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You are here: BAILII >> Databases >> England and Wales High Court (Technology and Construction Court) Decisions >> Saint Gobain Building Distribution Ltd (T/a International Decorative Surfaces) v Hillmead Joinery (Swindon) Ltd [2015] EWHC B7 (TCC) (15 May 2015) URL: http://www.bailii.org/ew/cases/EWHC/TCC/2015/B7.html Cite as: [2015] EWHC B7 (TCC), [2015] BLR 555 |
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QUEEN'S BENCH DIVISION
BIRMINGHAM DISTRICT REGISTRY
TECHNOLOGY & CONSTRUCTION COURT
B e f o r e :
____________________
| SAINT GOBAIN BUILDING DISTRIBUTION LIMITED (t/a INTERNATIONAL DECORATIVE SURFACES) |
Claimant |
|
| - v - |
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| HILLMEAD JOINERY (SWINDON) LIMITED |
Defendant |
____________________
Crown Copyright ©
A: Introduction
This case concerns the initial manufacture of laminated sheets, and their subsequent bonding onto MDF substrate to form bonded panels.
IDS commenced these proceedings by claiming the price of various goods sold and delivered. That claim was met by Hillmead's counterclaim. The claim is admitted, with the consequence that the trial was effectively the trial of Hillmead's counterclaim. The counterclaim relates to different products from those which are the subject matter of the claim.
These are set out in schedule 1 to the defence and counterclaim (page 1/23). At trial Darren Selman of Hillmead's parent company[2], accepted that the ninth invoice was sent to, and paid by, MWC Fittings Ltd (transcript: Day 1/109/12-15): I therefore find that the ninth invoice does not form part of Hillmead's counterclaim. The dates of the sales are from 15 February 2008 to 12 June 2008.
In paragraph 14 of his first witness statement, Darren Selman (although employed by Hillmead's parent company was also working as Hillmead's sales office manager) stated (page C/4) that Mark Shepherd (now deceased) of Railston Design had informed Ellis Greenhill, who was also employed by Hillmead's parent company, "... that there was a problem with the panels supplied to the Ealing Primark store, and that Primark had rejected these panels. This was the first of a series of rejections." He stated there were subsequent rejections between May and July 2008.
In paragraph 15 of his first witness statement, Darren Selman stated (page C/4-5) that "... I was aware that Primark and Railston Design were complaining that the panels were unsatisfactory as the surface finish of the panels was inconsistent, and had a mottled effect, and that ripples were evident across the surface of the panels". Although he referred to the fact of complaints in paragraph 6 of his witness statement, Gerard O Sullivan, a director of Railston Design, did not state what the substance of the complaint was; that may well have been because that aspect of the matter was dealt with at Railston Design by his late colleague Mark Shepherd.
Hillmead's belief (not disputed by IDS) was that "Primark's interior design contractors or in-house designers had discussions with Polyrey about the type of laminate to be used in the stores", as Darren Selman put it in paragraph 7 of his first witness statement. However, neither party called any witness at the trial from either Polyrey or Primark, its architects or any of the professional team engaged by Primark in connection with the fitting out programme. Hillmead did call Gerard O'Sullivan of Railston Design as a witness at trial, but as indicated above he did not give direct evidence about the substance of the complaint.
The value of the first eight invoices listed in schedule 1 to the counterclaim is £13,019.27. Hillmead's counterclaim is stated to amount to £367,408.69. In round figures, £46,000 of that total is alleged by way of "diversion of staff time" (item 12); and £254,000 of that total is alleged by way of "loss of business" over a six year period[3].
B: The issues in the case
(1) What were the terms of the contract between IDS and Hillmead? In particular (a) were IDS' standard terms and conditions incorporated into the contract; and/or (b) did the contract have the usual implied terms as to satisfactory quality and/or fitness for purpose as Hillmead alleges?
(2) If IDS' standard terms and conditions were incorporated into the contract, did they (whether all or individually) satisfy the statutory test of reasonableness?
(3) Was IDS in breach of contract? This will involve an assessment of the expert opinion evidence in the case.
(4) Was the loss alleged by Hillmead caused by any breach of contract, or did other factors cause or contribute to the incidence of such loss? In particular, did Hillmead have the opportunity to inspect either the laminate sheets or the bonded panels for defects?
(5) What is Hillmead's measure of loss and damage? In particular, is any of the claimed loss of business too remote?
C: The terms of the contract between IDS and Hillmead
"I/we the undersigned applied to the Company for Credit facilities and declare that the information given is correct.
I/we have read the 'Terms and Conditions' and should Credit facilities be granted agree to trade solely under these terms. The Company reserves the right to terminate this Agreement forthwith by notice upon a breach by the customer of any Conditions and all amounts then outstanding will become due forthwith ..."
In paragraph 13 of his written opening submissions Mr Cutting submitted that "... it is D's position that the mere reference to the T&Cs at paragraph 12 is not "reasonably sufficient" to render D liable to the T&Cs without a clearer notification of the T&Cs". That point was not specifically stated in Hillmead's rejoinder: the point taken there was merely that the T&Cs were not annexed to the application form, and accordingly Mr Bowers did not make the representation that future sales would be governed by the T&Cs. In my judgement the point which Mr Cutting sought to make in paragraph 13 of his written opening submissions goes rather beyond Hillmead's stated case, and strictly the point is not open for Hillmead to take at trial. Nevertheless I shall consider it.
D: The factual background
"In order to purchase the goods at a specific price which had been agreed between Polyrey and Primark when planning the specific projects ... (Hillmead) made (IDS) aware, before 15 February 2008, that the laminate was to be used as a decorative surface on panels in specific locations within Primark premises, by notifying it that purchases were intended for use in those projects."
That point is then developed in paragraph 8.1 as follows:
"It was in the contemplation of the parties when the above mentioned terms ... were agreed that ...
The goods would only be used in manufacturing laminated panels which would be sold to a specific end user, Primark, who would require a good quality of surface finish on such panels."
"Q: .. Do you have any knowledge of what goes on between the negotiations between Polyrey and a large customer like Primark as to how we get to the specification of particular products in particular prices?
A: … no. All we find out is when it has actually been specified. We are not involved in any negotiation with the companies."
"A large proportion of IDS' business relates to sales to fitters. Much of this distribution is in relation to large-scale projects including shop fit outs. IDS' involvement in shop fit outs is varied. Often with small scale projects a fitter will approach IDS for advice on specific products that may be suitable for the contract which they are undertaking. However, in most projects, the product has already been agreed between a representative of a product manufacturer and the architect or designer of the project."
In paragraph 14 he stated:
"I understand that in the Primark contract ... a Polyrey representative known as a "specification representative" met with an agent of the end user, Primark, or its instructed architect or contractor in order to ascertain the requirements of the laminate surface and to discuss suitable products ..."
In paragraph 17 he stated:
"IDS is very rarely, if ever, involved in the discussions that take place between the specification representatives and the end users/contractors the project to which a product is to be agreed. IDS was not privy to the discussions relating to specification for the Primark contract ... or to any other communications between Polyrey, Primark, its main contractors and Hillmead that resulted in the product being chosen. Hillmead first contacted IDS once a product specification and price had been agreed to ascertain whether IDS would be in a position to supply the required level of products."
In paragraph 19 he stated:
"Once an agreement had been reached between (Primark) and Polyrey as to the product, there would have been discussions between the contractors and the specification representative in relation to the price of that product. Product manufacturers often agree special reduced prices with contractors where there are large-scale projects. In such circumstances, if IDS agreed to supply the product of the contractor, it would be required to supply the product at the price agreed between the supplier and contractor ..."
In paragraph 20 he stated:
"As the price was pre-agreed, IDS then had to balance out any adjustment in price with Polyrey directly. This is known as a contract support price and is industry standard ..."
"Q: Do you also accept that, in a large supplier like yourselves, or like IDS, that information about the products and the price is disseminated within IDS to your sales teams so that they know that this could be coming?
