit. Here there was not. The plaintiffs then asked that leave to make the necessary amendment should be given. After referring to certain difficulties which this late application would create for the defendants, the learned judge refused leave.
In this Court the argument for the plaintiffs was reversed in order. It was first contended that leave to amend should be...
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