Sykes (F. & G.) (Wessex) Ltd v Fine Fare Ltd
| Jurisdiction | England & Wales |
| Judge | THE MASTER OF THE ROLLS,LORD JUSTICE DANCKWERTS,LORD JUSTICE WINN |
| Judgment Date | 16 November 1966 |
| Judgment citation (vLex) | [1966] EWCA Civ J1116-3 |
| Court | Court of Appeal |
| Date | 16 November 1966 |
[1966] EWCA Civ J1116-3
The Master of the Rolls
(Lord Denning)
Lord Justice Danckwerts and
Lord Justice Winn
In The Supreme Court of Judicature
Court of Appeal
From Mr Justice Roskill
MR RAYMOND WALTON, Q.C. and MR MICHAEL KEMPSTER (instructed by Messrs A. Kramer & Co.) appeared as Counsel for the Appellants.
MR MICHAEL KERR, Q.C. and MR ANTHONY LINCOLN (instructed by Messrs Moon Gilks & Moon) appeared as Counsel for the Respondents.
This case raises a number of issues for determination between two commercial firms. The plaintiffs, F. & G. Sykes (Wesson) Ltd. are producers of broiler chicks. The defendants, Fine Fare Ltd., operate supermarkets. A proposal was made in 1960 and 1961 for a working arrangement between them. The proposal was that Sykes should produce day-old chicks of special quality, fit to become broilers. They would sell those to growers in different parts of the country who would rear those. Day -old chicks into a size fit for eating. The growers would then sell those fowls to Pine Pare, who were to erect a factory to process them. At this factory the chickens would be killed and plucked and processed ready for eating. Pine Pare would themselves sell them to the public as oven-ready birds in their supermarkets.
That was a plan which no doubt required a great deal of work on both sides. On the part of Pine Pare it involved their building a factory of considerable capacity which it was suggested should be at Mere in Wiltshire. On the part of Svkes it meant the breeding of a suitable breed of chicks, and rearing a large number of day-old chicks which they would supply to growers.
Eventually an agreement was made between Sykes and Pine Pare on the 15th June, 1961. That is the agreement which falls to be construed by the Court, but before construing it, I must say that unfortunately this excellent plan came to naught. About the middle of 1963 Pine Pare decided that, owing to difficulties of water supply, and the like, they could not proceed with the factory at were. They cancelled the arrangements which had been made. Now Sykes sue them for damages for break of contract.
The first point is: To what extent was this agreement binding in law? Was it a binding contract? Or was it only a contract to make a contract, of such a kind as to be not binding? That is the main point for consideration today. If there was abinding contract, there is this further point: On what basis are the damages to be assessed?
Under the agreement Sykes agreed to raise such quantity of broiler chicks as should meet the requirements of Pine Pare, and to supply the chicks to the growers for the purpose. On the other hand, Pine Pare agreed to set up a factory of sufficient capacity to deal with the processing of all broiler fowls which Sykes reared, Also they agreed that they would give Sykes at least 26 weeks' notice in writing of the number of broiler fowls which they required for processing each week.
Then there was this important provision; "Provided that any numbers of broiler fowl referred to in a notice given under these provisions shall be not less than thirty thousand per week, nor more than eighty thousand per week (except by agreement between the parties here to) during the first year of this agreement" and these are the vital words - "and thereafter such other figures as may be agreed between the parties here to". The length of the agreement was stated to be a term of five years from a date six months from the date of the agreement. That is, as it turned out, five years from the 16th December, 1961. The five years would end on the 16th December, 1966. Thereafter there was a proviso that not less than four years' notice was to be given to terminate it. In addition there was an arbitration clause which said that: "If any difference shall arise between the parties as regards any such notice of dispute or the meaning of or effect of this agreement or as regards the performance by either party of their obligation hereunder or in relation to any matters incidental there to such differences shall be referred to arbitration by a single arbitrator and provisions are made for the appointment of an arbitrator.
