England and Wales Court of Appeal (Civil Division) Decisions

IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
(His Honour Judge Crawford QC)

		Royal Courts of Justice Strand London WC2
		Wednesday, 7th March 2001

1. LORD JUSTICE BUXTON: This is a renewed application for permission to appeal from a judgment of His Honour Judge Crawford QC, delivered on 30th March 2000, in a contractual dispute between Shico (UK) Limited, who are the claimants, and the Co-operative Wholesale Society Limited, who are the defendants. I have not gone into this aspect of the matter in detail, but I am alarmed to see that the trial, which was concerned with a matter of contractual construction, appears to have continued over a period of some seven days. In the circumstances, the judge, if I may respectfully say so, is to be commended for succeeding in reducing his judgment to 22 pages.
2. I do not intend in the course of this judgment to set out the facts in detail or at all. That is because, although this case and the issue it involves is of course of great importance to the parties immediately concerned in it, it raises no issue at all that is of any interest to anybody outside those parties. The basic facts are well known and not in dispute, and they are very clearly set out in the judge's judgment.
3. I can come, therefore, to the respect in which it is said that the judge went wrong. The issue was whether there was in existence an agreement between the claimants and the defendants which contained within it an exclusive purchasing clause: that is to say, whether the defendants had agreed that they would take their requirement of shoes from Shico and from no one else. That is, of course, a different question from whether it was in fact the case at any particular time that, because of practical difficulties or because of their wish to do so, they were in fact buying the whole of their requirement from Shico.
4. The exclusive purchasing condition or term was, in the pleadings, attributed to a number of possible sources. It was never agreed in writing, but what it came down to was that it had allegedly been agreed between a Mr Katan, who is the moving force in the claimant company, and a Mr Gilmour, who acted in the matter on behalf of the defendants. Other persons were at some stage involved on the defendants' part, but it is clear that it was Mr Gilmour who made the decisions and the agreements, if any, and the judge rightly concentrated on his evidence. The claimants' evidence and the way in which their case was presented did not provide a firm foundation for the judge to make findings as to the contractual arrangements.
5. Two meetings were in play at which it was said this matter had been discussed. Those were meetings on 14th March 1990 and 30th August 1990, both of them involving the two protagonists to whom I have made reference. The meeting of 14th March 1990 is agreed to have been of a brief nature and necessarily tentative, because at that time the claimants had not got their factory and operation up and running and were approaching the defendants on a provisional basis; and it is not now claimed on the part of the claimants that at that meeting the exclusive purchasing agreement was entered into. Nonetheless, it was Mr Katan's original evidence, as set out in paragraph 18 of his witness statement, that it had indeed been at that meeting that the agreement that he asserts had been made. He says that Mr Gilmour said to him that "he would agree to CWS purchasing all their ladies' safety footwear from my company". That, as I understand it, is a formulation of the exclusive purchase agreement.
6. As I say, however, that is not now the claimants' case. Their case is now that the terms were agreed at the meeting on 30th August, which again was attended by the two gentlemen I have referred to and also by a Mr De Nahlik, who took notes on behalf of the claimant company. Paragraph 44 of Mr Katan's witness statement, when dealing with that agreement, does not in fact assert that it was on that occasion that the exclusive purchase agreement was entered into. That is no doubt because he was originally of the view that it had been entered into earlier. But what seems to have been agreed then (according to Mr De Nahlik's note, and also to some evidence given by Mr Gilmour, to which I shall have to come in due course) was that the Co-operative Wholesale Society would purchase a substantial number of pairs of shoes from the claimants; and Mr De Nahlik's note records "Co-op propose 3 months' notice minimum for any change. Period negotiable." However, although the note, on its face, might appear to record a fixed agreement to take or to procure 1,000 pairs a week (that agreement being described as "to be subject to a proper agreement"), we were told that it was agreed in evidence that that proposal in those terms was unrealistic.
7. Mr Gilmour was cross-examined in great detail and with great skill by Mr Stewart, who appears on behalf of the claimants. Indeed, the judge, who had the benefit of actually hearing it, described the cross-examination as having been "brilliant". One particular passage is relied on in respect of the meeting of 30th August. Mr Gilmour was asked about Mr Katan's understanding:

"Q.Could he also have understood you had said if your purchasing arrangements were going to change you would give him 3 months' notice?

