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	England and Wales Court of Appeal (Civil Division) Decisions
You are here: BAILII >> Databases >> England and Wales Court of Appeal (Civil Division) Decisions >> Rosengrens Tann Ltd v Ayres [2001] EWCA Civ 997 (22 June 2001) URL: http://www.bailii.org/ew/cases/EWCA/Civ/2001/997.html Cite as: [2001] EWCA Civ 997

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IN THE SUPREME COURT OF JUDICATURE
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE CENTRAL LONDON COUNTY COURT
(Recorder Lincoln Crawford)

		Royal Courts of Justice Strand London WC2 Friday 22 June 2001

Friday 22 June 2001

1. LORD JUSTICE DYSON: In late 1997 the claimant sold to the defendant a batch of 56 safes which had been manufactured between 1990 and 1993. In these proceedings, the claimant claimed £5,135.93 in respect of two outstanding invoices. By his defence, the defendant admitted, subject to his set off and counterclaim, that he was liable to pay invoice 308330 in the sum of £1,979.88 but denied altogether that he was liable to pay the other invoice in the sum of £3,156.05. It will be necessary to consider the set off and counterclaim in some detail a little later. Suffice it to say at this stage that the defendant contended that he had a claim for damages for misrepresentation and/or breach of contract arising out of the quality of the safes.
2. The trial was heard by Mr Recorder Lincoln Crawford over four days, starting on 17 April 2000. It was limited to issues of liability. He gave judgment on 16 June. He dismissed the claim and found in favour of the defendant on his counterclaim. The assessment of damages was adjourned. The claimant now appeals with permission of this court, given on 9 February 2001.
3. Before I come to the issues raised on this appeal, I need to say something about the facts. In 1989 Rosengrens (part of the Group to which the claimant company belongs) took over a Dutch company called Martens, and formed a company called Rosengrens Martens BV. Martens was a well-known manufacturer of safes. As a result of the takeover, the claimant acquired a number of safes that had been manufactured by Martens and which were surplus to requirements. These included the 56 safes that are the subject of these proceedings.
4. The defendant specialises in the supply of new and used safes. He has been doing business with the claimant for a number of years. On 5 November 1997 Mr Hamill of the claimant sent a fax to the defendant. The fax was in these terms:

"SPECIAL OFFER

We have the following safes for sale at GIVEAWAY PRICES.

MARTINS of HOLLAND

TBN CASH SAFES =EUROPEAN GRADE II

17.5K CASH RISK

TXA CASH SAFES =EUROPEAN GRADE IV

60K CASH RISK

The offer is as the attached list of 56 safes of various sizes to be sold in one batch for a cost of only £22,344 plus VAT which equals £399 per safe."

5. The reference to cash risk is to the amount of cover an insurance company would be willing to provide in respect of the safes in question. Attached to the fax was a sheet which showed the make up of the 56 safes. 48 of them were TBN safes of different sizes; the remaining 8 were TXA safes, again of different sizes. To take one example, the sheet showed 15 safes of type TBN 50: it stated the inner and outer height, width and depth; its weight and volume and that it had one key lock, one shelf and one handle.
6. On 7 November there was a meeting between Mr Hamill and Mr Ayres at which (as the recorder found) Mr Hamill told Mr Ayres that the safes were not actually European grades but that they were equivalent in quality. Mr Hamill told Mr Ayres that he used the words that appeared in the fax in order to give buyers an idea of the quality of the safes. The relevant European Standard is EN 1143-1. It is dated January 1997 and was published later in that year. It therefore post-dated the date of manufacture of the safes which are the subject of these proceedings.
7. The recorder found that the defendant agreed to buy the safes for £22,344 plus VAT on 27 November. As I have said, there were 56 safes. His findings as to the formation of the contract are exiguous, to say the least. There were various documents during the period between 5 and 27 November which, it was agreed between the parties, contained or evidenced the terms of the contract. The recorder made no reference to these documents at all. He did, however, say at paragraph 10 of his judgment that he accepted that the claimant did not give any warranty to the defendant about the safes. This rather cryptic utterance calls for some explanation. By his letter of 19 November 1997, the defendant confirmed to the claimant that he understood that "no warranty is given to the safes in the field in the UK". It is accepted on behalf of the appellant that this meant no more than that it was not willing to give its usual twelve months' warranty in this particular case. It did not mean that it was seeking to exclude the terms implied by law in a contract for the sale of goods. Although some reference has been made to this by Mr Quinn on behalf of the appellant, it seems to me that nothing turns on the point and I shall say no more about it.
8. There is one other aspect of the case that has a potential bearing on the question of the terms of the contract, and that concerns the Martens Brandkasten drawing No 63882 dated 20 September 1978. As it turned out, this became a critical document in the case. Since neither party referred to it in any pleading, that in itself is rather remarkable. Before I consider this document further and see what the recorder made of it, I ought to refer to the pleadings.
9. The reamended defence and counterclaim was served on 28 June 1999. It alleged that the fax dated 5 November 1997 represented that:

