Tekdata Interconnections Ltd v Amphenol Ltd
| Jurisdiction | England & Wales |
| Judge | Lord Justice Longmore,Lord Justice Dyson,Lord Justice Pill |
| Judgment Date | 19 November 2009 |
| Neutral Citation | [2009] EWCA Civ 1209 |
| Docket Number | Case No: A3/2008/2787 |
| Court | Court of Appeal (Civil Division) |
| Date | 19 November 2009 |
[2009] EWCA Civ 1209
Lord Justice Pill
Lord Justice Dyson
and
Lord Justice Longmore
Case No: A3/2008/2787
IN THE HIGH COURT OF JUSTICE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM BIRMINGHAM MERCANTILE COURT
HH JUDGE SIMON BROWN QC
Royal Courts of Justice
Strand, London, WC2A 2LL
Mr Alastair Tomson (instructed by Howell-Jones) for the Appellants
Mr Malcolm Chapple (instructed by Nelsons) for the Respondents
Hearing date : 22 October 2009
Introduction
This appeal raises the question whether in what is sometimes called "the battle of forms", there can be circumstances in which a traditional offer and acceptance analysis can be displaced by reference to the conduct of the parties over a long-term relationship. An offer to buy containing the purchaser's terms which is followed by an acknowledgement of purchase containing the seller's terms which is followed by delivery will (other things being equal) result in a contract on the seller's terms. If, however, it is clear that the neither party ever intended the seller's terms to apply and always intended the purchaser's terms to apply, it is conceptually possible to arrive at the conclusion that the purchaser's terms are to apply. It will be a rare case where that happens. Do the facts of this appeal amount to that rare case?
The Facts
The parties to this dispute are part of a chain of suppliers to Rolls Royce as ultimate purchasers. Rolls Royce need engine control systems for installation in their aero engines. They bought such systems from a company called Goodrich who themselves bought cable assembly items such as cable harnesses for internal wiring from Tekdata Interconnections Ltd ("Tekdata") in Stoke-on-Trent. In order to manufacture these harnesses Tekdata acquired connectors from Amphenol Ltd ("Amphenol") who originally manufactured them at premises in Nottinghamshire but later, in about August 2005, moved to Whitstable in Kent. They in turn acquired material, such as electronic filters, for the connectors from a firm known as Oxley in Ulverston in Cumbria. The dispute has arisen between Tekdata and Amphenol (to whom I shall as relevant refer as "Buyers" and "Sellers"). Tekdata claim that certain connectors were delivered late and were not fit for the purpose or of merchantable quality. They say that the contract of purchase was on the terms of their purchase orders (or, more accurately, revisions to purchase orders already placed); Amphenol defend by saying that the contracts were on the terms of their (Amphenol's) acknowledgement of the purchase orders and that those terms exclude or limit their liability for any breaches of contract. It fell to HHJ Simon Brown QC sitting in the Birmingham Mercantile Court to decide, on a prelimary issue, whose terms (if either) applied.
Tekdata and Amphenol have been doing business for many years; for most (if not all of that time) the supply of connectors had been controlled by Goodrich who required Tekdata to purchase the connectors from Amphenol to a specification required by Goodrich and at a price determined by Goodrich. Goodrich had a long term supply contract with Tekdata although that contract had formally expired by August 2005 when problems started to arise. It emerged in the course of disclosure in the proceedings that Amphenol also had a long term contract with Goodrich pursuant to which they agreed to supply connectors to Tekdata for the price determined by Goodrich but Tekdata were unaware of that contract until it was disclosed in the proceedings.
The contractual obligations in relation to any particular equipment bought from Amphenol began with a Purchase Order generated by Tekdata. That stated that the purchase was to be on Tekdata's own terms and conditions. It contained a delivery date which was 26 weeks from the date of the order since Tekdata themselves had 28 weeks from the date of Goodrich's order to supply the harnesses to Goodrich.
According to Tekdata's financial manager Mr Downing, whose evidence the judge in general accepted, Tekdata then expected the purchase order to be automatically actioned and assumed that the items covered by the purchase order would be delivered by the relevant dates.
