Scottish Court of Session Decisions

OUTER HOUSE, COURT OF SESSION [2010] CSOH 7
A72/06	OPINION OF LADY CLARK OF CALTON in the cause C R SMITH GLAZIERS (DUNFERMLINE) LIMITED Pursuers; against TOOLCOM SUPPLIES LIMITED Defenders; FIT-LOCK SYSTEMS LIMITED Third Party: ­­­­­­­­­­­­­­­­­________________

Pursuers: Doherty, Q.C., Sandison Q.C.; Morisons LLP

Defenders: Howie, Q.C., Hawkes; Shepherd + Wedderburn LLP

15 January 2010

Procedure
[1] By interlocutor dated 20 December 2007, a preliminary proof was granted and restricted to establishing the terms, express or implied, of the contractual relationship between the pursuer and the defenders as referred to in Articles 1 to 5 of condescendence and the relative answers thereto. A preliminary proof was heard over six days commencing 3 November 2009. There was no appearance or representation on behalf of the third party. Senior counsel for the pursuers and defenders agreed that the preliminary proof should not be limited to Articles 1 to 5 and that in so far as the closed record dealt with matters which were the subject of the preliminary proof, the proof should not be so restricted. I permitted the preliminary proof to proceed on that basis. There were no difficulties during the proof about the scope of the preliminary proof in relation to the matters averred on record.

General background to the dispute
[2] The pursuers carry on business as fabricators, suppliers and installers of windows. The defenders carry on business as general suppliers of tools, parts chemicals and workshop consumables to the pursuers and other businesses. Over a period of years, the defenders supplied to the pursuers items of said type, not items used by the pursuers for assembly or manufacturing purposes. Subsequent events in relation to the supply from June 1996 by the defenders to the pursuers of rivets, used by the pursuers in the assembly or manufacture of windows, are at the heart of the dispute between the parties. I use the term "rivets" in this opinion in a general sense unless I indicate that the term has a more specific meaning.

[3] Senior counsel for both parties accepted that this was not a case pled and based upon a course of dealings between the parties. The case proceeded on the basis that over a period of years from June 1996, the pursuers and defenders concluded multiple individual contracts of sale for rivets. The paperwork lodged as productions which formed the basis of the individual contracts is the subject of some agreement in the joint minute number 30 of process. Within the productions, and referred to in evidence there are descriptions of the rivets which are the subject of the contracts of sale.

The issues in dispute before proof
[4] The main issues which required to be determined after preliminary proof were as follows:

(1) Were the defenders' standard terms incorporated in the individual contracts of sale?

(2) Were the pursuers' standard terms incorporated in the individual contracts of sale?

(3) Did the individual contracts of sale include an implied term imposed by the Sale of Goods Act 1979 (hereinafter referred to as "the 1979 Act"), section 14(2)?

(4) Did the individual contracts of sale include an implied term imposed by the 1979 Act, section 14(3)?

(5) Did the individual contracts of sale include an implied term imposed by the 1979 Act, section 13(1)?

[5] These broad questions provided the focus for the evidence led by the parties. The evidence required to be considered in relation to various chapters of evidence which bore upon the contracts at particular periods. Some additional legal issues arose depending upon the particular findings, and I deal with these issues in paragraphs [41] to [44].

The issues to be determined following submissions
[6] At the end of the evidence, the issues were narrowed as a result of legal concessions made in submissions by senior counsel for both parties. At my request, senior counsel provided outline written submissions and these are to be found in 31 and 32 of process. These outline submissions adequately summarise the oral submissions which were made to me. Certain important concessions were made in oral submissions.

[7] Senior counsel for the pursuers made a concession in relation to the 1979 Act section 14(3). He did not seek to maintain that on the basis of the evidence in the individual contracts of sale before 12/04/2001, there was a term implied that the goods supplied were reasonably fit for the purpose of being used by the pursuers as a means of fixing stainless steel friction stays to the sashes and frames of the pursuers' window units. I understood the date of 12/04/2001 to be his interpretation of the evidence as to when a demonstration had taken place involving Mr Greenwood, representing the defenders, in which employees of the pursuers demonstrated to Mr Greenwood the purpose for which they used the rivets. There was no dispute between the parties that the 1979 Act section 14(3) was implied after the date of said demonstration. On the evidence I was satisfied that this demonstration took place in March/April 2001. The fourth issue was therefore resolved on that basis.

[8] Senior counsel for the pursuers also conceded on the facts proved that there was a date when the pursuers became aware from the defenders that the rivets were not Gesipa rivets but that they were rivets of the same dimensions manufactured by someone other than Gesipa. He submitted that date was 12 November 2002. That restricted the scope of the fifth issue in relation to time.

[9] In relation to the first question as to whether or not the defenders' standard terms were incorporated in the contracts of sale, senior counsel for the defenders accepted that there was insufficient evidential support for the defenders' position. He therefore conceded that the defenders' standard terms were not incorporated in the individual contracts of sale. In relation to the third issue he conceded that, as a matter of law, the implied terms in the 1979 Act section 14(2) were imposed in the individual contract of sale.

[10] I was of the view therefore, towards the conclusion of the case that there were two main issues in dispute between the parties. There was a dispute about the second issue as to whether the pursuers' standard terms were incorporated in the individual contracts of sale. The other main issue outstanding was the fifth issue as to whether individual contracts of sale pre-dating 12 November 2002 were a sale by description, which included a term implied by virtue of section 13(1) of the 1979 Act that the goods supplied corresponded with the description and that part of the description was that the rivets were to be Gesipa rivets, that is rivets of a particular type and dimension manufactured by Gesipa.