A.That is quite likely.

Q.Could he also have understood that the purchasing arrangements would be understood that you would be buying all your ladies safety footwear from Shico?

A.That was a fact at the time."

8. The questioner then passed on to other matters.
9. The nub, as it seems to me, of Mr Stewart's argument, based upon that reply by Mr Gilmour, in a factual context where the Co-operative Wholesale Society was in fact taking all its goods from Shico, is that Mr Katan would have understood from the statement about three months' notice - and an objective observer viewing the exchanges would have understood - that the Co-operative Wholesale Society was going to give three months' notice if it went for any of its requirements at any time to anybody else: that is to say, an exclusive purchasing arrangement. I have to say that that inference does not follow at all from those exchanges. In the passage that I have just read out Mr Gilmour was emphatic, not that he was agreeing to take all his requirements, whatever they may be at any time, from Shico, but that it was in fact the case that that was so at that time.
10. The judge dealt with this matter carefully and in the light of Mr Gilmour's evidence. He is criticised by Mr Stewart for the weight that he placed on Mr Gilmour's evidence. Mr Stewart says that the question is not what Mr Gilmour thought or believed subjectively, but what an objective observer would have concluded had he been observing the exchanges on 30th August. That, of course, is quite right. But the reason why the judge set out what Mr Gilmour said is because the judge concluded that Mr Gilmour's attitude to these exchanges was well known to Mr Katan himself and, by the same token, would objectively have been obvious to anyone observing them.
11. The judge said:

"I accept Mr Gilmour's evidence that an Exclusive Purchase Agreement is an onerous and restrictive obligation; I am satisfied further that he would not have agreed to such a term without a mechanism being agreed both to determine crucial factors such as price, volume, quality, delivery times and so forth as well as providing CWS with a right to terminate, if Shico could not meet those criteria.

Notwithstanding Mr Stewart's cross-examination of Mr Gilmour, I am satisfied on the whole of Mr Gilmour's evidence, and it has to be said that Mr Gilmour was an outstandingly fair and honest witness, that he would have declined to enter into any Exclusive Purchase Agreement with Shico."

12. The first part of that conclusion may well relate, as my Lord, Mr Justice Bodey, pointed out in the course of argument, to any suggestion that there was an understanding in those terms at the meeting of 14th March: when, as I have said, Shico's operation was in a rudimentary state. But as it seems to me, the second part of the judge's observation relates to Mr Gilmour's attitude generally, as, indeed, expressed in the passage of cross-examination that I have read and in many other passages referred to by the judge which it is not necessary to set out.
13. The judge then said this on the basis of what he had concluded from Mr Gilmour's evidence:

"The minutes of the 30 August meeting make it clear that it was intended to embody what had been agreed in a written contract. That no such written contract was ever made is, I think, because Mr Katan, who is, I thought, a highly intelligent and astute businessman of great experience, knew or understood very well that Mr Gilmour and Mr Turner would not at that stage in 1990 agree to such an Exclusive Purchase Agreement."