A; That's correct
He further stated (transcript 5/44/23 to 5/45/3):
"A: If there was a specification and we were supplying, our project tracking team would have known about it because they would have been able to advise the branches of the level of price support, which is the primary reason for the contact."
(1) That all the discussions about specification and use of the laminate sheets (in particular when fabricated into bonded panels) occurred between Polyrey's specification representative and Primark's architect or other appointed representative; and that IDS took no part in such discussions; and that Hillmead did not give IDS any information at any time about the "specific locations within Primark premises" in which the bonded panels were to be used.
(2) Instead, what IDS did know was:
(a) what the product was, which had been previously agreed between Polyrey's specification representative and Primark's architect or other appointed representative; and
(b) the likely quantity of the product that would be required by the end user, here Primark; and
(c) what the price of the product was, which had been agreed between Polyrey and Primark (probably shortly after the initial discussions between Polyrey's specification representative and Primark's architect or other appointed representative).
(3) A further matter which IDS knew about was the level of price support, which was a matter discussed and agreed directly between IDS and Polyrey; this related to the difference in price of the product between that which IDS would normally be able to charge its customers, and the price which Polyrey had agreed with the end user would apply to sales of the product in this instance.
(1) Following Hillmead placing an order, IDS delivered sheets of laminate to Hillmead's premises.
(2) Those sheets of laminate were covered with a thin transparent film which Darren Selman agreed was in the nature of, but rather stickier than, cling-film: see his cross-examination: transcript 1/113/10 to 1/114/21; and Exhibit 3.
(3) Those sheets of laminate were delivered in stacks, and placed on pallets: see paragraph 13 of Darren Selman's first witness statement (page C/4).
(4) Until June 2008, i.e. after some of the bonded panels had been rejected, Hillmead did not carry out any inspection of laminate sheets delivered to its premises: see paragraph 3 of Darren Selman's third witness statement (page C/146) and paragraph 8 of David Bowers third witness statement (page D/5).
(5) Hillmead then sent the laminate sheets onward to fabricators (primarily Arnold Laver) to be used in the fabrication process to manufacture bonded panels.
(6) The fabricators then delivered the bonded panels back to Hillmead. The top surface of such bonded panels comprised the laminate sheets, still covered by the same transparent film.
(7) Hillmead did not carry out any inspection of the bonded panels upon their delivery back to Hillmead's premises: see Darren Selman's cross-examination: transcript 1/123/6 to 1/126/9.
(8) Hillmead then delivered the bonded panels to the various Primark locations as directed by Railston Design.
(9) Upon their arrival at the various Primark locations, the bonded panels were not inspected by Primark's architects and other engaged professionals, or by Primark's in-house project manager.
(10) Instead, the bonded panels were then installed at the various Primark locations. It was only after several days after such installation (initially at Ealing) that someone on behalf of Primark complained about the appearance of some of the bonded panels: see paragraph 5 of the witness statement of the late Mark Shepherd of Railston Design (page C/158).
(11) Only a proportion of the bonded panels were rejected: 246 out of a total of 392. The fact that some bonded panels were rejected, but others were not, was a matter that caused a deal of confusion for Hillmead in its subsequent investigations.
E: Did IDS' standard terms and conditions (whether collectively or individually) satisfy the statutory test of reasonableness?
(1) clause 5.8, which provides:
"The customer is under a duty wherever possible to inspect the goods on delivery or collection failing which the carrier's note or such other note as appropriate shall be marked 'not examined'."
(2) clause 6, which provides:
"If the terms of this clause are not complied with, the company shall be under no liability for any shortages, goods damaged in transit or visual defects either in quality and/or written description given in accordance with clause 8 (hereinafter referred to as "visual defects") that would be apparent on careful inspection and, in any event, will be under no liability unless a written complaint is delivered to the company within 3 working days of delivery or collection detailing the alleged damage, shortage or visual defect."
(3) clause 6.1, which provides:
"In all cases where damage, shortages or visual defects are complained of by the customer the company shall be under no liability in respect thereof unless a reasonable opportunity to inspect the consignment in which the goods complained of are contained ... is provided to the company before any use is made of the goods or any alterations or modifications are made thereto by the customer."
(4) clause 6.2, which provides:
"Subject to the foregoing the company shall make good any shortages in the goods and where possible collect the goods damaged in transit or with visual defects and replace the same as soon as it is reasonably able to do so but otherwise shall be under no liability whatsoever or howsoever arising for such shortage, damage or visual defect."
(5) clause 8.9, which provides:
"Save as set out in the foregoing sub-clauses no other terms, whether conditions warranties or innominate terms, express or implied, statutory or otherwise shall form part of this contract (except where the customer deals as a consumer with in section 12 of the Unfair Contract Terms Act 1977 ...)."
(6) clause 8.10, which provides:
"The company shall not be liable for any loss of profit, loss of business, loss of goodwill, loss of savings, increased costs, claims by third parties, punitive damages, indirect loss or consequential loss whatsoever and howsoever caused ... suffered by the customer or any third party in relation to this contract ..."
(7) clause 8.11, which provides:
"Except for death or personal injury directly attributable to the negligence of the company or in the case of fraudulent misrepresentation in no circumstances whatsoever shall the company's liability (in contract, tort or otherwise) to the customer arising under, out of or in connection with this contract or the goods supplied hereunder exceed the invoice price of the particular goods concerned."
(1) whether it is reasonable to exclude implied terms as to satisfactory quality and/or fitness for purpose, as provided for in clause 8.9;
(2) whether it is reasonable to exclude any liability on the part of the seller if the buyer does not inspect the goods on delivery and/or report complaints of damage, shortage or visual defects so as to provide the seller with a reasonable opportunity to inspect the goods before any use is made of them; this is the combined effect of clauses 5. 8 and 6.1;
(3) whether it is reasonable to confine any remedy to replacement of the goods, alternatively to limit financial liability to the invoice price of the goods, as provided for in clauses 6.2 and 8.11;
(4) whether it is reasonable to exclude any liability for consequential loss etc, as provided for in clause 8.10.
(1) The strength of the parties' bargaining positions.
IDS submit that the parties were of equal bargaining strength. However, in paragraph 39 of his written submissions Mr Cutting points to the contrast in the amounts of the parties' respective turnovers: that for IDS being of £111 million in 2012 (page B/42), whereas that for Hillmead being £2 million. As regards negotiation, in paragraph 12 of his witness statement, Paul Davies (the in-house solicitor employed by IDS' parent company) stated that "... it is simply not practical to allow the terms to be individually negotiated every time an order is placed." (page B/45); although in his cross-examination he stated that "... we do accept some negotiation" (transcript: 5/151/4-8). There was however no evidence of there having been any attempt to negotiate the terms and conditions in this particular case, or of the nature of the alteration to its terms and conditions which IDS had agreed on other occasions. I generally accept Mr Cutting's submissions on this matter, and find that IDS was in a significantly stronger bargaining position then was Hillmead.
(2) Inducement.
I do not regard the provision of credit facilities as being an inducement to agree IDS' terms and conditions. Absent negotiation, IDS' terms and conditions would have been in place irrespective of whether IDS afforded its customer credit facilities. This point is thus neutral on this issue.
(3) Knowledge of the terms and conditions.
In my judgement the fact that Mr Bowers signed a declaration stating that he had read IDS' terms and conditions is decisive of this issue, and accordingly I find that Hillmead either knew of IDS' terms and conditions, or is estopped from denying that it did.
(4) Whether it was practicable for the buyer to comply with a relevant term.
This is of particular relevance to clauses 5.8 and 6.1 dealing with inspection, and notification of damage, shortage or visual defects. In my judgement it was practicable for Hillmead to inspect the laminate sheets on a sample basis.
(5) Whether goods were manufactured to a special order.
There was no evidence that the laminate sheets had been manufactured to a special order.
"Seller warrants to buyer that at delivery time and for the warranty periods set forth below, the aircraft shall be free from (i) defects in material, (ii) defects in manufacture and (iii) defects in design, having regard to the state-of-the-art as at the time of design of the aircraft ..."