The evidence
[11] To the extent that evidence related to issues which by the end of the case were no longer in dispute, I do not dwell upon that evidence. I accept of course that the evidence was available to assist me, for example, in forming views about the witnesses. Much of the evidence about the way in which the contracts were formed between the parties and the administrative arrangements made by the parties in their own areas of business was not contentious. In dealing with the evidence, I have concentrated on the parts of the evidence which underlie the different legal submissions of the parties about the two main issues which were left in dispute.

By the end of submissions, much of the evidence was not in dispute. With the exception of some disputed factual matters which I deal with, counsel did not submit that the witnesses, apart from Mr Greenwood, were not credible or reliable. In these circumstances, I had no difficulty in accepting the factual evidence of the witnesses from both parties in relation to the matters which I record in this Opinion. There was significant dispute about some of Mr Greenwood's evidence.

Evidence led on behalf of the pursuer
[12] Adam Wallace was employed by the pursuers from 1985 to July 1999 and for the last six or seven years was the group purchasing manager. Of the three people employed in the purchasing department, Lesley Murphy and William McAndrew were mainly involved in the purchases of the rivets which were the subject of dispute. Lesley Murphy was the permanent employee but William McAndrew covered for her during maternity leave, and there was also some overlap when they worked together. Mr Wallace gave evidence to the effect that for many years until 1996 the pursuers sourced a supply of parts and materials for assembly and manufacturing purposes from Scope Window Systems. In about May 1996, Scope Window Systems informed the pursuers that they were closing their supply business. In about June 1996, Scope Window Systems provided the pursuers with a contact list of companies which had supplied various parts and items to Scope Window Systems. One of the items supplied to the pursuers by Scope Window Systems was PX0106 stay/reinforcement (peel-back rivet) (6/42-6/43 of process). The reference PX0106 was a reference devised and used by Scope Window Systems. By letter dated 7 June 1996, Scope Window Systems advised the pursuers of their suppliers and provided part number listings showing current suppliers. A list was provided at the time to the pursuers but was not a production. It was similar to the relevant list showing "Gesip" PX0106 (6/43 of process). In about early June the pursuers became aware that "Gesip" was a reference to Gesipa Fasteners Ltd (hereinafter referred to as "Gesipa") and they had the contact details of Gesipa. The pursuers required and wished to source a number of items, including Gesipa rivets which had been supplied to them by Scope Window Systems. Initially the pursuers contacted Gesipa. A representative of Gesipa, Mr Milligan, visited the pursuers' premises in Cowdenbeath. The date was before 11 June 1996. At that meeting, the pursuers were informed that Gesipa would not supply them direct as their order numbers were too small.

[13] Mr Wallace gave an overview of the paperwork which formed the basis of the contracts between the parties. The first order was completed on the pursuers' material requisition form dated 11 June 1996 (6/2 of process). It was a written request for 10,000 PX0106 with a notation that "delivery required a.s.a.p" (as soon as possible). There was no reference on the form to Gesipa, to rivets or to any dimensions. The pursuers' material requisition form is a standard form which has at the bottom the words "SEE OVER FOR TERMS AND CONDITIONS". On the back of the standard form there are noted various terms and conditions numbered 1 to 10.6. Throughout the period during which the parties entered into individual contracts, the pursuers faxed to the defenders only the front page of the material requisition form. The defenders therefore received a front page and a blank back page. They did not receive from the pursuers the back page which referred to terms and conditions of purchase. The background to this first order was contentious and I deal with that in paragraphs [31] to [34].

[14] Thereafter, the pursuers sent material requisition forms 6/4, 6/6, 6/8. 6/10, 6/12, 6/14, 6/16, 6/18 + 6/20 over a period of some months in 1996. All these forms made reference to an order for various quantities of "Gesipa peel-back rivets". No dimensions were specified.

[15] Thereafter no reference to "Gesipa" was written by the pursuers on the form. On 28 October 1996 there was included in the material requisition form for the first time a reference to a code 780394 and a description 4.8 x 16 peel-rivets. Thereafter the material requisition forms were filled in by reference to said code by the pursuers. In response thereto the defenders made deliveries of rivets. Numerous contracts were concluded between the parties. As a result of some problems identified by the pursuers, there was a change in the length of the rivets requested from 16mm to 14mm. This occurred in April 2001. After that date, the pursuers filled in the form using the code 78309 and a description 4-8 x 14mm peel rivets.

[16] Iain Milligan was a self employed professional agent during the period 1982 to 2006 with approximately 85% to 90% of his income related to Gesipa products. He was based in England. In June 1996 Mr Milligan came to Scotland to visit the pursuers at their premises. He spoke to Mr Wallace who wanted to buy Gesipa peel-back rivets, of the type and dimensions previously supplied by Scope Window Systems, directly from Gesipa. Mr Milligan informed Mr Wallace that the proposed orders were too small in volume and that the pursuers would require to use a supplier. I consider his evidence further in paragraphs [31] to [34].

[17] Gerald Pentleton was employed by the defenders during the period 1978 to May 1997 in the sales department. From about 1985 or 1986, he was the defenders' sales manager. Most of his evidence related to issues about the defenders' catalogues and the defenders' conditions of sale which are no longer in dispute.

[18] Walter Foreman was the pursuers' maintenance engineer at the date of the proof and had worked with the pursuers since 1984. He said that he did not have authority to purchase goods himself. He described how the purchasing department and other higher ranking employees would require to be involved if he wished to purchase goods. He was not involved in the purchase of goods used directly in the manufacturing process such as the rivets.

