Provimi France S.A.S. v Stour Bay Company Ltd
| Jurisdiction | England & Wales |
| Judge | David Edwards |
| Judgment Date | 04 February 2022 |
| Neutral Citation | [2022] EWHC 218 (Comm) |
| Docket Number | Case No: CL-2019-000626 |
| Year | 2022 |
| Court | Queen's Bench Division (Commercial Court) |
[2022] EWHC 218 (Comm)
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
COMMERCIAL COURT
Royal Courts of Justice
Strand, London, WC2A 2LL
David Edwards QC
SITTING AS A DEPUTY JUDGE OF THE HIGH COURT
Case No: CL-2019-000626
Yash Kulkarni, QC and Celine Honey (instructed by Pinsent Masons LLP) for the Claimants
Rachel Ansell, QC and Matthew Thorne (instructed by Clyde & Co LLP) for the Defendant
Hearing dates: 11–14, 18 October 2021
Approved Judgment
I direct that no official shorthand note shall be taken of this Judgment and that copies of this version as handed down may be treated as authentic.
David Edwards QC SITTING AS A DEPUTY JUDGE OF THE HIGH COURT
David Edwards QC:
A. Parties
The Claimants, Provimi France S.A.S., Cargill S.L.U., Cargill Poland Sp. Zo.o and Provimi Limited were originally part of the Provimi group of companies. Save where it is necessary to distinguish between them, I will refer to the Claimants (and to the group generally) as “Provimi”. Provimi was acquired by Cargill, Inc. in November 2011, and the Claimants are now part of the Cargill group which provides food, agricultural, financial and industrial products globally.
The Defendant, Stour Bay Company Limited (“Stour Bay”), is an English company that specializes in the supply and distribution of vitamins, minerals and amino acids for the animal feed, food and beverage industries. Stour Bay is a distributor: it does not manufacture these products itself but sources them from third-party manufacturers and intermediaries for on-sale to its customers.
B. Background
In February 2013, following discussions between the parties that first commenced in 2010, Provimi began purchasing a vitamin D3 product from Stour Bay. The particular purchases with which the present action is concerned were made in and after January 2015 under contracts of sale that I will describe later, but there were earlier purchases in 2013 and 2014.
The vitamin D3 product was sourced by Stour Bay from an Indian company, Fermenta Biotech Limited (“FBL”). The product was described in FBL's Product Information Sheet as “Vitamin D3 500 Feed Grade” and I will refer to it in that way in this judgment. Stour Bay accepts that it knew that the product was going to be used by Provimi to manufacture some form of animal nutrition product, although it says that it did not know precisely what product Provimi was going to make.
In the event, the Vitamin D3 500 Feed Grade product purchased by Provimi from Stour Bay was mixed by Provimi with trace elements and other ingredients to manufacture a poultry pre-mixture, which was then sold by Provimi to its customers — either feed mills or poultry farms – who then combined the Provimi pre-mixture with macro-nutrient ingredients to produce a poultry feed that was ultimately fed to chickens.
The purpose of adding vitamin D3 to poultry feed in this way is to support normal bone mineralization. The amount of naturally present vitamin D in animal feed ingredients is limited, and intensively reared chickens have limited access to sunlight and thus to a natural source of the vitamin. Vitamin D3 deficiency in chickens can result in rickets or osteoporosis in young growing birds and/or in poor eggshell quality.
Around the end of July 2015 (and possibly before then) Provimi began to receive complaints from some of its customers who reported low vitamin D3 levels in Provimi's pre-mixture and problems with their poultry, including poor growth, lameness, rachitis and abnormal mortality rates. The issue was investigated, and Provimi settled a number of claims for compensation.
It is common ground between Provimi and Stour Bay in these proceedings that the cause of the poor performance of the affected poultry was vitamin D3 deficiency. A number of other matters are also not in dispute, namely that:
i) The source of the vitamin D3 in the Provimi pre-mixture sold to the relevant customers was the Vitamin D3 500 Feed Grade product purchased by Provimi from Stour Bay and by Stour Bay from FBL;
ii) As at the date when the Vitamin D3 500 Feed Grade product was delivered by Stour Bay to Provimi, at that stage as a stand-alone product, the product contained fully compliant levels of vitamin D3; and
iii) The level of vitamin D3 found in certain batches of Provimi's pre-mixture produced in the spring and summer of 2015 had, however, dropped to unacceptable levels.
