Zymurgorium Ltd v Hammonds of Knutsford Plc
| Jurisdiction | England & Wales |
| Judge | Lord Justice Nugee,Lady Justice Falk,Lady Justice Nicola Davies |
| Judgment Date | 30 January 2023 |
| Neutral Citation | [2023] EWCA Civ 52 |
| Docket Number | Case No: CA-2021-000205 |
| Court | Court of Appeal (Civil Division) |
[2023] EWCA Civ 52
Lady Justice Nicola Davies
Lord Justice Nugee
and
Lady Justice Falk
Case No: CA-2021-000205
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
BUSINESS AND PROPERTY COURTS IN MANCHESTER
BUSINESS LIST (ChD)
His Honour Judge Pearce (sitting as a Judge of the High Court)
Royal Courts of Justice
Strand, London, WC2A 2LL
William Edwards (instructed by Pannone Corporate LLP) for the Appellant
Steven Reed and Lois Norris (instructed by Napthens LLP) for the Respondent
Hearing dates: 7 and 8 December 2022
Approved Judgment
This judgment was handed down remotely at 10.30am on 30 January 2023 by circulation to the parties or their representatives by e-mail and by release to the National Archives.
Introduction
This litigation arises out of the breakdown of a commercial relationship between the Claimant, Zymurgorium Ltd ( “Zymurgorium”), a manufacturer of drinks, particularly gin and gin liqueurs, and the Defendant, Hammonds of Knutsford plc ( “Hammonds”), a drinks wholesaler. From late 2015 Hammonds had acted as Zymurgorium's wholesaler, during which time its business expanded very dramatically. But in late 2018 the relationship came to an end after Hammonds discovered that Zymurgorium had started supplying a major customer, J D Wetherspoon ( “JDW”), without going through Hammonds.
That led to a claim by Zymurgorium for unpaid invoices, and a counterclaim by Hammonds for damages for breach of contract. The basis of the counterclaim was the contention that, although not reduced to writing, there was an overarching agreement between the parties which required Zymurgorium not to supply its products except through Hammonds, that Zymurgorium had acted in repudiatory breach of that contract, and that Hammonds had accepted the repudiation.
Following a trial on liability in Manchester over 9 days in May and June 2021, HHJ Pearce, sitting as a Deputy High Court judge, ( “the Judge”) handed down a long and careful judgment on 13 August 2021 at [2021] EWHC 2295 (Ch). References below to numbers in square brackets are, save where otherwise apparent, references to paragraphs of his judgment. So far as the claim was concerned, the invoices themselves were not disputed and the only issue he had to decide was a question of interest, against which there is no appeal. So far as the counterclaim was concerned, I will have to look at his conclusions in detail, but in summary he rejected the case that there was an overarching or master agreement between the parties, but found that there were individual contracts in relation to 5 particular customers, including JDW, and that by supplying JDW other than through Hammonds, Zymurgorium acted in repudiatory breach of that contract and renounced the others. He held that a reasonable notice period for these contracts was 3 months, and that Zymurgorium was therefore liable for damages for breach of those 5 contracts for that period.
Hammonds appeals the Judge's conclusion that there was no overarching agreement, and also his conclusion that the individual contracts were terminable on 3 months' notice, contending that a reasonable notice period would be 12 months. Permission for the appeal was granted by Arnold LJ on 18 January 2022.
Zymurgorium cross-appeals the Judge's conclusion in relation to one of the individual contracts, and also his conclusion that by supplying JDW as it did, it not only acted in breach of the contract in relation to JDW but also renounced the other 4 contracts. Permission for the cross-appeal was granted by Arnold LJ on 12 May 2022.
Despite the able submissions of Mr William Edwards, who appeared for Hammonds, in support of the appeal, and those of Mr Steven Reed, who appeared with Ms Lois Norris for Zymurgorium, in support of the cross-appeal, I would dismiss both appeal and cross-appeal and uphold the Judge's conclusions in their entirety.
Facts
There were many factual issues canvassed at trial, and the Judge not only had a large amount of documentary evidence but also heard from a fair number of witnesses, notably the two protagonists, Mr Aaron Darke, the founder and Managing Director of Zymurgorium, and Mr Jonathan Hammond, the Managing Director of Hammonds. (Mr Darke was subsequently joined in the business by his brother Mr Callum Darke, but when I refer to Mr Darke I mean Mr Aaron Darke.) The Judge gave a detailed account of the effect of the evidence at [45] to [106], gave his assessment of the witnesses at [107] to [117] and then dealt in turn with each of the issues, making relevant findings of fact where relevant to each issue. No challenge is made to his findings of primary fact, and I can summarise the relevant facts quite briefly from the judgment. At this stage I merely identify the outline of the story and the issues which arise; I give more detail as necessary when considering each of the individual grounds of appeal or cross-appeal.