[19] William McAndrew had worked for both the pursuers and the defenders. In particular from November 1995, he worked with Lesley Murphy in the purchasing department of the pursuers. She left on maternity leave in February 1996 and came back in July 1996. He was involved in the period in June 1996 in completing the order forms. Mr McAndrew was made redundant by the pursuers in 1998. From about 1999 to 2000 he worked in the defenders' purchasing department.

[20] Lesley Murphy worked with the pursuers for over 30 years. She said that she was on maternity leave from 15 February 1996 to 1 July 1996 under reference to 6/31 of process. She denied having any conversation with Mr Greenwood about rivets in the period of her maternity leave. She described the pursuers' ordering process. Under reference to 6/22 of process, she explained that this was a change in the ordering process which occurred because the defenders had allocated a product code number namely 780394 when they supplied the pursuers with rivets in response to the orders of the pursuers. Under reference to 6/47 and 6/16 of process, she explained how the defenders' despatch note of 12 September 1996 (6/16 of process) used the product code for the first time. She explained that when she came to prepare 6/22 of process, she used the product code assigned by the defenders in their despatch notes which they had used when despatching rivets in response to the prior specific orders by the pursuers of Gesipa peel-back rivets. She explained that the pursuers later ordered the same rivets as before, ie Gespia peel-back rivets but slightly shorter, 14mm instead of 16mm.

[21] John Bleakley worked for the pursuers over a period of about 28 years but not continuously. In 2006 he was the quality control manager of the pursuers. Under reference to 6/32 of process, dated March 2001, referring to the rejection of rivets supplied as "the wrong type", he explained that he asked Mr Greenwood to come to the pursuers' premises to have a discussion. He arranged for samples to be made up to demonstrate the use of the rivets in the assembly of windows. There was a later meeting involving employees of the pursuers and Mr Greenwood but Mr Bleakley did not attend that meeting. He understood that there was some discussion at that later meeting of changing to a shorter rivet as they thought that was the problem. The dates were not entirely clear but he said this happened in early 2001, by which time problems had been identified after sashes fell out of windows which had been assembled and installed by the pursuers.

[22] Alan Fleming is the supervisor in the fabrication department of the pursuers. In March/April 2001 he was the chargehand in that department. About that time he brought the problems about the rivets to the attention of Mr Bleakley.

[23] Craig Sandland was responsible from about 2001 for the manufacturing process as production manager of the pursuers. He left his employment with the pursuers in about 2005. He spoke to problems identified in the Spring of 2001 when sash windows fell away from the outer frame. This was serious. There were some investigations on site and at the pursuers' premises. He said that there was no discussion with the defenders directly about changing the size of the rivets. Mr Gallagher and he made the decision to change the size. They informed Mr Greenwood. There were five samples produced with different types and sizes of rivets. There was "a gathering"on the shop floor and Mr Greenwood was involved in this and the discussion. This took place between 20 March 2001 and 12 April 2001. Mr Sandland said that the pursuers shared their findings with Mr Greenwood and provided him with an explanation as to why the pursuers were going to change the lengths of the rivets.

[24] Hugh Eadie took over responsibility as the pursuers' purchasing manager in about 1999. He was given further responsibility for production in about September 2001. He continues to be employed by the pursuers and is responsible for commercial sales, purchasing and production. He described Mr Greenwood as his best friend whom he has known since about 1984. Prior to the proof he had checked the pursuers' terms and conditions of purchase from 1996 to 2003 and said they were "the same" as appear on the forms lodged as productions, for example, 6/1 and 6/2 of process. He said that as far as the pursuers were concerned, the pursuers were offering to deal on their terms and conditions. He stated that there was nothing in the defenders' despatch notes to say that they were not accepting the terms and conditions of the pursuers. Mr Eadie stated that he had not been involved in the decision making to change the length of the rivets from 16mm to 14mm. He was aware of the problems about rivets but did not discuss that with Mr Greenwood. He said that the change was made in April 2001 and that it would be a decision of the production people. He described the payment system used by the pursuers as being inconsistent with any term by the defenders for payment "strictly 30 days net". The pursuers always paid under a system by which payment is made at the end of the month following the date of invoice. He described that as "strictly net monthly account". He said that it was not until the Autumn of 2002 that he discovered that the rivets supplied by the defenders were manufactured by Ornett.

Evidence led on behalf of the defenders
[25] Paul Dunning worked for the defenders from 1986 to 2008 and was the defenders' purchasing manager (UK) from 2007. Prior to that he had been the purchasing manager in the defenders' Dunfermline premises since 1991. His responsibility was obtaining stock for the defenders. He was not responsible for supply to clients. He would normally see any representative that came from a manufacturer. Even if he delegated the task, he would know or be told about the visit. He did not see representatives on the basis of "cold calls" at reception. He would not be aware of such "cold calls". His meetings were by appointment only. At the defenders' premises there were three separate entrances where a representative might call. He had no knowledge of any visit by a representative from Gesipa. In 1996 he spent about 90% of his time in the office and always wore a shirt and tie, not casual clothes to work.

