Perkier Foods Ltd v Halo Foods Ltd
| Jurisdiction | England & Wales |
| Judge | Mr Justice Chamberlain |
| Judgment Date | 16 December 2019 |
| Neutral Citation | [2019] EWHC 3462 (QB) |
| Court | Queen's Bench Division |
| Docket Number | Case No: QB-2019-000347 |
| Date | 16 December 2019 |
[2019] EWHC 3462 (QB)
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
Royal Courts of Justice
Strand, London, WC2A 2LL
Mr Justice Chamberlain
Case No: QB-2019-000347
and
Daniel Saoul QC (instructed by Fieldfisher LLP) for the Claimant
Mohammed Zaman QC and Shakil Najib (instructed by Hillyer McKeown LLP) for the Defendant and Respondent
Hearing dates: 4 – 7 and 13 November 2019
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.
Introduction
There are two applications before me. The first is the application of the Claimant (‘Perkier’), issued on 6 June 2019, to commit the Respondent (‘Mr Tague’) for contempt and/or to sequestrate the assets of the Defendant (‘Halo’) for breach of an order of HHJ Blair QC, sitting as a High Court Judge, made on 21 February 2019 (‘the Order’). The second is Halo's application, issued on 19 July 2019, for discharge of the Order. Mr Tague is Halo's Managing Director and, he accepts, its controlling mind for all purposes relevant to the present applications.
The circumstances in which the Order was granted, and the reasons for it, are set out in full in a judgment handed down on 21 February 2019: [2019] EWHC 292 (QB). For present purposes, the following summary is sufficient. Perkier designs and creates recipes and specifications for food snack products, which it markets as ‘healthy’ and supplies to retailers. It has two relevant products: Perkier Bars (‘Bars’) and Perkier Bites (‘Bites’). Bites are spherical, bite-sized snacks. Perkier entered into two agreements with Halo: a Manufacturing Agreement (‘MA’) dated 5 July 2017, relating to Bars, and a Memorandum of Understanding (‘MOU’) signed by Perkier on 5 July 2017 and by Halo on 10 July 2017, relating to the development of the (then) new Bites product. One of the terms of the MOU was that Halo would purchase a machine from a German company, Kruger und Salecker GmbH & Co. KG (‘Kruger’), which could produce moulded cereal products. It was at the time the only machine of its kind in the UK. After an initial period during which recipes were trialled, Perkier placed two orders worth just over £20,000 and just over £30,000 in November and December 2018 respectively. Everyone agrees that these conformed to the contractual specification. On 14 January 2019, however, Mr Tague telephoned Dr Turner (Perkier's Managing Director), to say that Halo would no longer produce the Bites. He then imposed a credit limit of £20,000 on Perkier and finally purported to terminate the MA. Perkier applied for an order requiring Halo to comply with the MA and MOU.
HHJ Blair QC considered the purported termination at [20]–[34] and concluded that there was at least an arguable case that the MA had not been effectively terminated. At [35]–[37], he held that Perkier's argument that Halo had no right to impose a credit limit gave rise ‘ at the very least’ to a serious issue to be tried. At [38]–[40], he expressed a ‘ substantial degree of assurance’ that Perkier would at trial establish its right to a mandatory injunction requiring Halo to manufacture Bites. At [41]–[42], he considered the question whether damages would be an adequate remedy as follows:
‘41. If the interim injunctions as sought by the Applicant (prohibiting the imposition of a credit limit and mandating the Respondent to manufacture Bites under the Manufacturing Agreement) are not granted then it will be hugely damaging to the Applicant and, contrary to the submissions made to me by the Respondent, will in my view be extraordinarily difficult to assess in an award of damages. There is no other Kruger machine in the UK and so the Applicant cannot simply find an alternative manufacturer in the marketplace. The Applicant's future funding round is dependent upon their continued growth in a volatile and competitive market. The Applicant will suffer irremediable damage which will be extremely difficult to quantify.
42. On the other hand the losses which the Respondent suggested to me it would sustain if it were reluctantly obliged to manufacture the Bites in accordance with the contract and without a credit limit were in my view exaggerated. The figures put forward of several £100k were not credible. Doing my best to assess them I am prepared to accept on current information it is possible that they might reach £90k per annum. If the Applicant was to be unsuccessful at trial it would, in my view, be capable of meeting the Respondent's losses under the necessary cross-undertaking which they are obliged to offer and have offered. I am not persuaded that a cross-undertaking would be meaningless and unenforceable. Whilst the Respondent identified its concern about the Applicant having made a small trading loss of £10,000 in the 7 months to October 2018 this does not lead to the conclusion that the cross-undertaking in damages is inadequate.’