Thus, although the vitamin D3 content of the Vitamin D3 500 Feed Grade product was acceptable at the time the product was delivered to Provimi, thereafter, either as a result of being mixed with other ingredients during the course of producing the pre-mixture or for some other reason, the vitamin D3 content diminished or degraded, leading to vitamin D3 deficiency in the affected poultry.
C. The Proceedings
On 10 October 2019 Provimi commenced proceedings against Stour Bay alleging that the Vitamin D3 500 Feed Grade product that Stour Bay had sold to it was defective and claiming damages for breach of the contracts of sale.
(i) Provimi's claim
Provimi's pleaded case is that the content of the Vitamin D3 500 Feed Grade product sold to it and/or the way in which the product had been manufactured, in particular the absence of a gelatin or other coating, meant that the product was insufficiently robust and/or stable such that it could not withstand the normal processes involved in producing a poultry pre-mixture, including combination with other usual pre-mixture ingredients.
Specifically, Provimi alleges that:
i) It was an express term of the contracts of sale that the Vitamin D3 500 Feed Grade product would meet the requirements of a particular Provimi Ingredient Specification, identified by PAC Code 191910101, (“the Provimi Gelatin Specification”) in terms, inter alia, of ingredients, composition, stability and content, in particular a requirement for a non-ruminant gelatin coating;
ii) There were, in addition, under sections 14(2) and (3) of the Sale of Goods Act 1979, as amended, (“the SGA”), implied terms that the Vitamin D3 500 Feed Grade product would be of satisfactory quality and reasonably fit for the purpose of adding to Provimi's and/or to an industry-standard pre-mixture, fitness for purpose in that context, Provimi says, requiring:
“… the Product to be sufficiently robust and stable that the poultry to which [the pre-mixture] would ultimately be fed would receive the envisaged and/or a sufficient level of Vitamin D3”;
iii) The Vitamin D3 500 Feed Grade product did not comply with the Provimi Gelatin Specification and/or was not of satisfactory quality or reasonably fit for purpose in a number of respects:
a) It did not contain a coating of non-ruminant gelatin (or any coating) and it was not spray-dried;
b) It was manufactured using an atypical process, akin to a pharmaceutical granulation process, the result of which was that the vitamin D3 ingredient was unduly exposed to the aggressive processing conditions present in pre-mixture manufacture;
c) It did not contain 500,000 I.U./g of vitamin D3 upon or shortly after being combined with other ingredients in the pre-mixture; or, if it did it, it had a shelf-life which was not such as to allow the product to maintain such a vitamin D3 content; and/or
d) The product was, as a result of these matters, unstable and/or insufficiently durable, and the vitamin D3 in the product degraded upon or shortly after being mixed with other, ordinary ingredients that were included in Provimi's pre-mixture.
Provimi claims damages representing the amounts it says it paid to settle customer claims in France, Spain and Poland, some EUR 2,029,090.12. It also seeks to recover EUR 69,413.03 representing a refund it alleges Stour Bay agreed to make for Vitamin D3 500 Feed Grade product that was returned after the problem with the product materialised.
(ii) Stour Bay's defence
There are a number of strands to Stour Bay's defence.
First, Stour Bay denies that the Provimi Gelatin Specification formed part of the contractual terms. Stour Bay alleges, in that context, that:
i) Provimi had been told by Stour Bay in April 2010, and again in documentation provided in 2011 and 2012 as part of the material evaluation and supplier audit processes that I will describe later, that the Vitamin D3 500 Feed Grade product produced by FBL and sold to Provimi did not contain gelatin; and
ii) The absence of a gelatin or any other coating was or ought to have been apparent to Provimi in any event upon examination and when the product was tested and approved by Provimi's Quality Assurance department, which was a necessary step before any order for the product could be placed.
Secondly, Stour Bay asserts that, as a result of a course of dealing between the parties, the contracts of sale concluded in and after January 2015 incorporated Stour Bay's standard terms and conditions (“the Stour Bay T&Cs”) which, it says, were routinely included on the reverse of the invoices that were sent to Provimi.
The incorporation of the Stour Bay T&Cs is said by Stour Bay to have three particular consequences:
i) Under clauses 7.1 and 7.6 Provimi relied upon its own judgment in deciding whether or not to use the Vitamin D3 500 Feed Grade product (including whether to mix it with other ingredients), and was obliged to indemnify Stour Bay in respect of any losses, liabilities or claims arising from or in connection with its use of the product;
ii) By reason of clause...
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