Mr Downing thus thought that a contract came into existence as soon as Amphenol received the purchase order and that such contract was on the terms of that purchase order. That could not, however, be the legal position unless there was some prior overarching contract whereby Amphenol were obliged to supply connectors as and when Tekdata (or perhaps Goodrich) chose to order them and there was no evidence of such a contract, despite the considerable evidence that the parties had enjoyed a business relationship that went back for over 20 years.
The judge found that Amphenol acknowledged the purchase orders by sending an acknowledgment to Tekdata. In law it could only be at that date at earliest that a contract for the purchase and sale of the specified connectors came into existence. The acknowledgment, however, stated that Amphenol's terms and conditions were to apply and the traditional view would be that, if no further documentation passed between the parties and if Tekdata took delivery of the connectors, the contract would be on the terms of Amphenol's acknowledgement. The judge, however, held that it was never intended that Amphenol's terms should apply because the parties had always intended that Tekdata's terms were to apply. He seems to have concluded, although he did not expressly say so, that the clause (at the bottom right hand corner of the acknowledgement) about the application of Amphenol's terms was to be ignored and that the contract came into existence when the acknowledgment was returned to Tekdata.
There were 13 grounds of appeal but, in the course of oral argument they boiled down to the following two questions.
Was it open to Judge to accept Tekdata's arguments?
When I gave permission to appeal, I was troubled by this question because there was no sign in the pleadings that Tekdata wished to rely not on the traditional offer and acceptance analysis but rather on the conduct of the parties not only over their long-term relationship over 20 years but also after the conclusion of the relevant contracts. But I am now satisfied that Tekdata's skeleton argument made it sufficiently clear that (right or wrong) Tekdata wished to rely on the parties' overall relationship and that they would say that it was always their intention that Tekdata's terms were to apply. Any objection to this approach could and should have been taken at the time but was not and the Judge was therefore right to have proceeded to determine the second question.
Was it right to analyse the overall relationship and come to the conclusion which the Judge did?
Mr Tomson for Amphenol said the Judge was not so entitled and the traditional offer and acceptance analysis should be applied. The Judge relied on Butler Machine Tool Company v Excell-O Corporation [1979] 1WLR 401 in which Thesiger J had not applied that traditional analysis and said that the seller's quotation terms should prevail over the terms incorporated by the buyer's order because the seller's terms expressly said that they should prevail over any other terms. Lord Denning MR said (404 F-G):
"I have much sympathy with the judge's approach to this case. In many of these cases our traditional analysis of offer, counter-offer, rejection, acceptance and so forth is out of date. This was observed by Lord Wilberforce in New Zealand Shipping Co. Ltd. V A. M. Satterthwaite & Co Ltd [1975] AC 154, 167. The better way is to look at all the documents passing between the parties – and glean from them, or from the conduct of the parties, whether they have reached agreement on all material points – even though there may be differences between the forms and conditions printed on the back of them."
Applying that guidance he concluded that the contract was made when the seller returned a slip attached to the buyer's purchase order accepting the order on the buyer's terms. Mr Tomson pointed out that:
(1) in the end the traditional offer of acceptance analysis was applied even by Lord Denning.
(2) the other members of the court applied the traditional analysis, Lawton LJ saying expressly (405G) that the battle of forms had to be conducted in accordance with set rules;
(3) Butler's case was, therefore, no precedent for abandoning the traditional analysis.
I agree with Mr Tomson's submissions on the aspect of the case, while accepting that, as Lord Denning said, there will be cases when one must glean from documents passing between the parties and from their conduct whether agreement has been reached. The way in which I would put it is to say that the traditional offer and acceptance analysis must be adopted unless the documents passing between the parties and their conduct show that their common intention was that some other terms were intended to prevail.
I have already indicated that a traditional analysis would conclude that the terms on Amphenol's acknowledgment would be the terms, on which the parties contracted.
In this case the Judge gave weight to the following countervailing factors
i) The fact that the connectors were items of considerable sophistication which were to be fitted into engine control systems destined for use in Rolls-Royce aero engines. Any departure from agreed times of delivery or, even more importantly, the quality of degree of materials and workmanship as specified in the purchase order could have...
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