Mr Darke left university in 2012. He had by then already some experience in crafting a variety of drinks, and the Judge said that it was apparent from Zymurgorium's success that he had a talent for it, which the evidence tended to indicate was borne of a passion about the products [46]. He set up a business, initially making drinks in his parents' kitchen and shed, and set about promoting it in the Greater Manchester area. The business, then unincorporated, was renamed Zymurgorium in 2013, and subsequently continued by the Claimant company after its incorporation in 2016 [1].
Like many start-ups the business started slowly. In the 11 months to November 2015 there were only 42 sales to 8 customers [47]. Mr Darke was anxious to expand and in mid-2015 approached Hammonds, a long established wholesaler which had been founded in 1960 by Mr Hammond's father and which traded both with the on trade (pubs, bars, restaurants and the like) and the off trade (retailers, from small off licences to national chains and supermarkets, as well as online retailers) [49]–[50]. A meeting was eventually held between Mr Darke and Mr Hammond on 16 November 2015 at Hammonds' offices [53]. Mr Hammond was enthusiastic about Zymurgorium's products, which included both gin and gin liqueurs; the latter (which were then novel) are typically sweeter and less strong than full strength gin, often with highly innovative flavours – Zymurgorium's then included Sweet Violet, and later Turkish Delight, Cherry Bakewell, and (in a product called Realm of the Unicorn) marshmallow – that appeal to some younger drinkers (millennials and generation Z) [45.1]. The next day Mr Hammond sent Mr Darke an e-mail saying he had some great products; he went on to ask him to fill in a new supplier information form and said that they would be looking to take 12 bottles of each of 8 products on their first order [57.3].
Quite what was agreed at this November meeting was the first, and one of the main, issues on the counterclaim. Mr Hammond's evidence was that he was happy for Mr Darke to continue looking after the small accounts he already had, but that apart from that it was agreed that all sales would go through Hammonds [55]. This formed the basis for Hammonds' contention that there was an overarching or master agreement between the parties from the outset containing a term that Hammonds would be Zymurgorium's exclusive wholesaler. The Judge however found that although Mr Hammond was in general a credible witness, he could not accept his evidence that there was at this meeting any express discussion of Hammonds having exclusivity (at [112]–[113]); and when he came on to make findings on the particular issues, repeated that he was not persuaded that there was any express agreement to that effect at the meeting (at [132]). In those circumstances he was not satisfied that there was any contract made between the parties at all at the November meeting (at [135]). Hammonds challenges this latter conclusion in Ground 1 of its appeal.
Over the following months and years the relationship between the parties developed. The Judge found that there was a personal friendship between Mr Darke and Mr Hammond that went beyond that strictly necessary for their business relationship [58]. Zymurgorium's business also developed: the Judge referred to Hammonds having secured a central listing for it with a pub chain, Amber Taverns, in 2016, and to Zymurgorium enjoying gradual growth during 2017 [61]. But in late 2017 and early 2018 the sale of Zymurgorium products took off. A chart reproduced in the judgment shows the dramatic increase in sales, with the Judge noting that just over 60,000 bottles were sold in 2017 but over 540,000 in 2018 [73]–[74]. It was common ground that a major cause of the expansion was a social media posting on LADbible in February 2018 which praised Zymurgorium Manchester Sweet Violet Gin Liqueur, describing it as “bloody delicious” and “the perfect treat”, followed by a similar posting on UNILAD referring to its “luscious, floral, gently nostalgic taste” [74]–[75].
Hammonds had a secondary case that if the overarching agreement at the outset did not include a term as to exclusivity it was later varied to include one. The Judge rejected this on the basis that it did not arise as there had not on his finding been an overarching agreement at all [136]; but he also said that even if there had been an overarching agreement, he would not have found it to have been varied to include a term as to exclusivity [152], nor would he have found (had it been pleaded, which it was not) that an overarching agreement came into existence at some later time than November 2015 [153]. Hammonds challenges the latter two conclusions in Ground 2 of its appeal.
Hammonds also had an...
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Brian Burgess v Robert Kempson
...adopts to an alleged oral contract is quite different to that adopted for written agreements. As the Court of Appeal noted in Zymurgorium v Hammonds of Knutsford [2023] EWCA Civ 52 at [58]: Whether the contract was made at the meeting in November 2015 is a question of fact: see the account......