Russell Grant Ltd v Scott Equipment Company
| Jurisdiction | England & Wales |
| Judge | LORD JUSTICE MANCE,LORD JUSTICE LONGMORE,Lord Justice Waller,Lord Justice Wall,Mr Justice Blackburne |
| Judgment Date | 23 February 2005 |
| Neutral Citation | [2004] EWCA Civ 1497,[2005] EWCA Civ 156 |
| Docket Number | Case No: A3/2004/1258,A3/04/1258(Z) |
| Court | Court of Appeal (Civil Division) |
| Date | 23 February 2005 |
[2004] EWCA Civ 1497
IN THE SUPREME COURT OF JUDICATURE
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT
QUEEN'S BENCH DIVISION
(MR JUSTICE HOLLAND)
Royal Courts of Justice
Strand
London, WC2A 2LL
Lord Justice Mance
Lord Justice Longmore
A3/04/1258(Z)
MR TOM RAPHAEL (instructed by Messrs Holman Fenwick & Willan, London, EC3N 3AL) appeared on behalf of the Applicant.
The Respondent did not appear and was not represented
This is a renewed application for permission to appeal by the defendants against whom judgment was given below by Mr Justice Holland on 27 May 2004. Lord Justice Longmore gave permission to appeal on limited grounds by order dated 27 September 2004, but he refused permission on grounds 1, 2, 4 and 7. In the event it is only in relation to grounds 1 and 2 that the present application is pursued.
The claimants' claim was for an alleged breach of a minced fish dryer, which the defendants contracted, by a written contract dated 29 February 2004, to supply and instal at the claimants' Grimsby dock premises. The claimants pleaded that the dryer was delivered and installed at those premises in or about mid-August 2000. They started using it as from 22 September 2000, but it failed at all times to dry 2.9 tonnes of fish an hour as they say was contracted.
The proceedings were issued on 28 March 2002. The written contract contained a clause reading:
"The seller warrants that the goods are fit for their purpose.
….
Any actions for breach of this agreement or warranty must be commenced within one year after the cause of action has occurred."
Whether this clause provided a defence to the claim became one of the major issues at trial. For it not to be so, the defendants submitted that the cause of action sued upon had to accrue on or after 28 March 2001. They submitted that this was a contract for supply of goods in the form of a machine and that if any breach occurred it was on delivery and installation of that machine in September 2000. The judge rejected this and held that there was no time bar because the cause of action had accrued after 28 March 2001; he said it accrued on 1 June 2001. He set out various terms of the contract in paragraph 15 of his judgment as follows:
"15(a) 'To supply the Equipment so that it will dry 2900 kilograms of minced fish every hour. The minced fish shall contain at least 80% water and the final dry fish shall have a moisture content not greater than 8%. The fish shall be of the species haddock melanogrammus aeglefinus or cod gadus morhua. The fish shall be of any size from which the fillet and gut have been removed, so that it consists of skeleton and adhering flesh, skin, whole head and tail. The fish shall consist of a mixture of any proportions of haddock and cod. The fish shall be presented to the Equipment at a temperature between 2°C and 15°C. The fish shall have been minced prior to being presented to the Equipment by passing it through a standard mincer Model Homogeniser HC250-UNI'82 that has been manufactured by Woolfking and supplied by Scandia Food Machinery Ltd, incorporating a 10mm plate. The Equipment shall operate reliably on a continuous basis without frequent malfunction.
B. Performance and other criteria specified…in this contract are to be adhered to strictly and without exception. The Seller will not be liable (for) shortcomings or variations in performance that in the opinion of an independent and qualified third party arise from misuse of the equipment by the Purchaser.
C. Prices quoted include…commissioning.
D. All other terms and conditions are per the Scott Equipment terms and conditions included with the sales agreement.
E. The Seller warrants that the goods are fit for their purpose.
F. Any actions for breach of this agreement or warranty must be commenced within one year after the cause of action has occurred.
…
…the payment terms provided for payment of the last 10% of the purchase price '30 days after commissioning or 60 days after delivery [whichever is sooner]'."
The judge recited and made findings of fact regarding the factual history. The machine failed at the outset to achieve the output. He rejected various excuses put forward at trial by the defendants. As a result of these problems, in the judge's view, commissioning did not occur.