"i. the said TBN cash safes were the equivalent of European grade II 17.5K cash risk safes; and

ii. the said TXA cash safes were the equivalent of European grade IV 60K cash risk safes."

10. It went on to say that the defendant entered into the contract in reliance on the representations, and that the representations were false. At paragraph 5, the pleading alleged that the representations were expressed or implied terms of the contract. At paragraph 6 it was pleaded further and alternatively that it was an express or implied term of the contract that the safes would be reasonably fit for their purpose. At paragraph 8 particulars were given of the respects in which the alleged representations were false in these terms:

". . . the representations were false . . . in that the said TBN cash safes were substandard in that:-

(a) they were provided with no securing hole(s) in their bases;

(b) they had substandard locking mechanisms; (c) they did not have any or any adequate colouring or markings to substantiate the integrity of their design, structure or cash rating;

in respect of the TXA cash safes in that:-

(a) they were provided with no securing hole(s) in the bases.

(b) they had substandard locking mechanisms. (c) that they do not have any or any adequate colouring or markings to substantiate the integrity of their design, structure or cash rating;

(d) they had no or no adequate anti-peeling material.

(e) they had no or no adequate torch and drill resistance barrier".

11. At paragraph 9 these same matters were repeated as particulars of breach of contract.
12. By its amended reply and defence to the Part 20 claim, the claimant denied that the representations made in the fax of 5 November 1997 were false or that it was in breach of contract as alleged. It admitted that none of the safes contained securing holes, but denied that this amounted to a breach of contract.
13. The parties exchanged experts' reports. Mr Gater was the defendant's expert. His first report was dated 3 August 1999. His opinion was that the approximate equivalent European Grades of the safes were: TBN, European Grade I; and TXA, European Grade II/III. I should pause briefly to say something about European Standard Grades. The European Standard established a basis for testing and classifying safes according to their burglary resistance. Resistance is measured by a test using a drilling tool to establish the time taken to achieve partial and complete access to a safe. It is the yardstick by which insurance companies give cover for different types of safe. At the time when these safes were manufactured, there was no European Standard. That is why Mr Gater sought to establish the equivalent European Standard Grade. He arranged for a drill test to be carried out to determine door drill resistance. The results of that test formed the basis of one of the pleaded allegations.
14. The next report, chronologically, was the first report of McAinsh, the claimant's expert. He commented on each of the pleaded allegations, explaining why he did not consider that the safes were in any way defective. He then turned to Mr Gater's first report. He disagreed with Mr Gater's view about equivalent grading. He referred to the European Safe Rating List 1997, and said that in his opinion the safes did meet the European Standard Grades stated in the fax of 5 November 1997. He also criticised the drill tests that had been carried out, and concluded that they did not demonstrate that the torch and drill resistance of the safes, as measured by the tests, was less than required for Grade IV of the European standard.
15. Some time after he had prepared his first report, Mr Gater obtained a copy of drawing 63882. On 18 February 2000 he wrote to the Loss Prevention Council, sending them a copy of the drawing (which he described as a "specification drawing") and asked them to prepare a report on whether the safes accorded with that specification. The LPC report is dated March 2000. It explained that they had examined and tested one TBN Type 50 and one TXA Type 100 safe. The report described the results in some detail. Of the TBN safe the report concluded:

"In general the construction of the specimen unit was consistent with that specified for a Series TBN Type 50 safe apart from the thickness of the door face plate and rear panel which had an implied thickness of 6mm and 5mm respectively."

16. Of the TXA safe, it concluded:

"The construction of the Martens Series TBN Type 50 safe storage unit, serial number 50423, was consistent with the declared specification except for the door face plate and rear panel which were thinner than the implied thickness.

The construction of the Martens Series TXA Type 100 safe storage unit, serial number 45543 was not consistent with the declared specification as the unit incorporated a Series TK style of door on a TXA style of body that had a rear panel thinner than the implied thickness."

17. Mr Gater wrote a second report on 20 March 2000 which was based on the LPC report. His conclusions were accepted by the recorder at paragraph 16 of his judgment, where he said this:

"Based on the Martens Drawing No 63882, Mr Gater whose evidence I accept, concluded that the TBN safes were not manufactured to the correct Martens specification in that: (a) the outer mild steel plate was not to specification in the drawing, (b) a weaker mix of concrete [than] anticipated was identified and (c) the full height, full width 3mm Manganese plate had not been included. As regards the TXA safes, while the body matched that which was specified in the drawing, the doors did not. The faults in the safes as identified by Mr Gater rendered them substandard. The Defendant would not have been able to get insurance cover for them and could therefore have only sold those safes for which insurance cover was not required."

18. Mr McAinsh had responded to Mr Gater's second report by preparing a second report of his own, dated 5 April. He noted that the LPC tests were based on the drawing 63882, which he understood not to be part of the contract specification at all. He then criticised Mr Gater for alleging defects which had not been mentioned in the LPC report. He concluded at paragraph 12 that the LPC report had confirmed that the TBN safes were satisfactory, even when judged by reference to the drawing. He was unable to express a conclusion in relation to the TXA safe but he considered that he had seen nothing to indicate that the safes did not approximate to Grades II and IV of the European Standard.
19. There was evidence before the recorder as to the status of drawing 63882. At the time when he made his witness statement, Mr Raap was managing director of Rosengrens Europe BV, formerly Rosengrens Martens BV. He had joined the company as plant manager in 1992. In his witness statement, which formed part of his evidence, he said this:

"10. I have been shown a copy of a drawing serial number 63882 produced by the buyer of the safes. He alleges that the safes do not correspond with the manufacturer's specification because they are unlike the safe shown in the drawing. This drawing appears to be a copy of a drawing held at the company's factory in Doetinchem.

11. However, this particular drawing was a discussion document. It is a draft of a proposed master drawing showing the combined features of several models of safe which were in production as at 9 September 1978. If this master drawing had been approved by Martens, several further drawings would have been made. Each one of those drawings would have related to an individual model of safe and been based on the master drawing.

12. The drawing was not approved by Martens for production purposes. No safes were ever manufactured by following that drawing. It is possible that one or more of the features shown in the drawing are similar to features commonly found in Rosengrens safes today. However if one looked at the production drawings for a safe currently in production, it would be substantially different from the drawing."