No such alternative or other warranty as to quality or fitness for purpose was inserted in IDS' terms and conditions in place of the terms as to quality and fitness for purpose implied by the 1979 Act. That point was reinforced when Cooke J came to consider the test of reasonableness in the section of his judgement beginning at paragraph 123. He held in paragraph 133:
"In truth therefore, the real issue of reasonableness ... depends upon a comparison of the Sale of Goods Act obligations under sections 13 and 14, as compared with article 4 and the warranty in appendix A. ... In circumstances where the parties were of equal bargaining power, where the excluding terms of article 4 are set out in capitals and where the terms of the warranty were specifically drawn to the purchaser's lawyer's attention, it is hard to see why the court should conclude that the terms are unreasonable ..."
Cooke J also held in paragraph 127:
"The reasonableness of this term has to be considered in the light of the APA as a whole, including its provision for pre-delivery inspection. ... Purchasers of aircraft such as this almost invariably engage technical experts to examine the documentary records of the manufacturer and the aircraft itself ... the purchaser therefore has ... the opportunity to examine the defects and discrepancies ..."
(a) there, but not here, an alternative warranty was expressly included within the relevant terms and conditions;
(b) there, but not here, the parties were of equal bargaining power; and
(c) there, but not here, the buyer had an express contractual right to inspect the goods pre-delivery.
"(a) the fact that the rig was specially ordered;
(b) the fact that the specification contained precise details of the technical standards which the rig was required to meet; and
(c) the fact that EML made known to BSP the purpose for which they were ordering the rig."
The circumstances of Edmund Murray were thus also materially different to those in the present case.
(a) where the exclusion of statutory implied terms was not replaced by any other term or warranty as to quality or fitness for purpose within the terms and conditions sought to be relied on;
(b) where the parties were not of equal bargaining power;
(c) where goods were not manufactured to the special order of the buyer;
(d) where there was no agreed specification of the goods (save a general understanding that they would comply with the relevant BS, as to which see below);
(e) where Hillmead did not make known to IDS the purposes for which the goods were intended as alleged by Hillmead (as to which see below);
such as to lead to the conclusion that the terms of clause 8.9 of IDS' terms and conditions do not satisfy the statutory test of reasonableness.
" .. We shall be liable for defects including failure to achieve guaranteed quality standards as provided hereunder:
(a) The customer has to inspect the goods immediately after arrival at the place of destination. Claims on account of deficiencies and defects apparent on inspection can be recognised by us when they are reported to us by letter or fax immediately after arrival of the goods at the place of destination but within two weeks of arrival at the latest. Hidden defects are to be reported to us immediately, but within one week at the latest after being found out. Complaints are excluded after processing or incorporation of goods unless the defect became only recognisable by the processing or the incorporation."
"… there was little evidence as to whether the time limits specified in clause 5 (2) (a) were or were not practicable. I have my doubts on that score so far as hidden defects are concerned, especially in goods which have been processed or incorporated into other goods and sold on. In my judgement a period of one week from the time when the defect is found out (even if this runs only from the moment the purchase is informed of the defect by his sub-buyer) is too short and is unreasonable."
Here, there has been a good deal of evidence as to whether it was possible to inspect the laminate sheets on delivery to Hillmead. Clause 6.1 does not impose a specific time limit for reporting damage, shortages or visual defects (rather than hidden defects, which was the focus of HHJ Havelock-Allan QC's judgement in the passage cited above), so as thereafter to afford IDS the opportunity to inspect.
"Terra manufactured the carbon dioxide at its Severnside, Bristol chemical plant, and the cause of contamination was a leak, which enabled benzene to bypass the reforming section of the plant where the benzene would normally have been removed. Terra supplied Messer, which re-sold to various customers. After some period during which the contamination went undetected, its discovery led to extensive recalling and destruction of finished drinks supplied to wholesalers and others."
The relevant limitation of liability clause 12 provided as follows:
"12.1 Subject to any other limitation or exclusion of liability ... the liability of Messer ... in respect of personal injury or direct physical damage to property (and losses costs and expenses directly arising from such injury or damage), whether through negligence or otherwise, shall be limited to £500,000 in respect of any one incident ...
12.2 Messer ... shall have no liability whatsoever in respect of losses, costs or expenses of a purely financial or economic nature (including, but not limited to, loss of profits, loss of use or other consequential loss), or any other loss or damage not covered in clause 12.1, unless such loss, cost, expense or damage be caused by Messer supplying gas that is not of the purity warranted or by failure to deliver or by late delivery ... in which case Messer's liability shall be limited to the value of the quantity of gas concerned ..."
"Mr Prynne (submits) ... that since no one foresaw other contamination, a clause which does not foresee it or therefore allow any claim in respect of it should be regarded as reasonable. He submits that cause 12.2 does attempt to deal ... with matters which could be foreseen, such as a failure to comply with BS 4105, a failure to do deliver or late delivery. These submissions must be rejected in my judgement for reasons paralleling those which we expressed in the course of our judgement in the Britvic appeal. The fact that no one could have conceived of other contamination by some entirely extraneous elements ... is because all concerned would have assumed that Terrra's manufacturing process (and ... Messer's delivery service) would have been operated efficiently in such a way to make it impossible. Far from justifying an exclusion of responsibility if extraneous contamination occurred, this to my mind demonstrates the unreasonableness of any clause purporting to exempt Messer from liability in respect of such contamination."
26. In the circumstances, the judge's conclusion that clause 12 was unreasonable is unassailable in my judgement. It is unassailable in relation to the very situation which has arisen."
St Albans City v International Computers Ltd [1995] FSR 686, Kingsway Hall Hotel Ltd v Red Sky IT (Hounslow) Ltd [2010] EWHC 965 and Rasbora Ltd v JCL Marine Ltd [1977] 1 Ll Rep 645 are all decisions that essentially turn on their specific facts, and the consequential assessment of whether the relevant terms met the statutory test of reasonableness.
"Thus in ... Watford Electronics ... the judge found as a relevant factor ... that the buyer ... was "aware of the existence of the term, only first learned of its existence towards the end of the pre-contract discussions, attempted unsuccessfully to have it substantially amended, only succeeded in achieving a makeweight amendment and learned from Sanderson (the supplier) that a term excluding liability was standard software industry practice."
He then held at paragraph 23 as follows:
"… in the present case the commercial and contractual background were significantly different. The manufacture of carbon dioxide so as to exclude benzene does not compare with the provision of software (and exercise notoriously liable to give rise to problems). No one would have contemplated that the manufacturing process would allow benzene in, or ... would test the benzene, or indeed the compliance with BS 4105, which Messer anyway warranted. The parties did not discuss and negotiate with regard to the specific provisions of the contract, clauses 11.1 and 11.2 in particular."
The commercial and contractual background in the present case is significantly different to that which obtained in Bacardi Martini and Britvic Soft Drinks. However, the point that Mance LJ went on to make in paragraph 26 of his judgement has a particular resonance to the circumstances of the present case:
"… the judge was entirely justified in rejecting Messer's submission that it was reasonable for it as a supplier (and not a manufacturer) to limit its liability to compliance of the carbon dioxide supplied with BS 4105 ... if one asks whether it was reasonable to limit Messer's liability to compliance with BS 4105, the answer seems to me, therefore, to be that it ought to have been appreciated that compliance with BS 4105 would not, by itself, necessarily mean that the carbon dioxide supplied was suitable for use."
(a) the parties were not of equal bargaining power;
(b) the term was not negotiated;
(c) the term seeks to exclude all liability for consequential loss, rather than seeks to limit such liability;
(d) if the provision with less serious consequences to the buyer (namely the combined effect of clauses 6.2 and 8.11) does not satisfy the statutory test of reasonableness, that is a strong indication that the clause with more serious consequences to the buyer (namely the effect of clause 8.10) also does not satisfy the statutory test of reasonableness; and
(e) as with the analysis of clauses 6.2 and 8.11: it was in the contemplation of the parties that any direct loss to the buyer would be greater than merely the cost of replacing the goods.
F: Satisfactory quality and/or fitness for purpose
"For the purposes 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."
