Wickman Machine Tool Sales Ltd v L. Schuler A.G.

JurisdictionEngland & Wales
CourtHouse of Lords
JudgeLord Reid,Lord Morris of Borth-y-Gest,Lord Wilberforce,Lord Simon of Glaisdale,Lord Kilbrandon
Judgment Date04 Apr 1973
Judgment citation (vLex)[1973] UKHL J0404-2

[1973] UKHL J0404-2

House of Lords

Lord Reid

Lord Morris of Borth-y-Gest

Lord Wilberforce

Lord Simon of Glaisdale

Lord Kilbrandon

L. Schuler A.G.
and
Wickman Machine Tool Sales Ltd.

Upon Report from the Appellate Committee, to whom was referred the Cause L. Schuler A.G. against Wickman Machine Tool Sales Limited, That the Committee had heard Counsel as well on Tuesday the 30th and Wednesday the 31st, days of January last, as on Thursday the 1st, Monday the 5th, Tuesday the 6th, Wednesday the 7th and Thursday the 8th, days of February last, upon the Petition and Appeal of L. Schuler A.G. of Geoppingen/Wurt, Germany, praying, That the matter of the Order set forth in the Schedule thereto, namely an Order of Her Majesty's Court of Appeal of the 26th of April 1972, except so far as regards the words (" it is further ordered that provided the Respondents pay into Court the sum of £5,000 (Five Thousand Pounds) within 28 days from the date hereof then the said Respondents do have leave to present a Petition of Appeal to the House of Lords"), might be reviewed before Her Majesty the Queen, in Her Court of Parliament, and that the said Order, except so far as aforesaid, might be reversed, varied or altered, or that the Petitioners might have such other relief in the premises as to Her Majesty the Queen, in Her Court of Parliament, might seem meet; as also upon the Case of Wickman Machine Tool Sales Limited, lodged in answer to the said Appeal; and due consideration had this day of what was offered on either side in this Cause:

It is Ordered and Adjudged, by the Lords Spiritual and Temporal in the Court of Parliament of Her Majesty the Queen assembled, That the said Order of Her Majesty's Court of Appeal of the 26th day of April 1972, complained of in the said Appeal, be, and the same is hereby, Affirmed, and that the said Petition and Appeal be, and the same is hereby, dismissed this House: And it is further Ordered, That the Appellants do pay, or cause to be paid, to the said Respondents three-quarters of the Costs incurred by them in respect of the said Appeal to this House, the amount thereof to be certified by the Clerk of the Parliaments.

Lord Reid

My Lords,

1

The Appellants are a German company which manufactures machine tools and other engineering products. The Respondents are a selling organisation. On 1st May, 1963, they entered into an elaborate "distributorship agreement" under which the Appellants (whom I shall call Schuler) granted to the Respondents (called Sales in the agreement but whom I shall call Wickman) the sole right to sell Schuler products in territory which included the United Kingdom. These products included "panel presses" defined in clause 2 and general products. The panel presses are large machine tools used by motor manufacturers. Wickman were to act as agents for Schuler in selling the panel presses but were to purchase and re-sell the general products.

2

Wickman's obligation with regard to the promotion of sales of Schuler products is contained in clauses 7 and 12( b) which are in the following terms:

"7. Promotion by Sales

( a) Subject to Clause 17 Sales will use its best endeavours to promote and extend the sale of Schuler products in the Territory.

( b) It shall be condition of this Agreement that:—

(i) Sales shall send its representatives to visit the six firms whose names are listed in the Schedule hereto at least once in every week for the purpose of soliciting orders for panel presses;

(ii) that the same representative shall visit each firm on each occasion unless there are unavoidable reasons preventing the visit being made by that representative in which case the visit shall be made by an alternate representative and Sales will ensure that such a visit is always made by the same alternate representative.

Sales agrees to inform Schuler of the names of the representatives and alternate representatives instructed to make the visits required by this Clause."

12( b) Sales undertakes, at its expense, to look after Schuler's interests carefully and will visit Schuler customers regularly, particularly those customers principally in the motor car and electrical industries whose names are set out on the list attached hereto and initialled by the parties hereto and will give all possible technical advice to customers."

3

The six firms referred to in clause 7 are six of the largest motor manufacturers in this country. The agreement was to last until the end of 1967 so that clause 7( b)(i) required Wickman to make a total of some 1,400 visits during the period of the agreement. Wickman failed in their obligation. At first there were fairly extensive failures to make these visits. Then there were negotiations with a view to improving the position and Schuler have been held to have waived any right arising out of those failures. Thereafter there was an improvement but there were still a considerable number of failures.