14. That is a finding by the judge, having had the benefit of hearing both men give evidence and be cross-examined, as to what they actually understood each other's attitude to be. That is not a descending into the subjective beliefs of the parties in order to create an agreement, or lack of agreement; rather, in the particular context of this case, it is the judge dealing - and, in my judgement, dealing very fairly - with the problem that I have already indicated for the claimants that no written agreement was entered into as to an exclusive purchasing arrangement. As was agreed, it is impossible to place one's hand on anywhere that expression was actually used.
15. In those circumstances, the judge was quite right to ask himself whether it could nonetheless be said that Mr Gilmour, by his attitudes and answerings, had in fact created, or held out, an exclusive purchase agreement or opportunity which the claimants, Shico, had understandably adhered to. Those are questions scrutinising what the parties were actually doing objectively. His quite clear finding is that Mr Gilmour had not held out such a prospect and that Mr Katan well knew that that was so. Those are findings, as I have said, which were well open to the judge. This court will not go behind them.
16. That is the end of this application, but I should mention one or two other matters of which complaint is made; more particularly, that the judge made no findings regarding the matter as to which notice was in fact intended to be given at the meeting of 30th August 1990, and also did not deal adequately with a letter of 25th February 1993 written by Mr Gilmour.
17. As to the discussion of notice, it seems to me that it was entirely adequate for the judge to deal with the matter as he did in saying that the notice was not directed to any exclusive purchasing agreement. True it is that there were differing accounts given or views expressed as to what exactly the notice would entail.
18. As to the letter of 25th February 1993, this arose at a time when the defendants had in fact been taking all their supplies from Shico, and when there was some concern expressed by Shico that a former employee of theirs had started up a rival business and that the Co-operative Wholesale Society might be contemplating dealing with it. Mr Katan wrote a letter of complaint to the Co-operative Wholesale Society raising these matters but not, in fact, as far as I can see, asserting the existence of an exclusive purchase agreement. The Co-operative Wholesale Society, again in the shape of Mr Gilmour, wrote back on 25th February at some length. One of the matters in issue was the return of certain equipment, but Mr Gilmour said this about the principal matter:

"Our business relationship with Shico has not changed and should we feel the need to make any changes this would not happen without adequate prior notification.

All our ladies safety footwear requirements are being channelled through Shico.

Notwithstanding the above, we must reserve the right to look at alternative sources, whether internal or external, and the request for a quantity of lasts was based on the need to have that flexibility. I obviously need to remind you that this subject was discussed at our meeting on 2nd February when the same point was made."

19. Mr Stewart argues that that is an acknowledgment that "our business relationship with Shico" could not be changed without notification. He says that, since all supplies were still being taken from Shico, it necessarily follows that they would not go elsewhere without notifying them. That is the same argument as formed the basis of the alleged exclusive purchase agreement in 1990. I fear that that again does not follow at all. As the judge said, the letter of 25th February reserved the right to look at alternative sources. The judge said this about it and about the question of notice:

"In the correspondence and notes the words `notice' and `notification' are used and were used both to indicate notice of changes to range, volume, and style, and also notice to terminate. The note of 30 August meeting: `Co-op proposes 3 months' notice for any change.' I do not think it can be inferred from that that CWS were intending to create an Exclusive Purchase Agreement terminable upon 3 months' notice. Mr Gilmour's letter of February 1993 specifically reserved the right to look at alternative sources, and as he said in evidence `To buy if he thought fit.'"

20. I am satisfied that that was his stance when he was dealing with Mr Katan three years before.
21. That again was a finding that the judge was entitled to make. He clearly looked at these matters with care and dealt perfectly properly with the letter of 25th February 1993, as he dealt perfectly properly with all the arguments put before him.
22. As Lord Justice Schiemann said when refusing leave on paper:

"What was agreed is a pure question of fact and the judge was entitled to reach the conclusion which he did reach on the material before him. There is a distinction between an intention to buy exclusively from one supplier and a contractual commitment not to buy from elsewhere."

23. I respectfully agree. I would not grant permission to appeal.
24. MR JUSTICE BODEY: I agree and would only echo my Lord's admiration for the judge's judgment, which runs to a mere 22 pages, after seven days of evidence. It succinctly sets out the judge's conclusions on all necessary matters of fact and those conclusions are, in my judgement, unappealable.
Order:application for permission to appeal dismissed; costs of and incidental to this application to be paid by the applicant claimant, to be the subject of a detailed assessment if not agreed.