Section 14 (2B) provides:
"For the purposes of this Act, the quality of the goods includes their state and condition and the following (among others) are in appropriate cases aspects of the quality of goods:
(a) fitness for all the purposes for which goods of the kind in question are commonly supplied,
(b) appearance and finish,
(c) freedom from minor defects,
(d) safety, and
(e) durability.
It is immediately apparent that the matters stated in paragraphs (c), (d) and (e) of subsection 2B are not engaged in the circumstances of the present case.
"It was in the contemplation of the parties when the above-mentioned terms (and each of them) were agreed that:
8.1 the goods would only be used in manufacturing laminated panels which would be sold to a specific end-user, Primark, who would require a good quality of surface finish on such panels;"
There is an obvious inconsistency and/or tension in Hillmead's stated case that on the one hand there were implied terms of the relevant contracts, and on the other hand that such terms were "agreed". If by that assertion Hillmead submits that the parties expressly agreed the terms which are alleged in paragraphs 6 and 7 of the defence, then I reject such a submission. Further, although I construe paragraph 8 of the defence as relating primarily to the allegation that there was an implied term of fitness for purpose, it is to be noted that the text of paragraph 8.1 of the defence relates to quality.
"... a contemplation at the time that the contract is entered into that a third party would require a good quality surface finish does not, without establishing more, assist in determining the standard required. Good quality will always be a relative concept and the descriptor simply begs the question of what is meant by 'good quality' in any relevant circumstance."
"According to the English and Scottish Law Commission ... Report on the Sale and Supply of Goods ... this test is an objective one because it turns on what is acceptable to a reasonable person. The goods in question may not be acceptable to the actual buyer, but this will not be sufficient to justify a claim for breach of contract ... This basic principle asks the question: would the reasonable person regard the quality of the goods as meeting an acceptable standard in the circumstances? The question does not, of course, lay down an objectively ascertainable standard of quality, but it is a question which has a meaning, and one which it is possible to answer."
The Report (at paragraphs 3.23 to 3.26) made three points by way of amplification. First, the test moves away from extreme reliance on "fitness for purpose". With this shift of emphasis, the "reasonable person" would not, in general, find the standard of goods to be "satisfactory" if they had minor defects, but this test would permit a lower standard where only a lower standard could be reasonably demanded .... Secondly an objective comparison is required of the state of the goods (including unseen defects at the time of sale) with the standard which a reasonable person would find acceptable. Thirdly, goods meeting that standard will conform to the reasonable buyers' expectations about the quality, rather than the actual buyers' expectations."
" ... It has been said that the provision is "to establish a general standard of quality which goods are required to reach" and that it is "primarily directed towards a substandard goods". There is as yet a modest amount of case law on the application of this new definition although there are numerous cases on 'merchantable quality' in the previous legislation. These are however unlikely to be of direct assistance in interpreting the current definition. The reference to a 'reasonable person' suggests an objective standard, but presumably must take into account the position of the individual buyer and must necessarily presuppose that the reasonable person is fully acquainted with the condition of the goods (including any hidden defects) and would with that knowledge regard them as being a satisfactory standard. In determining the appropriate standard, it will obviously be relevant to take account of any description given of the goods .... The price may also be relevant in that the buyer may reasonably expect the standard of quality that is not grossly out of line with the price that he has paid. But all other relevant circumstances may be taken into account."
"Since decorative laminate surfaces are the ideal and most durable surfaces for your interior fitting projects, we have made HPL, Compact and laminate bonded board available across the breadth of our decorative offer.
This combination of products is further enriched by the availability of a selection of decors in HPL, melamine faced chipboard, MDF and plasterboard (new).
It is therefore possible for you to find the most economic and technically suitable solution for your projects."
"23. The general use of the product is in shop fittings. It is used for decorative cabinetry, displays and wall counters. It is also used in the transport industry on buses, ships and aeroplanes as well as in what are referred to as 'clean areas' such as kitchens and hospitals ... It is a highly sought after product because of its cost, availability and universal use. The product can also be easily fabricated for specific uses.
24. The level of gloss in this type of product is not specified and there is no standard way of measuring it. This is largely because the appearance of gloss is dependent on the product's use and application. As this product is a paper resin based laminate with a depth of only 0.7mm, there is a limit to the depth of gloss effect that can be achieved. The way in which the level of gloss is created is through the surface of the press used during production. Generally, the greater depth of gloss, the greater the price. For example, some manufacturers create mirrored glass laminates; however these are significantly more expensive than the product."
In his cross-examination Stephen Rickers stated (transcript 5/61/9-11):
"With any laminate of that thickness it is a low cost product with a certain level of gloss relating to that cost."
I generally accept his evidence, and do not find his reference to a thickness of 0.7mm (rather than to 0.8mm) to be material.
(1) the quality of the laminate sheets is to be assessed objectively; it is not to be a subjective assessment by Hillmead as buyer, or indeed by its customers further down its contractual chain;
(2) it is an assessment which is to take into account all relevant circumstances, including the way in which Polyrey products were described in the guide, the price of the product, and the general use of the product;
(3) subsection (2B) (a) is not of direct application to the facts of this case, because "goods of the kind in question" are not "commonly supplied"; the laminate sheets in question were supplied for a specific commercial application; and
(4) subsection (2B) (b) is of direct application to the facts of this case; I will consider matters relating to appearance and finish of the laminate sheets below.
"It is denied ... that IDS was informed that the product was to be used in specific locations within Primark stores and averred that IDS was not given any information about how the product was to be used within Primark stores."
Then in paragraph 22.1 of its reply IDS stated similarly that:
"IDS had no knowledge of the nature and quality of surface required by Primark. IDS was aware that the product had been specified for use by Primark and/or its agents/contractors and that negotiated rates applied to the supply of the product the ultimate use in Primark stores."
G: Was IDS in breach of contract? Analysis of the expert opinion evidence.
(1) the laminate sheets "exhibited a marked inconsistency of appearance and finish": see the first sentence in paragraph 9.1;
(2) either in amplification of the allegation of inconsistency of appearance and finish, or as an independent point, the laminate sheets "had a mottled effect and ripples were clearly evident": see the second sentence in paragraph 9.1, which goes on to allege that "the usual appearance and finish of high-gloss laminate is uniform, smooth, clear and reflective"; and
(3) the surface finish of (the laminate sheets) did not conform to BS EN 438 and/or BS 4965": see paragraph 9.2. It is now common ground and/or accepted by Hillmead that BS 4965 is not engaged in these proceedings.
"… it is suggested that the principal expert evidence issues which need to be resolved ... are:
1. What is the inherent/usual condition of the product? This issue breaks down to whether the product has a characteristic mottled/orange peel effect and/or whether it is usually "uniform smooth clear and reflective"?
2. Did the surface of some/any of the laminate supplied by IDS exhibit inconsistency of appearance and finish beyond any inherent mottled/original effect, and if so, did it do so to the degree that would render it is not a satisfactory quality?
3. What are the surface finish requirements of BS 438?
4. Were those requirements breached in respect of any of the laminate supplied by IDS?
While there are a number of other points to be considered, I accept the submission that these are the essential issues on the topic of breach which call for decision.
On 19 January 2009 Darren Selman (Hillmead's sales office manager) sent a sheet of laminate (batch number 4081600379) to FIRA[5] to be tested for compliance with BS 438: see paragraph 27 of Darren Selman's witness statement (page C/7). Ms Susan Calver of FIRA carried out that test, and her report of the outcome of that test is set out in her first report dated 19 March 2009, which she exhibits to her main report dated 4 July 2013 (page G/23).
In paragraph 3.2.4.1 of his report Mr Hitchcock stated as regards his sample 1A (Exhibit 1):
"The mottling (orange peel) pattern which is a characteristic of the Polyrey G028 laminate was slightly more prominent in places of the bonded panel but not all over when being compared with the loose laminate A4 sample."
He went on to state:
"… the change in the effect to the mottle pattern is being caused by uneven bonding of the laminate to the core material, and that the reflective surface is exaggerating the distortion. This is a common industry fault if bonding of the laminate of the core material is not carried out correctly, for example if the adhesive is unevenly applied and/or the press/roller pressure is too low when pressing the components together to form the finished bonded panel ... this fault is more commonly the case when using a spray applied adhesive ...