There was sufficient certainty for the first year. The agreement provided that during the first year of the agreement from the 16th December, 1961, to the 16th December, 1962,Fine Fare were to give notices to Sykes to provide broiler fowl, but they were to be not less than 30,000 a week, nor more than 80,000 a week. Undoubtedly the agreement subsisted during the period of that first-year. Then the agreement goes on to say J and thereafter such other figures as may be agreed between the parties hereto". It is said by Pine Fare's adviser that is a contract to enter into a contract: and that is too indefinite and uncertain to create legal relations and therefore the contract was not binding after that first year.
On this point we have once more gone through all the cases from May and Butcher v. The king, Hillas v. Arcos, Foley v. Classique Coaches Ltd. and the Novinex case and others. I would just say this. In a commercial agreement the further the parties have gone on with their contract, the more ready are the Courts to imply any reasonable term so as to give effect to their intentions. When much has been done, the Courts will do their best not to destroy the bargain. When nothing has been done, it is easier to say there is no agreement between the parties because the essential terms have not been agreed. But when an agreement has been acted upon and the parties, as here, have been put to great expense in implementing It, we ought to imply all reasonable terms so as to avoid any uncertainties. In this case there is less difficulty than in others because there is an orbit ration clause which, liberally construed, is sufficient to resolve any uncertainties which the parties have left.
Bearing those principles in mind, I am quite satisfied that this phrase "after the first year such other figures as may be agreed between the parties hereto", does not introduce such uncertainty into the contract as to render it no contract. Effect can be given to this agreement by saying that in default of agreement, thenumber of chicks shall be. Such reasonable number as may be ascertained by an arbitrator under the arbitration clause. You can either imply a term that, in default of agreement, the number shall be a reasonable number with a subsequent provision tint in case of any dispute as to what is reasonable, it should be determined by arbitration: or, alternatively run the two terms together and say "such reasonable figures as the arbitrator may determine". Whichever is adopted, it all comes to the same thing. The provision that figures were to "be agreed" does not nullify the contract. It can be made certain by reasonable figures being ascertained by an arbitrator.
Any other view would be completely contrary to the intentions of the parties. The agreement was to 1ast for five years and then afterwards from year to year with a four years' notice. The contention of Fine Pare Ltd. would be to reduce it from a five year agreement to one year. I may add that if Pine Pare had succeeded in putting up their factory, they would have been the first people to complain if Sykes had said: "This does not cast for more than one year".
On this issue I bold that this was a binding agreement operative in its terms for the full period of five years. As it turned out, there was repudiation by Pine Pare in June 1963 which was accepted by Sykes in July 1963. There is no dispute that the actual determination date was the 15th June, 1968, Damages must be assessed on that footing.
The second point is on damages. It raises a point of construction. Clause 2 (ii) provided that: "Pine Pare shall be entitled in any week to purchase broiler fowl from any source other than the nominate r" growers if the nominated growers are unable in any week concerned to supply fowl of the said saleable quality ready for processing in accordance with the quantities notified in Clause 2(a) but otherwise Pine Pare shall not be entitled to purchase broiler fowl from any other such source".
The question is this: Do the last words of the clause prevent Pine Pare from buying for their supermarkets oven-ready birds (already processed) from other suppliers? I think not.It seems to ma, although the words "for processing" are not written into that clause, they are imported by necessary implication. In any place where "broiler fowl" is used, it means "broiler fowl for processing". It is pretty plain to my mind that, if the nominated growers cannot supply the quantities of unprocessed birds which Pine Fare require, then Pine Pare can purchase unprocessed birds elsewhere because they want to keep their factory going for the purpose of processing them. But if the nominated growers can supply all the unprocessed birds that Pine Pare requires, then Pine Pare are not entitled to get unprocessed birds from any other source. I think that is the reasonable meaning of that proviso. But if Pine Pare wish to buy birds oven-ready (already processed) for their supermarkets from any other source, they are at liberty to do so. But I hasten to say that I do not think this result makes any substantial difference to the damages. In assessing the damages the arbitrator, or whoever has that task, has to ask himself this question: Suppose this agreement had been fulfilled and the factory had been built in accordance with the contemplated plans - I have no doubt there were plans in existence - and there had been no agreement as to the figures: In those circumstances what would be the reasonable number ofunprocessed birds which would be required by Pine Fare on the one hand, and...
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