20. It is now time, finally, to come to the judgment in more detail. The first point to note is that the recorder made no specific finding on any of the pleaded allegations of particulars of misrepresentation and breach of contract. The nearest he got to doing so was at paragraph 8 where he referred to the "problem with the safes" not being apparent at the time of delivery. He said that it was only when the installation team started to install the smaller safes that it was discovered that they could not be secured because there were no bolt holes. But that was not in issue. What was in issue was whether that amounted to a misrepresentation or breach of contract.
21. The next supposed problem that he identified at paragraph 8 was expressed in these terms:

"The problem with the larger safes came to light when London East Security Centre of Romford Road, London E12, contacted the Claimant in order to try and confirm the cash ratings for the safes they had purchased from the Defendant. These were sold on the basis that they had a £60,000 cash cover. However, the Claimant could not confirm the cash rating for £60,000 with the result that the Defendant had to install a new safe in order to placate London East."

22. But this was, as it turned out, not a problem which formed the basis of any pleaded allegation against the appellant. What had happened was that the appellant had sold a safe to the respondent with a stated cash risk of 17.5K, and the respondents had sold this on to the customer with a stated cash risk of £60K. It is disturbing that the recorder should have made such a mistake.
23. The only pleaded particular allegation that had any bearing on whether the European Standard Grade was satisfied was the allegation that the safes had no or no adequate torch and drill resistance barrier. This allegation was based on the test that Mr Gater had carried out, and which Mr McAinsh had criticised in fairly trenchant terms. At paragraph 14, the recorder referred to the test and to Mr McAinsh's criticisms and said:

"It is not necessary in this case for me to resolve the question as to whether the method of testing was adequate or not. The important issue here is whether the drawing which gave the specification of the safes was a development plan or as Mr Raap put a discussion document."

24. At paragraph 15 the recorder referred to the evidence of Mr Raap and then said:

"Mr Gater said he would be amazed if the drawing was a development drawing. He and the LPC are criticised by Mr McAinsh for relying upon it. It seems to me on the evidence, and in the absence of any other drawing being produced that the specifications in Drawing No 63882 was in fact the specifications relating to the final production of the 56 safes."

25. Having accepted in paragraph 16 the evidence of Mr Gater based on drawing 63882, in the terms I have already mentioned, the recorder then summarised his findings at paragraph 17 as follows:

"In summary I find that this was a sale by description. No warranty was given by the Claimant to the Defendant. I accept the evidence of Mr McAinsh on the description of the safes and find that there was no misrepresentation on the part of the Claimant, because the safes were equivalent to the European Grades II and IV but in name only. In reality they were substandard and did not follow the specification in the Drawing No 63882."

26. At paragraph 18 the recorder simply quoted sections 13(1) and 14(2) and (2A) of the Sale of Goods Act 1979 without comment. These provide:

"13(1) Where there is a contract for the sale of goods by description there is an implied term that the goods will correspond with the description.

. . .

14(2) Where the seller sells goods in the course of a business, there is an implied term that the goods supplied under the contract are of satisfactory quality;

(2A) For the purpose of this Act, goods are of satisfactory quality if they meet the standard that a reasonable person would regard as satisfactory, taking account of any description of the goods, the price (if relevant) and all the other relevant circumstances."