He expressed himself in similar terms in his report as regards his samples 2A (exhibit 2) and 3A (Exhibit 6).
"I looked at the surface area over the face of the laminate and the mottle, orange peel ... was consistent across the sheet face. The reflectiveness of the sheet was also uniform across its surface. And I could not see an inconsistency in its appearance."
This part of Mr Hitchcock's evidence thus derived from his examination of the samples which he had taken from three laminate sheets, one which Hillmead regarded as of satisfactory quality, and the other which Hillmead regarded as of unsatisfactory quality, and the third being one taken from his own stock.
"The Polyrey ... binder … clearly shows the G028 laminate with a mottle (orange peel) pattern characteristic, this binder is the first port of call when selecting a laminate for use by clients, designers, specifiers and manufacturers."
In his evidence in chief Mr Hitchcock corrected the reference to the small sample of grey (gris flannelle) G028 laminate shown in the binder in FA SOFT finish, to the small sample shown immediately below on the same page in the binder of black (noir) N005 laminate in BRIHG finish, which is a gloss or shiny finish. He stated (transcript 7/10/3-8):
"A: It was the effect of the N005, which was the black, which has the gloss finish, which I was stating had got mottle finish and was visible, more with the BRIHG finish.
Q: With the gloss finish?
A: The gloss finish, yes."
Mr Hitchcock's evidence was thus that he also discerned a mottle effect in the small sample of N005 laminate in BRIHG finish shown in the Polyrey binder.
"The image below shows how the usual finish of G028 is uniform, smooth clear and reflective."
The image below is a photograph which Ms Calver took of a large sheet of un-bonded laminate apparently laid horizontally on a table or workbench at Hillmead's premises. A poor photo-copy of that photograph is at page G/15, and a much clearer printed copy is at page G/15A. In her cross-examination she accepted that the reflected lines shown in the surface of this sheet of laminate were wiggly and distorted, but she stated that this was because the laminate sheet was unsupported. She stated (transcript 6/110/19):
"Q: Is it not correct ... that actually if you look at the photograph ... what you see is undoubtedly a shiny surface but one that has obvious distortions of the images which it reflects in its shiny surface ...
A: These materials are extremely difficult to photograph.
…
She continued a little later (transcript 6/112/1-11):
"Q … if you look for instance at the wall in the background has straight lines coming down it. When you see the reflection of those lines in the gloss finish of the panel none of them are straight, they are all wiggly and distorted.
A: I understand what you mean. It is because it is a sheet laminate that we are looking at and not a bonded panel. It is not self-supporting and would need to be bonded for it to lay flat."
…
She further stated (transcript 6/120/4- 6/121/6):
"A: The un-bonded laminate's surface appearance certainly appears to vary and I have ... samples here that show that it is not perfect but is a reasonably good, smooth, reflective surface. And other samples that show that there are clear undulations, orange peel effect is perhaps a common expression for it, in the surface ...
"Q: … could I ask you … to clarify, even within the example that you have described as having a reasonably good surface, a reasonably good appearance, that mottling effect, the orange peel effect, ... can still be seen under certain lighting conditions and in a certain plane? Would you accept that?
A: A good sample will still show some degree of surface distortion."
She was then asked about the small samples in the Polyrey binder, and stated (transcript 6/122/10 - 6/124/19):
"Q … there is an N005 gloss finish black colour there ... if you could look at that … in a vertical plane ... would you accept that you can see a mottling, an inconsistency of finish or appearance?
…
A: There is a small amount of distortion on the surface of both that one and the blue one that is next door.
Q: And that is consistent with the mottling effect which you have accepted in your answer is visible even in good quality samples?
….
A: …yes."
In his report Mr Hitchcock considered the samples of unbonded laminate sheet which he had cut from the half sheets selected by Darren Selman as being "good" and "bad", and also the sample of un-bonded laminate sheet which he had cut from a separate sheet he had in stock. His opinion was that both sample 1A (exhibit 1) and sample 2A (exhibit 2) "... did not exhibit a marked inconsistency of appearance and finish" (page G/2). He also compared those two samples with the third sample taken from the stock sheet, and stated:
" I could not find any difference in colour, texture or reflective finish to the main surface of either sheet when comparing one against the other, and as an added check compared these against a sheet of same product ... which we had in stock ... and once again there was no difference."
"Without special lighting or enhanced imagery it's easy to see a marked inconsistency of appearance and finish - the dimples and undulations visible in the surface are random, uneven and inconsistent.
The light does not reflect back to the eye in a way that shows a smooth reflective surface.
Similar effects are sometimes seen on vehicle paint and are commonly referred to as 'orange peel'."
"Neither the 'good' or 'bad' samples of the laminate exhibited any form of defect or damages listed above, within the decorative surfaces."
I prefer the evidence of Mr Hitchcock to that of Ms Calver on both these issues. I do so for the following reasons:
(1) Mr Hitchcock has the more relevant experience. He has worked for many years in a whole range of positions in businesses involved in the fields of joinery and the fabrication of laminates, and for nine years until 31 October 2013 when he became self-employed he was managing director of Key Joinery in Derby, whose business was in those fields: see paragraph 1.2 of his report. He thus has direct work experience, gained over many years, of the fabrication of bonded panels using laminate sheets. In contrast, Ms Calver's experience is that of someone working in a testing house (albeit in a well-respected and well-reputed testing house). But she has no direct knowledge or experience of the fabrication of un-bonded laminate sheets, or of bonded panels using such laminate sheets.
(2) Mr Hitchcock's evidence, in particular as set out in his report, was based on his assessment of samples of the laminate sheet in question, and of bonded panels which he made using samples of such laminate sheets. In contrast, Ms Calver's evidence was based on her assessment of the 6 bonded panels which Hillmead made available for her to inspect, and of the large sheet of un-bonded laminate of unknown provenance (no batch number for this laminate sheet being recorded) which had been laid horizontally on a table or workbench at Hillmead's premises.
(3) It was striking that in her assessment in section 3 of her report of whether the laminate sheets as supplied had "a marked inconsistency of appearance and finish", Ms Calver only referred to bonded panels; she carried out no assessment of un-bonded laminate sheets in this section of her report. The batch number captured on internal page 4 of her report (page G/11) was of the sheet of laminate which Hillmead had provided to Ms Calver for inspection: see the first sentence of section 2 of her report (and transcript 6/44/5 - 6/48/18). Although that sheet had been made available to Ms Calver for inspection, she made no further reference to it in her report. Instead it was only in the joint statement (pages G/159-160) that she expressed such an opinion. The fact that she did not consider this issue in her report (a) diminishes her opinion in this regard; and (b) suggests some inexperience in preparing reports for use in litigation, certainly as regards topics which go beyond testing materials at FIRA.
(4) In the course of the trial I had the opportunity to look at Mr Hitchcock's sample 1A (exhibit 1), sample 2A (exhibit 2), and sample 3A (exhibit 6). To my eye it was difficult, if not impossible, to discern a "marked inconsistency of appearance and finish" between those samples. Ms Calver's evidence did not demonstrate how or where such inconsistencies were apparent in those samples.
(5) In the course of the trial I also had the opportunity to look at the small samples of laminate in the Papago range shown in Primark's binder. To my eye it is indeed possible to discern the mottled effect in both the small sample of Gris Flanelle laminate in the FA SOFT finish, and of Noir laminate in the BRIHG finish.
(1) the inherent or usual condition of G028 laminate sheet in BRIHG finish is that it has a mottled effect; in that regard I reject the allegation that "ripples were evident" in the laminate sheets supplied to Hillmead; and
(2) the laminate sheet as supplied did not exhibit a marked inconsistency of appearance and finish, either at all, or to the extent that it was not of satisfactory quality.
