Russell Grant Ltd v Scott Equipment Company
| Jurisdiction | England & Wales |
| Judge | The Hon Mr. Justice Holland,Mr Justice Holland |
| Judgment Date | 27 May 2004 |
| Neutral Citation | [2004] EWHC 1229 (QB) |
| Court | Queen's Bench Division |
| Date | 27 May 2004 |
| Docket Number | Case No: 3MC 00124 |
[2004] EWHC 1229 (QB)
IN THE HIGH COURT OF JUSTICE
LEEDS MERCANTILE COURT
QUEEN'S BENCH DIVISION
The Honourable Mr Justice Holland
Case No: 3MC 00124
Peter Knox Esq. (instructed by Wilkin Chapman) for the Claimant
Thomas Raphael Esq. (instructed by Holman Fenwick & Willan) for the Defendant
Hearing dates: 2 nd to 6 th February, 9 th to 13 th February, 18 th and 19 th February and 23 rd to 25 th February 2004
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.
Mr Justice Holland:
Introduction
The Claimant, Russell Grant Limited ("Grants") is a family company trading from two premises, respectively situate in the Fish Dock area of Grimsby. The managing director is Mr. Derek Grant; he is assisted in the management by his two sons, Philip and Russell. At all material times the principal, if not sole activity of the company has been the purchase of fish waste (that is, what remains after removal of fillets) and onward sale after processing. With a view to diversifying, Grants engaged the services of a consultancy firm, The Consultancy for New Products Limited, and in particular those of its principal, Dr. John 'Williams. In the event the latter suggested that fish waste could be profitably put through a drying and grinding process such as would result in conversion to an effective powder of 8% moisture that could be fed to livestock, typically pigs. He further suggested that this metamorphosis could be achieved by means of a drying plant manufactured in Minnesota, U.S.A. by the present Defendants, Scott Equipment Company ("Scotts"). This company specialises in the design, manufacture and installation of drying plants for various purposes.
The subsequent history involves the managing director of Scotts, Mr. David Lucas, a skilled engineer in their employ, Mr. Chris Dolan, and their U.K. based engineer, Mr. Howard Graham.
Initial contact between the parties was in about 1998 and gave rise to a feasibility study conducted at the premises of Scotts' then U.K. agents Sibus Ltd. at Penrith. The results encouraged Grants to pursue the project as suggested by Dr. Williams.
By the end of 1999 events were gathering in momentum. Having visited Minnesota so as to see a drying plant in operation, Derek Grant became determined to go ahead with the project, finance permitting. As to this, a price was agreed for the plant as shipped, installed and commissioned at £500,000. The financing was prefaced by the preparation of projections and costings with the aid of Grants' accountant, Mr. Martin Standish of Baker Tilley. These persuaded Derek Grant that the venture could be financially justified if the plant's throughput, once installed, could be of the order of 2.9 tonnes of waste fish per hour and it was on this basis that he secured a bank loan of £450,000. Before the year closed there was oral agreement between the parties, subject to contract, for the supply and installation of this plant at the agreed price – with an advance payment of £50,000 to signal Grants' commitment.
In early 2000 the parties made a contract in writing and in September of that year the drying plant, the subject of the contract was delivered to and installed in Grants' premises. Thereafter the history becomes one of disappointment and frustration leading to a claim by Grants for damages for breach of contract and an indignant rebuttal of such by Scotts. A number of issues arise – shortly I turn to each in sequence. By way of preface, two comments. First, throughout a prolonged hearing of evidence I was struck by the calibre of the witnesses. Each impressed as a person; each sought to help me; each seemed to be a victim, direct or indirect, of what are ultimately to be identified as significant design shortcomings such as prevented this plant meeting specification notwithstanding sustained, dedicated effort by all concerned. The present conflict between the parties is an inevitable consequence but it is a sad one and does not fairly reflect their respective characters. The second comment concerns Scotts. Throughout the whole course of this matter, before and since the inception of this litigation, they have evinced an unerring capacity to 'wrong foot' themselves, essentially through a sustained failure to give full and timely attention to the realities of the situation. Points have been taken, regardless of merit, regardless of consistency as and when they finally came to mind pursuant to belated concentration on the issues. It has been difficult for the Court to appear evenhanded and to demonstrate proper appreciation of such merits of their case as command careful attention and appraisal.