[26] Elizabeth Philp carried out work of a similar type with the defenders and their group over some 15 years. She was now called the sales order processing assistant. During the period 1996 to 2005 she dealt with customers not suppliers. There were three people, including her, in the department. Her job was to receive faxed orders which were placed in a tray on her desk. She was responsible for processing the orders through the computer system. A similar job was done by the other two assistants. There was no predetermined system as to who dealt with which order. She would check from the order inter alia the part number and description and the quantity. She would get the price from the computer. The computer would produce a despatch note which went automatically to the stores department. If there was no part number, she said they would have to look up a catalogue to find out the part number. If the order was not standard stock, she would have to go to the purchasing department and they would have to source the part. If a number was given in the order form, she said she would key in the number and that should produce the description of the goods. There was always an identity between the part number in the computer and the part number in the catalogue. Referring to 6/2 of process, she said that the reference PX0106 would have no meaning to her. If she had dealt with 6/2 of process, she would have asked Mr Greenwood about it. He was in direct contact with the customers. She thought that whoever dealt with 6/2 of process, would have to get the information from somewhere to fulfil the order, but she could not say how this had happened. She accepted that during the period covered by the documents in 6/4 to 6/20 of process when the pursuers were ordering Gesipa peel-back rivets and the defenders were delivering goods in response, the defenders allocated a specific product code. In response to a question whether she could see why C R Smith thought they were getting a product code for Gesipa rivets, she responded "yes - she understood that now". She could not recall ever seeing the back page of the pursuers' order form.

[27] Fraser Greenwood was the managing director, then chairman of the defenders. He retired in 2005. Until the early 90's he was the 100% shareholder of the defenders. From about 1996 he was an 84% shareholder. In 2005 the defenders were sold to Barnes Group. Mr Greenwood was kept on for six months as a consultant. During the period 1996 to 2003 he was the managing director but also did a lot of direct selling. He spent 50% of his time "out on the road" speaking to customers. The pursuers and defenders had done business together since 1988. He knew the senior employees and many of the other employees to whom he often spoke. These matters were not in dispute.

[28] When asked how the defenders got the first order for rivets from the pursuers, he said he was in Chesterfield when he received a telephone call. He said the telephone call was from "Lesley Murphy" and she asked if the defenders had 4x8 by 16mm peel-back rivets. He thought this telephone call was in about July 1996. As it was urgent, Mr Greenwood said that he would phone the defenders' office to see if the order could be met. He was told that the defenders could get the rivets to the pursuers by Friday. He telephoned Mrs Murphy and confirmed that the defenders could supply the rivets by Friday. Mr Greenwood said that he knew it was urgent. He could not recall whether there had been any mention of the manufacturer Gesipa. If that had been mentioned, Mr Greenwood said he would have explained that the defenders were a Fitlock distributor and asked Mrs Murphy if she could take rivets supplied by Fitlock. If she had refused, he would have endeavoured to get a specific "make" of rivets if that was what was wanted by the pursuers. In the circumstances where there was no mention of a specific "make", he would have given rivets from the defenders' normal distributor (i.e. Fitlock). When asked to comment on 6/2 of process, he said the conversation must have taken place in June. He was now aware, because of preparations for the proof, that Mrs Murphy denied any such discussions. He said that he had sleepless nights thinking about this but was sure that he had such conversations. He said that he was also now aware that Mrs Murphy was on maternity leave until July 1996 but "he could not change his story".

[29] Mr Greenwood said he did not normally handle the pursuers' order documents. He would normally see these only if there was a problem. He had no recollection of ever being asked about the reference PX0106. Commenting on the pursuers' terms and conditions illustrated in 6/1 and 6/2 of process, he said that if there was a problem he would see the orders. The terms and conditions were never drawn to his attention. He described the way in which the defenders could obtain goods from various manufacturers. Although the defenders did not have a direct account with Gesipa, it was possible for the defenders to obtain Gesipa products from "super distributors". He had no knowledge of a meeting with Mr Milligan or any conversation with him about Gesipa rivets. He could not recall such a meeting. He explained that he met thousands of suppliers over the years. Mr Greenwood said that he was not qualified to give advice on the manufacture of windows and the use of rivets. He knew in general that the rivets were to be used in the manufacturing of windows. He was aware of difficulties with the windows starting in 2001. He accepted that he attended a meeting and demonstration in 2001. After that he knew exactly what the rivets were being used for and the materials in use. The decision to change the rivets from 16mm to 14mm was made by the employees of the pursuers. He did not advise on the change. He was not qualified to advise. He thought that the pursuers were aware that it was Ornett rivets when he invited Mr Cruddos to come to Scotland to visit the pursuers premises. He accepted that Mr Cruddos was a representative of Fitlock, not Ornett.

[30] Under reference to 6/2 of process, Mr Greenwood accepted that the form was to the effect that the offer was on the pursuers' terms and conditions. He said he probably could have got the terms and conditions from the pursuers' office. He accepted under reference to 6/47 of process that the defenders in their despatch note did not make any reference to the defenders' terms and conditions. He accepted that after despatch of the goods, "it was a done deal". In cross-examination, he said he could not explain Mrs Murphy's evidence that there was no telephone call from her or to her about rivets. He did not accept that his evidence was untrue but he was prepared to accept that it was possible that he was confused after 16 years. He insisted that it was his belief that such a telephone call had been made by Mrs Murphy. In the absence of such telephone call, he said that it was impossible to explain how the defenders had been able to deliver an order of rivets as an urgent overnight delivery. He recollected that when he was receiving the call, an English sales manager, Mike Munro, was with him. In a passage in cross-examination, Mr Greenwood accepted that when the change was made from 16mm to 14mm, all that was to change was the length, but otherwise it was the same rivet. With reference to the meeting in April 2001, he accepted that it was then made very clear how the rivets were being used for by the pursuers to make up the windows. Mr Greenwood also conceded that when he introduced Ken Cruddos at the meeting on 30 September 2002, he introduced Ken Cruddos as a representative of Fitlock. He accepted that Fitlock was a supplier, not a manufacturer. He conceded therefore that the fact that the manufacturer was Ornett was not clear to the pursuers as a result of that meeting. Mr Greenwood accepted that C R Smith may have thought that the defenders had some expertise in whether a part was fit for purpose but he said that the defenders supplied a vast array of products and that the sales people were trained to involve the specialist manufacturers if problems arose. That is what the defenders did in this case. He also accepted that he was personally at financial risk in relation to the outcome of litigation.