At [43]–[44], HHJ Blair QC concluded that this was one of the relatively rare cases where a mandatory injunction was appropriate in a commercial context. At [45], he said this:
‘It is suggested that the court will have to endlessly supervise the compliance of the contract and the Respondent will be at constant risk of expensive litigation to resolve any alleged contempt of court for breaching the injunctions. I do not believe that to be the case. This is a relatively straightforward contract which has provision within it to resolve most issues.’
In retrospect, it may be observed that the suggestion made on behalf of Halo to HHJ Blair, and rejected by him, was prescient.
The Order, which contained a penal notice, provided in relevant part as follows:
‘1. The Defendant shall, pending final judgment or earlier settlement, comply in full with the Manufacturing Agreement between the parties dated 5 July 2017 and the Memorandum of Understanding between the parties signed on 5 July 2017 by the Claimant and on 10 July 2017 by the Defendant, including by doing the following:
(a) Manufacturing the food product Perkier Bars according to the Finished Product Specifications set out at Schedule A, at the prices set out in Schedule B (unless and until such prices are changed in accordance with the terms of the Manufacturing Agreement), in such quantities as the Claimant shall order (subject to the +/-10% variation permitted to the Defendant), and deliver the same to the Claimant in accordance with the delivery dates stipulated by the Claimant (the Claimant to give the Defendant not less than 10 working days' notice of any required delivery date).
(b) Manufacturing the food product Perkier Bites according to the Finished Product Specifications set out at Schedule C, at the prices set out in Schedule D (unless and until such prices are changed in accordance with the terms of the Manufacturing Agreement), in such quantities as the Claimant shall order (subject to the +/-10% variation permitted to the Defendant), and deliver the same to the Claimant in accordance with the delivery dates stipulated by the Claimant (the Claimant to give the Defendant not less than 10 working days' notice of any required delivery date);
(c) refraining from imposing any credit limit upon the Claimant with respect to the value of the food products ordered by the Claimant;
(d) Taking all steps required to adhere to the plan for the launch of new Perkier Bars in Cacao & Orange and Cacao Salted Caramel flavours, as set out in Schedule E;
(e) cooperating with the Claimant to launch new products which benefit both parties, and using its best endeavours in relation to the same, as required by paragraph 12, sub-paragraph 7, of the Manufacturing Agreement.’
Annexed to the Order were 49 pages of documents comprising the various documents referred to.
HHJ Blair QC refused Halo's application for permission to appeal. Halo did not renew that application to the Court of Appeal. It is common ground that Halo complied with its contractual obligations (and therefore with the Order) so far as concerns Bars. It is also common ground that Halo did not comply with paragraph 1(b) of the Order, which relates to Bites. In response to an order placed by Perkier in February 2019, it supplied the quantity ordered, albeit late, but a substantial proportion of the product was of such poor quality that it was unsaleable. Nothing at all was supplied in response to orders placed by Perkier in March and May 2019.
In those circumstances, Mr Daniel Saoul QC, for Perkier, says that the failures to comply with the Order amount to contempts of court and seeks to commit Mr Tague to prison and/or to sequester Halo's assets. For their part, Mr Mohammed Zaman QC and Mr Shakil Najib, for Halo and Mr Tague, say that a failure to comply with an order does not amount to a contempt of court if compliance is impossible. They submit that compliance was impossible here, because the recipes set out the specification annexed to the Order were either too abrasive or too sticky for the machine they had purchased. These recipes, they say, caused the fingers on the machine's rollers to degrade, shedding plastic into the food mix, which might have made the food produced unsafe.
The law
Contempt of court
In Masri v Consolidated Contractors Ltd [2011] EWHC 1024 (Comm), Christopher Clarke J considered the mens rea required to establish contempt of court arising from the breach of an order. Having reviewed the authorities, he concluded as follows at [150]:
‘In order to establish that someone is in contempt it is necessary to show that (i) that he knew of the terms of the order; (ii) that he acted (or failed to act) in a manner which involved...
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