The Contract
The first issue that arises is as to the composition of the contract. In September 1999 Scotts faxed a copy of the proposed contract to Grants' solicitor, Mr. Geoffrey Hudson of Messrs John Barkers of Grimsby. It comprised terms specific to the proposed supply supplemented by their standard conditions of sale as set out on three pages. Initial attention to this draft was desultory but by February 2000 the matter had become urgent: £50,000 had already been paid in anticipation of a contract in writing and both sides were anxious to make progress. Unhappily, Grants were unable to accept the contract as submitted in draft. With respect to so much of it as was specific to the proposed supply, such was then re-drafted by the multi-talented Dr. Williams. With minor amendments made by Mr. Hudson this became and remains an unchallenged part of the eventual contract. The problem arises with respect to the conditions of sale. The three pages were perused by Mr. Hudson and, so he told me as a witness summoned by the Court, found wanting. He particularly noted that it was specified that the contract would be subject to the laws of the State of Minnesota – to this the Grants understandably took objection. He further noted that the conditions specifically excluded any warranty of fitness for purpose, an exclusion that was in obvious conflict with the terms of so much of the draft as had been prepared by Dr. Williams. His solution, again so he told me, was to prepare two amendments to the second page, respectively so as to stipulate that the contract law was that of the United Kingdom and that fitness for purpose was warranted. Turning his attention to the other pages he opted, again so he told me, to retain the third page but to omit the first page altogether. This latter, ostensibly drastic step reflected appreciation of apparent conflict between some of its terms and the amendments to the second page: omitting the page was an easy answer to drafting problems and, whether he noticed it or not, would serve to free from any resultant contract provisions that were potentially unfavourable to Grants, in particular a limitation of contractual liability to the purchase price of the item supplied. In the result, the now truncated conditions would start at the top of the second page with an obvious part sentence that had commenced on the first page.
On the 8 th February 2000 Mr. Hudson sent to Scotts for their approval photostat copies of pages two and three with the former amended as proposed; he did not send page one, nor did he draw attention to this as a deliberate omission. On the 10 th February Mr. Lucas wrote confirming agreement to the two amendments of page two.
Subsequently Mr. Hudson faxed to Scotts what he represented as the full contract in draft and asked for confirmation that such could be agreed. The documentation amounted to the specific contract as drafted by Dr. Williams supplemented with conditions of sale as constituted by the amended page two and the unamended page three. On the 22 nd February Mr. Lucas responded: "Please proceed with the formal documentation needed for the contract … the agreement should be in accord with your document dated 17 th February 2000."
On about the 27 th February 2000 the contract as so formed was signed by Derek Grant at its end, that is, at the end of the truncated conditions of sale. With this signature so appended, the same pages were faxed to Scotts for signing. So soon as the documentation was to hand there was some attention to its purport – albeit belated as in other contexts. Thus, Mr. Lucas faxed what he had received to Scotts' U.K solicitors, Robert Muckle of Newcastle, presumably asking for their advice upon its terms. His precise instructions were not put before me but seemingly they failed to indicate the urgency of the situation. Robert Muckle did not to respond until the 9 th March by which time Mr. Lucas had long since gone ahead, appending his signature below that of Mr. Grant and faxing the whole to Grimsby. Further, when Robert Muckle did respond no adverse attention was drawn to the conditions of sale: "… these terms are familiar."
There contractual matters remained until shortly before the trial commenced before me on the 2 nd February 2004. Whereas by his witness statement of the 21 st October 2003 Mr. Lucas had exhibited the documentation as signed as the contract, in January Scotts belatedly (par for the course) initiated a contention that the true agreement between the parties embraced page one of their standard conditions of sale so that there should be an order for rectification of the documentation and a re-amendment of the Defence so as to invoke the hitherto missing terms – in particular this limitation of potential liability to the purchase price.
At the beginning of the trial, that is before Mr. Hudson gave his account of the matter, Mr....
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