Disputed evidence: the order for 10,000 PX0106 (6/2 of process)
[31] I accepted the evidence from Mr Wallace about the difficulties which arose in about June 1996 when Scope Window Systems were closing their supply business. From the evidence of Mr Wallace and Mr Milligan, it was plain that the pursuers in June 1996 were seeking, from Gesipa, a supply of Gesipa peel-back rivets of the identical type which had been supplied to them over a long period by Scope Window Systems. I accept that when Mr Milligan explained that Gesipa could not supply said rivets directly to the pursuers that Mr Wallace told Mr Milligan that he should discuss with the defenders the supply of said rivets. I accept the evidence of Mr Milligan that immediately after his meeting with Mr Wallace, he used the map and contact name which he had been given and attended at the defenders' premises. He said that he saw someone in charge of buying at the trade area, not in an office. He thought he had spoken to the person whose name he had been given by Mr Wallace. The man to whom he spoke to was "a slim guy, casually dressed.." aged about 35. He was in no doubt about the Gesipa rivets which were wanted by the pursuers. He had measured the sample rivets shown to him by Mr Wallace before he left the pursuers' premises. In discussion at the defenders premises, Mr Wallace explained that the pursuers wished a particular Gesipa rivet. He illustrated this by marking the rivet in the Gesipa catalogue, 6/30 of process. He circled the product and put an asterisk beside it. He could not now remember what the product was. The Gesipa brochure was left at the defenders premises with the person with whom he had had the discussion. He also explained that in order to become a Gesipa distributor, the defenders would require to open an account. His normal practice was to telephone to ask the Gesipa office to fax through a credit application form to enable an account to be set up. He had no knowledge whether a credit account was ever set up. He accepted that his evidence about what happened in relation to the catalogue and the credit account was based on his normal practice. He also accepted in re-examination that the defenders could have supplied Gesipa products to the pursuers by sourcing them indirectly from bigger distributors rather than direct from Gesipa.

[32] I have no difficulty in accepting that Mr Milligan went to the defenders' premises in early June 1996 and had a discussion of the type he described. The evidence is unclear about the identity of the person with whom he had the conversation or where he had the discussion. The discussion was not in the office but in some part of the premises to which the public had access. I accept that the purchasing manager at the relevant time was Mr Dunning. I consider that it is unlikely that in the circumstances described by Mr Milligan that he saw and spoke to Mr Dunning. Mr Dunning explained that he was always formally dressed at work and saw people such as sales representatives only by appointment. He did not give interviews to people who merely turned up at reception. As he was in charge, he would expect anyone who had such a discussion to inform him of it. He was unaware of any discussion of the type described by Mr Milligan and no Gesipa catalogue ever came to him. Mr Dunning explained that there were three separate entrances with a number of staff servicing these entrances at the defenders' premises. He accepted that "a cold call" might be dealt with by one of these staff and that would not be formally intimated to him. I accept Mr Greenwood's evidence that he was out of the defenders' premises about 50% of the time and that he had no recollection of any meeting with Mr Milligan. That does not mean that I accept the meeting was not with Mr Greenwood, merely that he does not remember it.

[33] The next chapter of evidence involves a direct conflict between the evidence of Mrs Murphy and Mr Greenwood. I am satisfied that the pursuers have established that Mrs Murphy was on maternity leave during the relevant period. In addition she denied such conversations. In my opinion it is plain from the evidence that the pursuers had arranged for Mr McAndrew to take over Mrs Murphy's duties during her maternity leave. Mrs Murphy impressed me as a diligent employee but not an employee who would be actively involved in the defenders' business when she was on maternity leave. I consider that Mr Greenwood has persuaded himself about these conversations but his recollection, in my opinion, is plainly wrong. He was wrong about the date. It was not my impression that Mr Greenwood was deliberately lying. I take into account that many years have passed since the events in dispute. Mr Greenwood was involved in numerous discussions with numerous people over the years since these events happened in 1996. I do not consider that anyone appreciated the significance and implications of the orders for rivets at the time. Any discussions were merely part of the day to day business arrangements. I accept that it is likely that Mr Greenwood must have had discussions with someone at or around this time but the nature and content of the discussions is not clear to me. I say that because information must have been conveyed from the pursuers to the defenders to permit the order 6/2 of process to be completed. In said order, the pursuers requested from the defenders "10,000 PX0106". The reference "PX0106" would have been completely meaningless to the defenders' processing staff who dealt with the orders. Whoever dealt with the order, that employee of the defenders must have obtained information from someone as 10,000 peel-back rivets of the correct size 4.8 x 14mm were supplied by the defenders to the pursuers in response. I accept the evidence from Mrs Philp that if she had received such an order she would have asked Mr Greenwood because he was the Managing Director and dealt directly with the pursuers. It is difficult to imagine who else apart from the pursuers could have supplied the information. This witness accepted that she cannot say what happened. There were two other people (not led as witnesses) who worked in the department who may have dealt with this order.

