England and Wales Court of Appeal (Civil Division) Decisions

IN THE SUPREME COURT OF JUDICATURE
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM CENTRAL LONDON COUNTY COURT
(MR RECORDER LINCOLN CRAWFORD)

		Royal Courts of Justice Strand London WC2A 2LL Friday 9 February 2001

1. LORD JUSTICE POTTER: I will ask Lord Justice Sedley to give the first judgment.
2. LORD JUSTICE SEDLEY: In late 1997 the claimant sold to the defendants, at a bargain price, a batch of safes which its sister company in Holland had manufactured between 1990 and 1993 for a sale that had aborted. When the defendants were sued in these proceedings, they asserted that the safes had turned out to be, among other things, so deficient as to be useless for their purpose; so they had withheld payment. In the action brought by the claimants for the price, the defendants counterclaimed in a much greater sum for their losses.
3. The trial of the cross-actions came on before Mr Recorder Crawford at Central London County Court. The 4-day hearing concluded on 17 April 2000. The recorder handed down a reserved judgment on 16 June. It appears that there had been neither an order nor an agreement that liability alone should be tried, but it was to liability alone that the judgment was directed with the issue of quantum reserved to a further hearing.
4. The recorder found that there had been no warranty given in respect of the safes and that no misrepresentation had occurred. He concluded, however, that there had been breaches of the terms implied by virtue of sections 13 and 14 of the Sale of Goods Act 1979 that the safes would correspond with their description as equivalent to European grades II and IV and be of satisfactory quality. The latter includes a standard which takes account of price. Accordingly the recorder gave judgment for the defendants both on the claim, for what he took to be the only claimable portion of the contract price, and on the counterclaim for damages for breach of contract.
5. One result of standing over the question of quantum was that, as too frequently happens when the issues are split, causation is left dangling. It is not clear whether his judgment is to be taken as determining causation and recoverability or not. That, however, is a marginal issue for the present. Although on a reading of the papers, which included a written submission on the defendant's behalf, I was not persuaded that the proposed appeal had a sufficient prospect of success, my mind has been changed both by reconsideration of the papers and by Mr Quinn's submissions before us. He flags up four particular points:

(1) He submits it was not open to the recorder to prefer the defendant's expert's evidence on the key point of the standard to which the safes were manufactured because of the manifest want of expertise and knowledge of material facts on that witness' part.

(2) Mr Quinn submits that the judge's account of the sales history omits the important fact (which had only emerged in cross-examination) that the defendant had sold on at least one of the safes under a materially different description.

(3) Mr Quinn says that no judge could reasonably have concluded, as the learned recorder did, that the drawings which he took as his benchmark related to the product in question. They were drawings of the claimant's sister company, the manufacturer of the safes, but they were not the working drawings. The reason, Mr Quinn tells us, was amply explained in evidence, namely that the real drawings are a trade and security secret and therefore not ordinarily disclosed or disclosable.

(4) Mr Quinn argues that much of the three days' evidence had in fact gone to the question of causation because it went to the merchantability of the goods. It turned out that there had been onward sales of some half of the batch of safes. I f so, he submits, loss goes out of the picture in that regard.

6. These are perhaps indicators that there may well be respectable support for an appeal which, in broader terms, it now seems to me is arguable both on the basis of possible lacunae in the learned recorder's reasoning and on the basis of the departures from the pleaded cases. These merit the court's attention, even if it should turn out, as it may, that in the end the recorder reached the right conclusion.
7. The one issue upon which I would not grant permission to appeal is delay. This is a discrete point raised by Mr Quinn. There is no basis at all for ascribing any deficiency which there may be in this judgment to the passage of eight weeks between the final hearing date and the delivery of the judgment, nor for complaining that such a lapse of time is in itself a denial of justice.
8. For the rest, I would not formally limit the grounds of appeal. I would refrain from any comment on them save to say that this court is not likely to be interested in any attempt merely to reargue findings of fact.
9. LORD JUSTICE POTTER: I agree that leave should be given in this case. In addition to the four particular matters highlighted by Lord Justice Sedley, it is right to say that a broad complaint has been raised on this application that the lines of the judgment did not follow either the way in which the claim was pleaded or the way in which it was argued at trial and that, on reading the judgment, the plaintiffs are unable to see why they won or lost.
10. The matter which has chiefly concerned me in trying to make overall sense of the judgment, is that it appears to have been given on a basis which had never advanced in the pleadings of the defendant despite several amendments. The case advanced in the reamended defence and counterclaim was put on the basis of a misrepresentation that the safes supplied were of equivalent grade to European grades II and IV. That misrepresentation is contained in a fax dated 5 November 1997 (see paragraphs 2 and 3 of the counterclaim). That misrepresentation was said to have induced a written agreement contained in documents enumerated in paragraph 4, in relation to which it was alleged that there was an implied term of the agreement that the safes would be reasonably fit for their purpose, with no specific section of the Sale of Goods Act 1979 being identified.
11. There was a list of defects, all characterised both as the subject of misrepresentation and as breaches of contract. What is notable is that nowhere was it suggested that there had been a formal specification or drawing in respect of the safes which formed part of the contract with which the claimants had failed to comply, nor indeed that the goods were sold under any particular description. That position appears to have been recognised by the judge in his summary of the defendant's complaints in paragraph 7 of his judgment.
12. Nonetheless, the evidence of the defendant's expert was largely directed to, and the judge's findings that the counterclaim was proved were ultimately based upon, the degree to which the safes complied with or departed from a manufacturers drawing 63882 produced by the defendant's expert on which no reliance had been placed in the pleadings and which the claimants denied was ever more than a provisional specification which was never used as a basis of manufacture.
13. The judge appears to have seized upon the non-compliance of the safe with the standards provided for in that drawing as the touchstone of liability. In a passage which it is not entirely easy to follow, he said at paragraph 17 of his judgment:

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

14. He then referred to section 13 of the Sale of Goods Act 1979, "Sale by Description", and section 14(2), "Implied Terms to Satisfactory Quality". He founded his judgment on the counterclaim upon those sections, neither of which had in fact been pleaded. Thus he appears to have rejected the basis upon which the claim had primarily been put, ie that the claimants had misrepresented to the defendants that the safes were equivalent to European Grades II and IV, and to have held for the defendants on the basis of a breach of contract by the claimant which had never been pleaded.
15. In these circumstances, as well as for the reasons mentioned by Sedley LJ, it seems to me that permission to appeal should be granted.
Order: Permission to appeal granted. Permission to amend grounds of appeal. Time estimate of 1 day. (Order does not form part of approved Judgment)