(1) Mr Hitchcock's evidence that laminate sheet of a thickness of 0.8 mm is more likely to "telegraph" any underlying inconsistency in the substrate to the surface, than would a laminate sheet of a thicker size. In his cross-examination he was asked about the observation made by Ken Dobbin of the BLFA in the short report (page H/45/117) commissioned by Mark Raistrick of Arnold Laver[6], in which Ken Dobbin observed in the final paragraph that "some degree of telegraphing is inevitable when using this thickness (0.7) laminate ..."; in his cross-examination Mr Hitchcock stated (transcript 7/113/24 - 7/114/25):
"Q: … is this statement ... consistent or inconsistent with the comments that you make in your report about the appearance of bonded panels?
A: It's consistent ... because it is a post-forming grade laminate that has been used which is more flexible than the standard grade laminate, that because it is more flexible the telegraphing of the surface below will telegraph through to the surface of the laminate when it is bonded to a board.
…
A: … if there is an uneven surface below the laminate, when you bond the laminate to it, if there is any undulation or shape form in that, it will transmit through or telegraph through and show on the face of the laminate. Because it's a post-forming grade laminate, it's more flexible."
I accept that evidence.
(2) The evidence that the way adhesive is applied in the course of fabrication of the bonded panels would have an effect on the upper surface of the bonded panel (comprising the laminate sheet) after fabrication: see paragraph 3.2.4.1 of Mr Hitchcock's report. In their main joint statement Ms Calver accepted that such a factor could exacerbate deficiencies in appearance (page G/212).
It is important to note that Hillmead does not allege compliance with BS 438 as an express (or indeed an implied) term of the contract of sale between it and IDS. Instead Hillmead alleges that in breach of the implied term as a satisfactory quality "... the surface finish of the (laminate sheets) did not conform to BS EN 438 ...": see paragraph 9.2 of the defence.
"EN 438-2 describes the methods of test that shall be used to determine the performance of HPL products in their various internal and external application fields, e.g. construction, transport, furniture, flooring etc. The test methods have been specially developed for testing HPL.
It should be noted that not all test methods apply to all types of HPL."
HPL is the acronym for high-pressure decorative laminates: see the cover sheet for part 1. The text in section 4.1 continues below:
"…EN 438-3 applies to laminates less than 2 mm thick intended for bonding to supporting substrates to produce HPL composite panels …"
"4 Assessment of appearance
12 Resistance to immersion in boiling water
14 Resistance to water vapour
15 Resistance to wet conditions (Exterior grade laminates)
16 Resistance to dry heat"
"4.1 Principle
Laminates shall be inspected the surface appearance under standardised conditions of lighting and viewing.
4.2 Apparatus
4.2.1 Horizontal inspection table, of height approximately 700 mm …
…
4.4 Procedure
Place the laminate, decorative face uppermost, on the inspection table. Wipe it free from any loose contamination with a soft cloth, using a suitable cleaning agent if necessary. Inspect it from the distance required by the relevant part of EN 438 for defects such as smudges, smears, fingerprints, scratches, foreign particles, damage or any other form of blemish evident within the decorative surface.
The inspector shall use normal vision, corrected if necessary.
"High-pressure decorative laminates are characterised by their qualities, durability and a functional performance. HPL sheets are available in a wide variety of colours, patterns and surface finishes; they are resistant to wear, scratching, impact, moisture, heat and staining; and possess good hygienic and anti-static properties, being easy to clean and maintain."
Section 4 describes three different types of material:
"Type S - Standard grade decorative laminates
Type P - Postformable decorative laminates; similar to type S, but can also be formed at elevated temperature
Type F - Decorative laminates with improved fire retardance …"
Section 5.3 provides in alphabetical classification system. The first letter is either H for horizontal grade, or V for vertical grade; the second letter is either G for general purpose or D for heavy duty; the third letter is S for standard grade, or P for postformable grade, or F for flame-retardant grade.
Table 3 then "compares the alternative classification systems and shows how different HPL products relate to some typical applications". The first column is headed 'Performance category' and is set out in three sections, the first dealing with very high resistance to surface work, impact and scratching; the second dealing with high resistance to those matters, and the third to medium resistance to those matters. HGP laminate is shown in the fourth column as coming in the second of those sections; the fifth column gives as an example of its typical application:
"Kitchen and office working surfaces, restaurant and hotel tables, doors and wall coverings in public areas, interior walls of public transport vehicles"
6.1 Compliance
Laminates classified in Table 3 shall meet all appropriate requirements specified in Clauses 6.2, 6.3 6.4[7]. This applies to both full-size sheets and cut-to-size panels.
6.2 Inspection requirements
6.2.1 General
Inspection shall be carried out in accordance with EN 438-2, Test Method 4 at a distance of 1,5m
…
6.2.3 Surface finish
When inspected at different viewing angles, there shall be no significant difference between the corresponding surface-finish reference sample held by the supplier and the specimen under test.
NOTE where colour and surface finish are critical, it is recommended that sheets be checked for colour and surface finish compatibility before fabrication or installation
…
6.2.5 Visual inspection
…
It shall be noted that only a small percentage of sheets in a batch (the level to be agreed with the customer) shall contain defects of the minimal acceptable level.
6.2.5.1 Surface quality
The following surface defects are permissible:
Dirt, spots and similar surface defects
The admissible size of such defects is based on a maximum contamination area equivalent to 1,0 mm2/m2 of laminate and is proportional to the sheet size under inspection.
6.4 Test requirements
6.4.1 General requirements
General requirements specified in Table 5"
(a) for resistance to immersion in boiling water (test 12): it is ironical that the sample from the sheet of laminate which Hillmead had selected as 'bad' passed with a performance level of 3, while the sample from the sheet of laminate which Hillmead had selected as 'good' failed with a performance level of 2;
(b) for resistance to water vapour (test 14): both 'good' and 'bad' samples passed;
(c) for resistance to dry heat (test 16): both 'good' and 'bad' samples passed.
That is a total of 5 passes out of 6 samples.
As regards the assessment of appearance (test 4) the author of the report Leslie Komatsu stated:
"Neither the 'good' or 'bad' samples of the laminate exhibited any form of defect or damage as listed above, within the decorative surfaces."
Such a finding is consistent with that made by FIRA back in 2009.
" … failure to meet the requirements (of BS 438) if used as an HGP laminate indicates that the laminate may give rise to problems in use and may fail to perform and behave as expected." (My underlining and emphasis).
However, Ms Calver did not carry out any analysis of the laminate sheets to ascertain whether or not any failure to comply with tests 12, 14, 16 and/or EN 12721 had in fact given rise to problems in use and/or of failure in performance or behaviour, and accordingly I do not find her assertion of such a potential consequence has been established on the evidence.
Given the expert evidence does not establish that IDS was in breach of the implied term to satisfactory quality, it is necessary to have regard to some of the other evidence in the case. Hillmead's case is that there were problems with the surface finish of the bonded panels, which Darren Selman described as being "inconsistent", having "a mottled effect", and that "ripples were evident across the surface of the panels" (see paragraph 15 of his witness statement at page C/5) when Arnold Laver & co Ltd fabricated bonded panels, either by itself or by putting such work out to its subcontractors J A Rose Ltd and Premier Post Forming Panels Ltd. As a result Hillmead sent other laminate sheets to another fabricator which it had used in the past, namely Saxon Laminates; however Saxon also encountered problems: see paragraph 17 of Darren Selman's witness statement (page C/6).
" … the bonded panel ... using the above mentioned laminate ... shows evidence of slight telegraphing or undulation to the surface, which could be an attribution of standing chatter from (sic) the substrate surface, adhesive coverage, and above all the thickness of the laminate. The thickness of the laminate will, of course, have a pronounced effect on the severity or otherwise (of) (t)elegraphing as thicker laminates are more able to bridge the irregularities of the substrate." (My additions/alterations to the text as it appears on the face of the document.)