[34] I accept that the defenders, in order to fulfil this order, must have received information from someone but the circumstances and context in which the defenders received that information are not established to my satisfaction on a balance of probabilities. I do not accept the pursuers' submissions that this could only be explained by accepting that Mr Milligan spoke to Mr Greenwood. Mr Milligan plainly spoke to someone but Mr Dunning knew nothing about that. Mr Greenwood had no memory of such a discussion. There was no evidence that a marked Gesipa catalogue ever found its way to the defenders sales employees. Even if I accepted that such a conversation took place between Mr Milligan and Mr Greenwood, I find that there is a lack of evidence to explain what happened when the order 6/2 of process came into the defenders' office. The reference PX0106 would be meaningless to Mr Greenwood unless there had been some direct discussions about this reference between someone of behalf of the pursuers and Mr Greenwood. Mr Milligan spoke to identification of rivets by reference to the Gesipa catalogue. There was no evidence that he was aware of the reference number used by Scope Windows Systems and discussed that. The reference PX0106 is not a Gesipa reference. It is a Scope Windows System reference. Even if Mr Milligan informed Mr Greenwood of the pursuers' wish to purchase Gesipa rivets that in my opinion does not translate into a discussion at a later stage about PX0106. I consider that any such discussion has been lost in the passage of time. In relation to this chapter of the evidence, I take the view that the onus is on the pursuer to satisfy me on evidence that the order for 10,000 PX0106 represents a sale by description of Gesipa rivets. I am not so satisfied because the evidence does not disclose to my satisfaction on the balance of probabilities what was said and by whom when the order 6/2 of process landed in the filing basket at the defenders' premises.

The second issue: were the pursuers standard terms incorporated in the individual contracts of sale?

[35] Senior counsel for both parties were agreed about the general principles which fall to be applied in determining whether the pursuers' standard conditions were incorporated in each of the contracts of sale. Senior counsel for the pursuers referred to the principles derived from the authorities as set out in McBride, Law of Contract in Scotland (3^rd Edition) para. 7-02. He accepted the analysis at 7-09 to the effect that if there is a reference to conditions which have not been communicated, such as conditions on the blank reverse of a faxed document, there may not be incorporation of the terms. He emphasised however that this depended on the facts and circumstances. He cited Continental Tyre & Rubber Co Ltd v Trunk Trailer Co Ltd 1985 SC163 to illustrate an example of the Court applying the general principles of offer and acceptance. Reference was also made to Gloag on Contract (2^nd Edition) page 7. He submitted that it was not disputed that where there were individual concluded contracts agreed between the parties "the judicial task is not to discover the actual intentions of each party; it is to decide what each was reasonably entitled to conclude from the attitude of the other."

[36] There was much discussion in oral submission about Poseidon Freight Forwarding Co. Ltd. v Davies Turner Southern Ltd [1996] 2 Lloyds Rep. 388. Senior counsel for the pursuers submitted that the circumstances were materially different. Senior Counsel for the defenders conceded that on the facts there are matters of distinction. But he submitted that the passages relied on are not dependant on the special facts of the case. I do not regard Poseidon as providing a clear solution to the present case because the facts and circumstances and the wording on the form are different. I agree however with the views expressed by Leggatt, L.J. at p.395 in Poseidon "...that the facts in that case are an example of a party whose terms are in issue doing nothing, probably because his representatives did not think about it. If they had, it is difficult to suppose that they would have regarded not sending their terms with a contractual letter of 3 June 1991 as being a propitious way of ensuring that they applied, nor does it look as through they hoped by keeping quite about their terms to render them applicable as sometimes occurs. This is not a case where a party declares that the terms are available for inspection. It is a case where, on documents sent by fax, reference is made to terms stated on the back, which are, however, not stated or otherwise communicated. Since what was described as being on the back was not sent, it was a more cogent inference that the terms were not intended to apply...". There was also discussion about J Murphy & Sons Ltd v Johnston Precast Ltd (2008) EWHC 3024 (TCC) under reference in particular to paragraphs 36, 37, 61, 83 - 88, 92 and 99. Senior counsel for the defenders submitted that considerable weight should be given to the opinion of Mr Justice Coulson at paragraph 99, where he states:

"I acknowledge at once that this means that I am effectively putting to one side the words at the bottom of the Murphy order (paragraphs 62 and 63 above). However, I have concluded that it is appropriate to do so. There are a number of reasons for this. First, there is no evidence that anybody on either side paid any attention to whether or not the terms were actually attached to the order when it was faxed on 21^st April. Secondly, of course, no terms were in fact faxed, so the words were meaningless. Thirdly, I do not believe that these words amount to an effective incorporation of the Murphy terms in any event. They merely draw the reader's attention to the conditions; they do not say expressly that those conditions wholesale will be incorporated into any proposed contract. They do not say that the Order is 'subject to' those conditions, or even that the order 'incorporates the conditions overleaf'. Fourthly, I am confirmed that this is the right approach by the decision in Sterling in which a similar (in fact, rather stronger) attempt to incorporate non-existent terms and conditions was rejected by the learned judge".

Senior counsel for the pursuers submitted that there were "no magic words" of incorporation and that the observations of Mr Justice Coulson went too far. I accept that whether there is incorporation must depend upon the particular facts and circumstances of the case and that the decisions of both Poseiden and Murphy require to be interpreted in the context of their particular facts.