On 19 April 2001 the claimants, through their solicitors, wrote to the defendants as follows:
"Our client has been in touch with us again and he is most concerned that commissioning of the equipment has still not taken place despite the contents of your previous correspondence to us. The machine does not seem capable of running at full capacity as a result of which our client cannot make economic use of it. Unless this matter is resolved in very early course we can see little alternative but to advise our client to resort to litigation."
Mr Raphael, who has presented the application eloquently on behalf of the applicants, suggests that that is no more than lawyers' talk and was never accepted. However, as I see it, in his judgment the judge proceeds on the basis that commissioning was continuing throughout this period and until at least 1 June 2001. There does not appear to be any denial of that letter of 19 April so far as it refers to commissioning. There are further references to commissioning as outstanding; for example in a letter of 7 May 2001 the defendants acknowledged that there were ongoing efforts to bring the plant up to specification. They concluded:
"Because of the additional funds that are going to be spent on this project it is necessary for us to collect the final £50,000 so we can finish any outstanding work that needs to be done. My understanding with Howard Graham is the Dryer is now operating at about the 90% efficiency level and he is confident we will soon be to the full production rate."
That is a reference to Mr Howard Graham, who was the defendants' expert. He was on site and working throughout this period until well after 1 June 2001 making improvements and alterations to the machine with a view to achieving the contractual throughput.
There was further correspondence. The parties continued in this way to work together to achieve that throughput. There is a further letter of 11 May 2001 written by the claimants pointing out that:
"The project as you know was a turnkey one."
They discussed the various possibilities which Mr Graham had suggested. On 22 May 2001 the defendants responded again seeking payment of £50,000 and saying that if it were paid forthwith they would work to establish the optimal efficiency.
On 23 May 2001 the claimants responded to points which the defendants had raised to the effect that the wrong type of fish had been used in operating the machine. They made various suggestions and said that if, after the tests which they had suggested had been attempted, and "if all is satisfactory", Mr Derek Grant (one of the claimants' directors) would sign a Handover Acceptance Document to say that he accepted that the machine had been fully commissioned and the outstanding payment could be made.
On 1 June 2001 Mr Lucas of the defendant's wrote:
"More work is left to be done, but this work can be completed in relatively short time provided both parties come to an agreement on the payment terms and the type of fish to be run."
He suggested that the claimants pay a pro rata part of the outstanding money. The claimants refused. The judge found in paragraph 34(a) of his judgment:
"By way of inter-party correspondence the parties are still looking forward to final commissioning."
That was during the autumn of 2001. Mr Lucas, a structural engineer in the defendants' employ, wrote on 12 July 2001:
"It is my hope that with…the four point plan that [Mr Graham] has that we have agreed on here…the final commissioning of the dryer system will occur in the near future."
There again there is a reasonably clear acceptance by the defendants that what was being aimed at was commissioning and, as the judge found in paragraph 34(b):
"True to the foregoing Mr Graham carries out sustained and intensive work on the plant. Internal communications bear eloquent witness to his various measures-typically an e-mail of the 14th September 2001 lists no less than 19 measures undertaken in that week alone, one such being the welding of a 1/8"perforated plate over the dryer outlet."
Even as late as December Mr Graham was still on site seeking to achieve a contractual performance.
In the light of these circumstances, the judge held in paragraphs 44 and 47 of the judgment:
"44. I reject the submissions of Scotts that the contract simply obligated them to deliver a plant with the inherent capacity reliably to meet specification. That is in terms not what the contract provides. The terms are in this context clear and consistent. Term a. commenced 'The seller agrees to supply the Equipment so that it will dry 2900 kilograms of minced fish every hour'. As I think, this connotes more than simple delivery, it connotes in addition adjusting and, if necessary, modifying the plant so that demonstrably 'it will dry' at the throughput rate. This constructions is at one with the next ensuing not presently cited terms the successive obligations do not reflect capability but actual performance —it 'shall' do this, it 'will' do that. This construction is further at one with the cited term b. The reference is not to 'capacity' but to 'performance' viz, not to what the plant should do but what it does do —and its terms strongly emphasise the key...
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