4

After some correspondence Schuler wrote to Wickman in October, 1964, terminating the agreement on the ground that failure to fulfill their obligation for weekly visits to the six firms entitled Schuler to treat that failure as a repudiation of the agreement by Wickman. In accordance with clause 19 of the agreement this question was referred to arbitration. In spite of the apparently simple and limited nature of the question in dispute, proceedings before the Arbitrator were elaborate and protracted. Ultimately the Arbitrator issued his award in the form of a Special Case on 6th October, 1969. He held that Schuler were not entitled to terminate the agreement. This finding was reversed by Mocatta J. but restored by the Court of Appeal.

5

In order to explain the contention of the parties, I must now set out clause 11 of the agreement.

6

"11. Duration of Agreement

7

( a) This Agreement and the rights granted hereunder to Sales shall commence on the First day of May 1963 and shall continue in force (unless previously determined as hereinafter provided) until the 31st day of December 1967 and thereafter unless and until determined by either party upon giving to the other not less than 12 months' notice in writing to that effect expiring on the said 31st day of December 1967 or any subsequent anniversary thereof PROVIDED that Schuler or Sales may by notice in writing to the other determine this Agreement forthwith if:—

(i) the other shall have committed a material breach of its obligations hereunder and shall have failed to remedy the same within 60 days of being required in writing so to do or

(ii) the other shall cease to carry on business or shall enter into liquidation (other than a members' voluntary liquidation for the purposes of reconstruction or amalgamation) or shall suffer the appointment of a Receiver of the whole or a material part of its undertaking;

8

and PROVIDED FURTHER that Schuler may by notice determine this Agreement forthwith if Sales shall cease to be a wholly-owned subsidiary of Wickman Limited.

9

( b) The termination of this Agreement shall be without prejudice to any rights or liabilities accrued due prior to the date of termination and the terms contained herein as to discount commission or otherwise will apply to any orders placed by Sales with Schuler and accepted by Schuler before such termination."

10

Wickman's main contention is that Schuler were only entitled to determine the agreement for the reasons and in the manner provided in clause 11. Schuler, on the other hand, contend that the terms of clause 7 are decisive in their favour: they say that "It shall be condition of this agreement" in clause 7( b) means that any breach of clause 7( b)(i) or 7( b)(ii) entitles them forthwith to terminate the agreement. So as there were admittedly breaches of clause 7( b)(i) which were not waived they were entitled to terminate the contract.

11

I think it right first to consider the meaning of clause 11 because, if Wickman's contention with regard to this is right, then clause 7 must be construed in light of the provisions of clause 11. Clause 11 expressly provides that the agreement "shall continue in force (unless previously determined as hereinafter provided) until" 31st December, 1967. That appears to imply the corollary that the agreement shall not be determined before that date in any other way than as provided in clause 11. It is argued for Schuler that those words cannot have been intended to have that implication. In the first place Schuler say that anticipatory breach cannot be brought within the scope of clause 11 and the parties cannot have intended to exclude any remedy for an anticipatory breach. And, secondly, they say that clause 11 fails to provide any remedy for an irremediable breach however fundamental such breach might be.

12

There is much force in this criticism. But on any view the interrelation and consequences of the various provisions of this agreement are so ill-thought out that I am not disposed to discard the natural meaning of the words which I have quoted merely because giving to them their natural meaning implies that the draftsman has forgotten something which a better draftsman would have remembered. If the terms of clause 11 are wide enough to apply to breaches of clause 7 then I am inclined to hold that clause 7 must be read subject to the provisions of clause 11.

13

It appears to me that clause 11( a)(i) is intended to apply to all material breaches of the agreement which are capable of being remedied. The question then is what is meant in this context by the word "remedy". It could mean obviate or nullify the effect of a breach so that any damage already done is in some way made good. Or it could mean cure so that matters are put right for the future. I think that the latter is the more natural meaning. The word is commonly used in connection with diseases or ailments and they would normally be said to be remedied if they were cured...

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2 firm's commentaries
  • English Law – A Love Letter
    • United Kingdom
    • Mondaq United Kingdom
    • 22 de julho de 2014
    ...that strikes an impartial observer as unreasonable. Forty years ago, the House of Lords in L Schuler AG v Wickman Machine Tool Sales Ltd [1974] AC 235 noted "The fact that a particular construction leads to a very unreasonable result must be a relevant consideration. The more unreasona......
  • Shareholder Disputes
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    ...which would produce a more commercially reasonable result, relying on Lord Reid in L Schuler AG v Wickman Machine Tools Sales [1974] AC 235 and more recently Lord Clarke in Rainy Sky v Kookmin Bank [2011] 1 WLR 2900. Decision The court held that when the clauses were construed alongside one......
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    • Southampton Student Law Review Nbr. 2-2, July 2012
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    ...[1981] 1 WLR 711 (HL); Lom bard North Central Plc v Butterw orth [1987] QB 527 (CA). cf. L Schuler AG v W ickm an Machine Tool Sales Ltd [1974] AC 235 (HL); Rice (T/ A the Garden Guardian) v Great Yarm outh Borough Council (20 0 0 ) J uly 26 The Times; (20 0 0 ) WL 823961 (CA); J Thomas, ‘S......

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