[37] Let me turn now to the facts of the present case. It is plain from the evidence that the pursuers' standard conditions are as set out on the back of 6/1 of process which was used in the evidence as an example of the standard conditions. The same standard conditions were used by the pursuers in their paperwork during the period in which the parties concluded the individual contracts of sale. The pursuers' employees repeatedly faxed the purchase requisition forms which bore the legend in capital letters at the bottom of each page "see over for terms and conditions". As only the front page (not the back) was ever faxed to the defenders, the defenders never received anything but a front page and a blank backing. They never received from the pursuers any written terms and conditions of purchase. No attempt was ever made by anyone on behalf of the pursuers to bring any actual terms and conditions of the pursuers to the attention of the defenders. If one attempted to look over the page for terms and conditions as invited by the pursuers, one finds nothing - a blank.

[38] I accept that some of the pursuers' employees were aware of the pursuers' terms and conditions and gave evidence to the effect that they considered that these were the terms and conditions which applied. This response was elicited in a careful manner by senior counsel for the pursuers from Mrs Murphy, Mr Wallace and Mr McAndrew. Mr Eadie appeared to be speaking to a period in 1999 when he became purchasing manager by which time the sending of the blank backing was well established. There was no explanation from anyone as to why the pursuers' employees considered that faxing a blank backing instead of the written terms and conditions was considered to be a method to incorporate the terms and conditions. The evidence of those employees of the pursuers who gave evidence about this practice amounted to little more than an acknowledgement by them that the pursuers used a standard form which had on the back terms and conditions. I note that the pursuers' standard terms envisaged that the pursuers would insert a price in the purchase requisition form. This was not done by the employees of the pursuers. The purchase price was filled in by the defenders. When difficulties arose, for example, in relation to rejection of the rivets as illustrated in 6/32 and 6/33 of process, no reference was made by anyone from either party to the standard conditions, paragraph 8 of which dealt with defects. My strong impression from the evidence was that at the time the individual contracts were concluded, nobody involved with the paperwork paid any attention to legal issues and standard conditions. The employees of the pursuers merely carried out the general administrative procedures involved in the ordering process. There appeared to be no management systems in place, in support of the standard forms, to ensure that employees brought the actual terms and conditions to the attention of the other contracting party. I make no criticism of the employees involved in the process. The reality of the situation appears to be that employees of the pursuers and the defenders did not give much or any thought to the legal position when dealing with the contractual process. The views expressed in the evidence of Mr Greenwood and Mrs Philp, many years after the contracts were concluded, were interesting but not in my opinion determinative. I accept that if enquiries had been made of the pursuers, a copy of the pursuers' terms and conditions could have been made available from the office and probably would have been. There was no evidence however that any such enquiries were ever made. Both parties therefore proceeded on the basis that the pursuers faxed a purchase requisition form which stated "see over for terms and conditions". On turning the page over, there was a blank page and no terms and conditions.

[39] Senior counsel for the pursuer accepted that the onus of establishing that the pursuer's terms and conditions have been incorporated rests on the pursuers. I have attempted to apply the principles which both parties in my opinion correctly concede are appropriate. I accept that prior cases may be of limited assistance in an area which is so fact specific and dependent. I have attempted to consider the facts which I have found proved in this case reasonably and objectively to determine what inference to draw about the parties' mutual intention as to whether the pursuers' standard conditions of sale were intended by the parties to be part of each of the individual contracts. My clear conclusion is that whatever various witnesses of both parties say, years after the events, and now in the knowledge of the problems and legal disputes which have arisen, at the time the contracts were concluded none of the employees gave much or any thought to the legal terms and conditions. There was no practice or procedures to ensure that faxed material included the standard terms and conditions. The standard terms and conditions were never sent to the defenders in any shape or form. They were never discussed. The pursuers requisition form did not make it plain that standard terms and conditions applied to each order to purchase goods from the defenders and that, for example, the terms and conditions could be obtained on request. On the contrary, the form indicated that any terms and conditions which applied were on the back of the document and the backing was blank. That is the way in which I interpret the words "see over for terms and conditions" in this case. In my opinion, the only reasonable and objective inference to draw from such mutual interaction is that the pursuers' standard terms and conditions of sale were not incorporated into the individual contracts.

Alternative submissions on behalf of the defenders

[40] I have found in favour of the defenders in relation to their submission that the pursuers' standard terms and conditions were not incorporated into the individual contracts. Senior counsel for the defenders put forward some alternative submissions in the event that I found the pursuers' terms and conditions were so incorporated. I now deal briefly with these submissions in case I have erred in my conclusion about the defenders' main submission.

[41] Senior counsel for the defender submitted that if the standard terms and conditions of the pursuers were incorporated, the result for the pursuers would be that the contractual term in paragraph 8.1.1 was more limited than the implied term under and in terms of the 1979 Act section 14(3). He submitted that the said contractual term covered the same ground as the statutory warranty but is narrower in scope. The contractual term was therefore inconsistent and supplanted the statutory warranty. He submitted this "narrowing" occurred because the contractual conditions used terms namely "order" and "writing" to prescribe the circumstances in which a purpose may be made known to the seller in order to create certainty as to purpose and the date when known.

[42] In response senior counsel for the pursuers referred to Chitty on Contracts (30^th edition), volume 1, paragraph 35. He submitted that the contractual terms must be construed as a whole.

[43] I consider that if one construes paragraph 8.1.4 which provides that the defenders warrants to the pursuers that the goods "will comply with all statutory requirements and regulations relating to the sale of the goods", the contractual conditions expressly refer to the statutory requirements which I interpret as a reference inter alia to the Sale of Goods Act 1979. I accept that paragraph 8.1.1 makes provision for the defenders warranting to the pursuers that the goods will be of good quality and fit for any purpose in the circumstances defined in said clause. I do not accept that means that the parties intended that the statutory requirements should be so limited and that the warranty extended only to circumstances where the purpose was held out by the defenders or made known to the defenders in writing at the time the order was placed. I consider that is a specific condition on which the pursuers would be entitled to rely in these defined circumstances. I am not persuaded however that the intention was to limit the application of the statutory requirements. In my opinion therefore, even if the standard terms and conditions of the pursuers are incorporated, I consider that the 1979 Act section 14(3) applies also by virtue of clause 8.1.4.