However, it appears that neither expert was referred to this document before they prepared their respective reports, and neither considered this issue in their reports. Ms Calver was asked about the document in the course of her cross-examination (transcript 6/90/16 - 6/93/11); she did not express any detailed opinion about the document and/or the views expressed by Ken Dobbin on this issue. Mr Hitchcock was also asked about the document in the course of his cross-examination (transcript 7/31/5 - 7/35/6), and although he did not express any detailed opinion about the document in that part of his evidence, he was asked about the general issue of telegraphing in the course of his re-examination (transcript 7/113/24 -- 7/114/25) to which I have referred to in paragraph 87 above. As already indicated, I accept Mr Hitchcock's evidence on the issue of telegraphing.
"The laminate was bonded into bonded ... panels by 5 different fabricators all using different fabrication methods and materials. It is inconceivable that the cause of the Defect is the fabrication or bonding process particularly when the same fabricators fabricated darker colour laminated bonded panels for Hillmead with no problems even though they were fitted to feature walls."
In paragraph 20 of his opening written submissions, Mr Sheehan made the general submission that:
"IDS supplied 1,236 sheets of the product to 24 other customers between 5 June 2007 and 18 December 2008, but only Hillmead has made a complaint about the quality of the product will supplied ... even though other customers are likely to have been supplied with parts of the same batches of the product that were supplied to IDS."
Reference to such general points only serves to indicate the necessity for direct evidence on the cause of the matters complained of by Hillmead, whether in the form of direct evidence from the fabricators and/or in the form of opinion evidence from experts. In my judgement the evidence which Hillmead adduced at trial was insufficient to enable the court to draw the inferences and/or conclusions contended for which are implicit in general submissions of this nature.
I thus conclude that Hillmead has failed to prove the breaches of contract alleged in paragraphs 9.1, 9.2 9.3 of the defence.
H: Causation of loss
(a) the issue of whether Hillmead could and/or should have inspected the laminate sheets before sending them on the fabrication and bonded panels; and
(b) the issue of whether Hillmead could and/or should have ensured that a control or approved sample was made available, so as to provide a touchstone or reference point for comparison purposes.
I: The measure of Hillmead's loss and damage
The first point is that Hillmead accepts that item 9 in schedule 1 is not recoverable, so the sum claimed for this item reduces to £13,019.27. The second point is that Hillmead accepts that only 246 of the 392 bonded panels were rejected by Railston Design: see the evidence of Darren Selman in cross-examination (transcript 1/172/16-19). That is 62.75% of the total. I would therefore have allowed £8,169.59 in respect of this item.
"…Ms Calver's evidence suggested that used in other locations the rejected bonded panels may have been acceptable. In the circumstances at least some of the rejected panels must have continued to have value and a further discount should be made accordingly."
However, the evidence did not indicate the type (if any) of alternative use to which the bonded panels could have been put, and accordingly I would not have reduced the above figure for this reason.
The first point is that Mr Bowers does not deal with this item in his first witness statement. The second point is that while Darren Selman stated in paragraph 21 of his first witness statement (page C/6) that:
"I attach at pages 10-43 of exhibit DS1 a copy of the invoices and the spreadsheet detailing the additional costs and expenses that Hillmead incurred as a consequence of the rejection of the panels",
none of those pages in that exhibit relate to this item.
These are claims for alleged additional costs incurred by Hillmead in delivering replacement laminate sheets to Arnold Laver, and then of replacement bonded panels to 3 different sites. The evidence as regards these items was as follows.
While Mr Bowers accepted in cross-examination that Hillmead could no longer produce an invoice to substantiate this item, he stated that Hillmead had had such an invoice (transcript 3/193/21-25). This item was also claimed in the same sum in the initial calculation of Hillmead's loss which Darren Selman carried out, dated 7 May 2009, and which he produced in exhibit DS1 to his witness statement (page C/20). I accept Mr Bowers' evidence in this regard, and would have awarded £630.59 for item 3.
Mr Bowers stated that the position was the same for item 4 as item 3. A like sum was also identified in the initial calculation of Hillmead's loss. I again accept Mr Bowers' evidence on this point, and would have awarded £197.06 for item 4.
Mr Sheehan stated that he would deal with this item in closing submission, rather than in cross-examination (transcript 3/194/19-21). In paragraph 165 of his closing written submissions Mr Sheehan identified two invoices which Darren Selman produced in support of this item. They in fact total £250.55, which is the sum originally claimed for van hire to Galway in the initial calculation of Hillmead's loss at page C/20. However, those invoices were addressed to MWC Fittings Ltd and "MWC" respectively.
Darren Selman produced one invoice for £1,750 plus VAT which was addressed to Hillmead. £1,750 was the sum claimed in Hillmead's initial calculation of its loss at page C/20. While Mr Bowers referred to another invoice which Hillmead had disclosed as part of some late disclosure in these proceedings, he was not able to identify such an invoice in his oral evidence. The additional invoice which Mr Cutting identified at page J/81/425 was again addressed to MWC Fittings Ltd. As a result, I would have awarded £2,056.25 (i.e. £1,750 plus VAT) to Hillmead in respect of item 6.
These are claims to recover what are described as "Contra charge made by Railston" in respect of refitting bonded panels at three separate sites. The first point which thus arises is that the underlying costs are not Hillmead's, but instead are those of Railston Design.
"The losses that Hillmead are claiming can be separated into three broad categories. Firstly, there are the costs incurred by Hillmead which relate to the cost of delivering and refitting replacement panels, and the cost of handling and storing the rejected panels. Invoices, receipts and other documentary evidence have already been supplied to the Claimant in respect of this element of the claim."
However, in the remainder of that paragraph, and throughout the following text of that witness statement, Mr Bowers only dealt with the second and third categories of loss which he identified. He did not refer further to the alleged cost of refitting bonded panels in his witness statement.
"I attach at pages 10-43 of exhibit 'DS1' a copy of the invoices and the spreadsheet detailing the additional costs and expenses that Hillmead incurred as a consequence of the rejection of the panels"
However he made no further reference to the subject matter of items 7-9 in that witness statement.
"These are Railston's costs and this is where, against this cost, we gave a credit note of £15,000, which is in a separate document."
That credit note is at page I/74/368.
Neither Mr Bowers nor Darren Selman referred to these items in their respective witness statements. In his cross-examination Mr Bowers was referred to the calculation at page I/77/404 dated 6 October 2011. However, he did not identify its author.
"Q: There was no need to keep as many as three pallets worth of rejected panels for three years before you decided to dispose of them, was there?
A: Probably not, in hindsight."
Mr Bowers also accepted, as with item 10, that these were not costs which Hillmead had actually incurred, again in the sense of being specifically calculated.
In paragraph 14 of his first witness statement, at the end of the section headed "diversion of staff time" Mr Bowers stated:
"Throughout 2008, 2009 and 2010 Hillmead staff were engaged initially in dealing with the immediate consequences of the rejection of panels by Railston and rectifying the problems at the various stores. Attention then focused on trying to identify the cause of the problems and seeking to liaise with the claimant to resolve matters. Various Hillmead staff members were engaged throughout this process and attached at pages 15-18 of exhibit DB1 is a schedule detailing the time spent by the various members of staff and how that staff time has been quantified."
The schedule is dated 6 October 2011 and is at page D/22. Mr Bowers stated (transcript 3/111/5-19) that he had done some of the initial calculations in it, and then passed it on to Hillmead's accountants for checking. However, he did not state precisely what calculations he had done, or what revisions to them had been carried out by those accountants. In any event those accountants were not called as witnesses at trial. The schedule lists seven persons, including Mr Bowers, Darren Selman and Ellis Greenhill, all of whom gave evidence at trial. The amount claimed in respect of Darren Selman is stated to be £16,100.
"n.b. Darren is employed by MWC Holdings Ltd who are based in Cirencester. His costs are part of an inter-company charge that is made to Hillmead Joinery (Swindon) Ltd who was based in Swindon."
However, Hillmead did not adduce any evidence about such an inter-company charge, or produce any record of resolutions or other decisions by directors of either company, or accounts to show how such an inter-company charge had been put into effect. In his cross-examination Mr Bowers accepted that Hillmead had not produced any evidence about such an inter-company charge (transcript 3/120/6 - 3/121/8, and again at 3/133/15-21). As a result, there is no, or insufficient, evidence to establish that Hillmead had in fact suffered any loss as a result of the time it asserts Darren Selman, as an employee of MWC Holdings Ltd, spent on its behalf in dealing with these matters.