27. The defendant appeals against the decision on a number of grounds. The first question to be decided is upon what basis the recorder found in favour of the claimant. On an appeal, that is usually the least of the problems facing this court. But, regrettably, in the present case the recorder has put both the parties and the court in a difficult position. It seems to me that paragraph 17 of the judgment is rather like a corrupt classical text over which scholars may puzzle. The recorder found that this was a sale by description, but failed to define the relevant description. The relevant description, in my view, was that the safes were TBN and TXA cash safes equivalent to European Grade II, 17.5K cash risk and European Grade IV, 60K cash risk respectively. This may have been the description to which the recorder was referring because he said that he accepted the evidence of Mr McAinsh as to the description of the safes, which was that the safes were equivalent to European Grades II and IV. But then the recorder went on to find that there was no misrepresentation because the safes were equivalent to the two grades, but he added "but in name only". The qualifying words "but in name only" are unexplained. I think that the next sentence in the paragraph may provide some illumination: "In reality they were substandard and did not follow the specification in the Drawing No 63882."
28. The one thing that is clear is that the recorder considered the safes to be substandard because they suffered from the faults stated in paragraph 16, and those faults were identified by reference to the drawing 63882. That is the reason why he found against the claimant. To my mind it is impossible to say with any confidence whether or not the recorder found that there was a breach of the term implied by section 13 of the Sale of Goods Act 1979 upon the basis that the description of the safes was contained in part in the drawing, but to the extent that he did so find, I think that he was wrong to do so. In my view the drawing had no contractual relevance at all.
29. First, the reasons given by the recorder for holding at paragraph 15 that the 1978 drawing was the specification to which the safes were manufactured between 1990 and 1993 were wholly inadequate. Mr Raap gave a convincing and detailed explanation as to the nature of the drawing, and why it was not the specification to which the safes were manufactured at any time, let alone some 12 to 15 years later. Mr Raap was scarcely cross-examined on this point. But secondly, even if the 1978 drawing was the specification to which the safes were manufactured, that did not make it part of the description of the 56 safes that were sold in November 1997. None of the contract documents made any reference to the 1978 drawing, nor was it mentioned in any of the oral discussions at the time the contract was made. Indeed, Mr Courtney Stewart does not seek to argue that the drawing formed part of the description of the safes that were sold.
30. To summarise, the factual basis on which the recorder reached his decision was that the safes were substandard because they did not conform to drawing 63882 in the respects mentioned in paragraph 16. Since he mentioned sections 13 and 14(2) of the Sale of Goods Act 1979 in paragraph 18, I shall assume that he found that the faults described in paragraph 16 amounted to breaches of both sections 13 and 14(2). But the foundation for a case under section 13 had to be that the drawing formed part of the contract description. Moreover, the basis upon which the recorder must be taken to have found in favour of the respondent under section 14(2) was that the drawing was incorporated into the contract, and for that reason alone provided the yardstick of "satisfactory quality" mentioned in section 14(2). Since, for the reasons that I have given, the drawing was not part of the contract, the recorder's decision cannot stand.
31. I would therefore allow this appeal on that ground alone. I do not find it necessary to deal with the many other points that have been made in the skeleton arguments. The question arises as to whether there should be a retrial. I am acutely conscious of the fact that the costs of his litigation are by now probably out of all proportion to what is at stake. Mr Quinn submits that a retrial is pointless because the appellant is bound to win if there is a further trial. I do not agree. In my view, there are three reasons why there should be a retrial. First, it seems to me that the respondent may have a case under section 14(2) which does not depend on establishing that drawing 63882 was a contract document. Mr Courtney Stewart said that his case was that these safes were of such poor quality that they could not properly be described as safes at all. He would not need to go that far to show a potential case of breach of section 14(2), although the various circumstances described in section 14(2A) would have to be taken into account and might prove to be of crucial importance. Secondly, the recorder failed to decide whether the testing upon which Mr Gater relied for his first report was adequate. As I understand it, that testing is relevant to whether the safes failed to achieve a standard equivalent to that required by European Grade IV, and possibly Grade II as well.
32. Finally, I regret to have to say that I regard this judgment as generally extremely unsatisfactory. I have already referred to the surprising error in paragraph 8. In some parts the judgment is cryptic; in others, although the recorder's conclusion is clear enough, his reasons are simply inadequate. This is all the more surprising when it is appreciated that this was a reserved judgment which was not given until almost two months after the end of the hearing. I am left with an uneasy feeling that if there is no retrial, the respondent might suffer a real injustice. I would therefore allow this appeal and order a retrial.
33. LORD JUSTICE SIMON BROWN: I agree with my Lord's judgment and the order he proposes, and there is nothing that I can usefully add.
ORDER: Appeal allowed, and case remitted for retrial. Costs to be in the action. (Order not part of approved judgment)