[44] Counsel for the defenders also made some submissions in relation to paragraph 3.1. I understood him to concede that however one interprets the contractual terms, the effect is that the parties are bound by a term identical to the term imposed by section 14(2) of the 1979 Act and that it matters not whether that term is considered to be an express term of the contract or implied by the 1979 Act.

The fifth issue: sale by description
[45] In relation to this chapter, it is necessary to understand that the contents of the pursuers' material requisition forms varied. I consider that the requisition forms could be classified into three main categories. There was much evidence about the first order 6/2 of process dated 11 June 1996. There was only one requisition form which fell into the first category. I have dealt with that disputed evidence in paragraphs [31] and [34]. For the reasons explained, I concluded that this was not a sale by description as contended for by the pursuers. I now require to consider the second and third categories.

The "Gesipa" orders
[46] These orders are to be found in 6/4-6/20 of process. Senior counsel for the defenders made the concession in submissions that he could not suggest that these orders did not contain a "Gesipa" description. For the avoidance of doubt, I consider that this concession was entirely in line with the evidence. Accordingly I find that in said orders, the pursuers sought to purchase the quantity and description of the goods specified in said productions and that the description of the goods (the rivets) included an express reference to "Gesipa" but no express reference to any particular dimensions. As a result however of the interactions between the parties the dimensions of the rivets sought and supplied were 4.8 x 16mm. The dimensions were not in dispute.

Subsequent orders using a part number
[47] There was no significant dispute in the evidence about the way in which the orders were made. After the first order for PX0106, the pursuers ordered by reference to "Gesipa" with various additional descriptions. In response, the defenders allocated their own reference number to the rivets which they sent to fulfil the pursuers' orders. The factual background was that the pursuers ordered Gesipa rivets and the defenders supplied rivets of a peel back type and dimensions of 4.8 x 16mm with their own part number (or catalogue product code) which they generated. Thereafter, having been given a part number from the defenders, the pursuers began and continued ordering the rivets using the part number which was supplied by the defenders in the paperwork which accompanied the rivets sent to them in response to their "Gesipa" orders.

[48] Senior counsel for the defenders accepted that on the basis of the evidence employees of the pursuers might have thought the part number was for a Gesipa part. He submitted however that it was a part number for a non specific rivet. The true meaning of the part number generated by the defenders was the meaning given to it by the defenders in their computer and/or catalogue. That meaning was a reference to Ornett rivets supplied to the defenders by their suppliers, the third party. The pursuers therefore by ordering rivets with the defenders' reference number had not made an order for "Gesipa" rivets because that is not what the order number meant to the defenders. The defenders have allocated that reference number to rivets of a different manufacturer.

[49] I consider that the analysis by counsel for the defenders breaks down in the circumstances of this case. It must have been plain to the defenders from orders 6/4-6/20 of process that Gesipa rivets were being ordered by the pursuers and not some other type of rivet. Indeed this was effectively conceded by senior counsel for the defenders. By allocating a code number and providing rivets in response to the "Gesipa" orders, the only conclusion which I can draw is that as between the parties, in the circumstances which had arisen, the defenders' part numbers could only be interpreted by the Court as referring to Gesipa rivets. In the circumstances where there are repeated orders for Gesipa rivets and by fulfilling these orders and allocating a part number without informing the pursuers that some other non Gesipa rivet is being supplied, the pursuers are entitled to assume that the part number relates to the type of rivets they ordered which were Gesipa rivets. There was nothing about the rivets or done by the defenders to alert the pursuers that the part number did not refer to Gesipa rivets and that non Gesipa rivets were being supplied by the defenders.

[50] There came a date however when the pursuers became aware that the rivets supplied to them by the defenders were not manufactured by Gesipa but were Ornett rivets. Senior counsel for the defenders suggested that the pursuers became aware of this when Mr Cruddos visited the pursuers' premises in October 2002 but I do not accept that. Mr Eaddie said that he became aware that Ornett rivets were being supplied by the defenders in the Autumn of 2002. That date was not explored further. Senior counsel for the pursuers conceded that by November 2002 the pursuers were aware that the rivets supplied by the defenders were not manufactured by Gesipa but by Ornett. I consider that the evidence is not entirely clear on this date but conclude that the pursuers became aware shortly after the meeting attended by Mr Cruddos in October 2002 but not at that meeting. In conclusion therefore, from the date of 6/4 of process (17 June 1996), up until the date when the pursuers first became aware that the defenders were supplying Ornett rivets to them, the individual contracts of sale between the parties included a term that the goods supplied corresponded with the description and that part of the description was that the rivets were to be Gesipa rivets, that is rivets of a particular type and dimension manufactured by Gesipa. For the avoidance, of doubt I do not consider that the said terms were implied after the date when the pursuers became aware that the defenders were supplying to them Ornett rivets.

[51] As this is a preliminary proof, I consider that the cause should now be appointed to the By Order roll to consider further procedure and deal with expenses. I would like to acknowledge the assistance provided by all counsel in this case. Counsel took steps to narrow and focus the issues in order to save time and expense. I am also grateful for the written submissions which they provided at my request at short notice.