"Q: … it must have been almost impossible for you to have any kind of accurate recollection about how you spent your time between March 2008 and March 2009 when you were first asked to carry out the task in October 2011. Would you agree?
A: I agree."
Ellis Greenhill gave evidence to like effect (transcript 2/70/15 - 2/71/5). Mr Bowers also agreed in cross-examination that the calculation at page D/22 was not a detailed account of "... who is said to have been diverted at what times and in what ways" (transcript 3/106/22- 3/107/1).
(1) Darren Selman. He gave oral evidence at trial, and did refer to this topic in his witness statement. A calculation of his hourly rate is at page D/23, and a calculation of his time spent at pages D/24-25. He is however employed by MWC Holdings Ltd.
(2) Ellis Greenhill. He gave oral evidence at trial, but did not refer to this topic in his witness statement. No calculation of his hourly rate has been produced by any witness. A calculation of his time spent is at page C/134, but Hillmead adduced no evidence from him on that topic. He also is employed by MWC Holdings Ltd.
(3) Jon Bowers. He did not give any evidence at trial, and made no witness statement. A calculation of his hourly rate is at page C/136, and of his time spent at page C/135, both within the material produced by Darren Selman. However, Hillmead adduced no evidence from him, or from any other witness, about these matters.
(4) Mr Bowers. He did give oral evidence at trial; while he referred to the topic of diversion of staff time generally on his witness statement, he did not in fact give any direct evidence about the amount of time he himself spent dealing with these matters, or as regards his hourly rate. A calculation of his hourly rate is at page C/139, and of his time spent at page C/140, both within the material produced by Darren Selman, rather than by Mr Bowers himself.
(5) Keith Honour. He did not give any evidence at trial, and made no witness statement. There is no calculation of his hourly rate. A calculation of his time spent is at page C/137 within the material produced by Darren Selman. However, Hillmead adduced no evidence from him, or from any other witness, about these matters.
(6) Chris Lewis. He did not give any evidence at trial, and made no witness statement. There is no calculation of his hourly rate. A calculation of his time spent is at page C/138 within the material produced by Darren Selman. However, Hillmead adduced no evidence from him, or from any other witness, about these matters.
(7) Dave Edmonds. He did not give any evidence at trial, and made no witness statement. A calculation of his hourly rate is at page C/132, and a calculation of his time spent is at page C/131 both within the material produced by Darren Selman. However, Hillmead adduced no evidence from him, or from any other witness, about these matters.
(1) There is no direct evidence about any inter-company charge, and thus the claims in respect of time spent by Darren Selman and Ellis Greenhill are not established on this ground alone.
(2) None of Jon Bowers, Keith Honour, Chris Lewis and Dave Edmonds made witness statements, and thus their evidence on these topics was not tested at trial in any way, with the result that the evidence in their respects lacks cogency.
(3) While Ellis Greenhill did make a witness statement, he did not deal with this topic in a witness statement, and thus his position is similar to that of Jon Bowers and the others identified above.
(4) As regards the quality of the evidence about time spent, both Darren Selman and Ellis Greenhill agreed that it was impossible to have an accurate recollection of the time spent dealing with these matters, so the accuracy of the figures claimed in this regard is significantly diminished.
(5) No contemporaneous record of time spent by members of staff dealing with these matters was kept.
" … the extent of the diversion of staff time has to be properly established and, if in that regard evidence which it would have been reasonable for the claimant to adduce is not adduced, he is at risk of a finding that they have not been established"
That warning rings loud in the circumstances of the present case.
This claim derives from the one line calculation in the schedule at page D/22. While the figure may itself be reasonable, no witness gave direct evidence to establish the underlying criteria upon which the figure had been calculated, and accordingly I would not have awarded any sum in respect of item 13.
The evidence in support of these claims is to be found in (a) paragraphs 15 and 16 of Mr Bowers first witness statement; (b) the evidence of Gerard O Sullivan, a director of Railston Design; (c) the calculation at page I/77/406, which was not produced by any witness, setting out the arithmetic of Hillmead's claims, which is then set out in items 14 and 15 of schedule 2; and (d) the "Railston schedule" at page I/75/369 setting out the value of work placed by Railston Design initially with Hillmead and thereafter with "MWC" over the years 2006-2014, which Gerard O Sullivan produced as an exhibit to his second witness statement.
(1) The period claimed. Hillmead advances a claim for loss of business over a six-year period, but adduces no or insufficient evidence to establish how or why damages should be awarded over such a lengthy period of time. The claims are founded on a single premise, namely that the loss of orders from one customer, Railston Design, would have been the sole cause of all loss of business sustained over such a six-year period. However the evidence fails to take into account Hillmead's prospects of obtaining work from alternative sources. There was simply no evidence directed to this issue. While I have little doubt that Hillmead suffered a loss of business in the immediate aftermath of Railston Design's decision not to place any further business with it, Hillmead failed to produce any evidence to show what was - on balance of probabilities - the period during which such loss of business could be shown to have been caused as a direct result of Railston Design's decision.
(2) The inter-relationship between Hillmead and MWC Fittings Ltd. The Railston schedule shows that in the years 2012-2014 Railston Design placed very significant volumes of work with "MWC", which Mr Bowers confirms was MWC Fittings Ltd. That opens an entire enquiry as to whether, and if so in what way, any downturn in business placed with Hillmead should be balanced by an upturn in business placed with MWC Fittings Ltd, each being part of the same corporate group. The point was simply not addressed in the evidence; nor did Hillmead make any or any sufficient analysis of the point. The point could, of course, be a complete answer to the claim in respect of the second three-year period.
(3) The value of each contract with Railston Design. Mr Bowers asserts that this was £70,000: see schedule 2. But he produced no calculation to substantiate this figure, or to show how it had been calculated or derived.
(4) Hillmead's gross profit margin. Again, Mr Bowers asserts that this was 26%: see schedule 2. But again he produced no calculation to substantiate this figure, or to show how it had been calculated or derived. Palpably, Hillmead produced no accounts or any other documents at trial to establish what, if any, was its gross profit margin, achieved over what year or years.
J: Conclusion
(1) IDS' terms and conditions were incorporated in the contracts of sale between it and Hillmead. This deals with issues 1 and 2.
(2) IDS' terms and conditions did not satisfy the statutory test of reasonableness. This deals with issue 5.
(3) There was an implied term as to satisfactory quality in the contracts of sale between IDS and Hillmead; but there was no implied term of fitness for the purpose alleged in the defence. This deals with issues 3 and 4.
(4) IDS was not in breach of such an implied term as to satisfactory quality. This is sufficient to deal with issues 6 to 9.
(5) As a result, Hillmead does not recover any loss and damage as alleged in the defence and counterclaim. Had I found that IDS was in breach of the implied term to satisfactory quality, then I would have awarded the sums identified in section I of this judgement. That deals with issues 18 to 27.
DG
20.03.15
Note 1 See transcript day 5/21/14 [Back] Note 2 Which David Bowers confirmed was MWC Holdings Ltd, although Darren Selman referred to it as "MWC Group": see transcript day 3/35/-14 and day 1/119/14 -19. [Back] Note 3 item 14 being for the 3 years 2009 to 2011, and item 15 being for the subsequent three years from 2012 to 2014 [Back] Note 4 entitled a ‘Reply’, but referred to at trial as a ‘Rejoinder’ to avoid confusion with IDS’ Reply & Defence to counterclaim [Back] Note 5 the Furniture Industry Research Association (see page G/22) [Back] Note 6 apparently dated on or about 5 August 2008 [Back] Note 7 clause 6.2 deals with inspection, 6.3 with dimension, and 6.4 with test requirements and table 5 [Back] Note 8 see internal page 7 [Back] Note 9 British Laminate Fabricators Association [Back] Note 10 see ‘Chitty on Contracts’ 31st edn volume 1 at paragraph 26-062, and the cases cited there [Back]