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
MANCHESTER DISTRICT REGISTRY
(His Honour Judge Kershaw QC)

		Royal Courts of Justice Strand London WC2 Tuesday, 15th January 2002

1. MR. JUSTICE PARK: This is a short judgment on this application. I will refer to the two parties in this case by their initials: VL for the claimant; MR for the defendant. VL is an English company. MR is a Spanish company. I shall at a later stage also have to refer to an Italian company which I will call Carillo. Last year VL commenced a claim against MR about an alleged contract for it (that is to say VL) to sell a quantity of cloth to MR. VL said that there was a contract, that MR was in repudiatory breach of it, and that VL had suffered loss as a consequence of the breach. There was an order for the issue of liability to be tried first, with assessment of damages to follow later if the court found that liability existed.
2. The hearing on liability took place in February and March 2001 before His Honour Judge Kershaw sitting as a High Court judge. He found in favour of VL on liability in a judgment delivered on 1st March 2001. On 14th March 2001 MR filed an appellant's notice seeking permission to appeal. I may be wrong, but I think that no formal application for permission to appeal was made to Judge Kershaw. If one was, then it must be the case that he refused to grant permission. Either way MR was entitled to apply to this court for permission to appeal and did so. At that stage MR was not seeking to rely on any new evidence. It wished to appeal on the basis that Judge Kershaw, on the oral evidence and the other materials which were before him at the trial, came to the wrong conclusion. It has emerged in the course of submissions this morning that MR still seeks permission to appeal on those grounds. However, in the first instance in this short judgment I will be concentrating on issues concerning new evidence.
3. MR having sought permission to appeal on 14th March 2001, the application was dealt with by Mance LJ on the papers. He refused permission to appeal. MR could have applied for the matter to be reconsidered in an oral hearing. It intended to do that. In the event it did not do it, apparently because of something that went wrong at its then solicitors. MR has now made a new application for permission to appeal, and that is the application which Mance LJ and I have heard this morning. It appeared to me before the oral submissions this morning that the present application was based solely on new evidence which MR has discovered only recently. It now appears that, while MR does seek permission to appeal on the basis of new evidence, it also seeks to advance orally the case which it had originally advanced on 14th March 2001. I will have to come to that later but, as I indicated a few minutes ago, I will for the moment focus on the issues concerning new evidence.
4. I should record that it is common ground that this court does have power to grant permission to appeal out of time based on new evidence. Further, given that we have heard Mrs Heal's application which is based on new evidence, I, for my part, would be prepared -- I believe that Mance LJ will take the same view -- to consider submissions which are based on the original grounds and do not place any particular reliance on new evidence. Nevertheless, although the court has power to grant permission to appeal, in my opinion permission should not be granted.
5. Staying for the moment with the new evidence I do wish to stress one point. It is that my reason for declining to give permission to appeal is not that I consider the new evidence to be of no significance. In my opinion it might (I cannot at this stage say more than it might) be of major importance and of major value to MR in the case. However, it seemed to me when considering this matter in advance of the hearing, and I have to say that it still seems to me after having listened to Mrs Heal's submissions, that the new evidence impacts, not on the question of liability or not, which is the question which Judge Kershaw decided, but on the question of quantum of damages. That is the next stage in the proceedings in the High Court, and of course MR needs no permission from this court to take advantage at that stage in the proceedings of the new evidence which it believes it has discovered.
6. I will now explain as briefly as I can how the point arises. VL's case on liability had three essential elements: (1) that in March 1998 it concluded a conditional contract to sell a quantity of a grey cloth of a particular kind, referred to as Pakistani Loneta, to MR; (2) that later in 1998 the condition was satisfied; and (3) that in October or November 1998 MR repudiated the contract by stating that it would refuse to accept the cloth and would refuse to pay for it.
7. Judge Kershaw accepted VL's case on those three elements. Having found in principle that MR was liable for breach of contract, he gave directions about the next stage, that is to say about the assessment of any damages suffered by VL in consequence of MR's breach. Pursuant to the directions VL has served points of claim and evidence in support of them. The core of what VL said is this. It was holding in stock a quantity of Pakistani Loneta cloth which it was proposing to supply to MR in fulfilment of its sales contract. When MR repudiated the contract VL had to look for a purchaser elsewhere, and eventually -- it appears on 22nd May 2000 -- resold the cloth to the Italian company Carillo. VL says that the price it got from Carillo for the cloth was substantially lower than the contractual price which had been agreed between it and MR. The difference between the two prices was the main component of the damages which, in its points of claim, VL said that it had suffered.
8. When MR received VL's evidence in support, it made its own inquiries. In particular, it made inquiries of Carillo. MR says that it has evidence that the cloth which VL supplied to Carillo was not Pakistani Loneta cloth at all, but a different cloth of a lower quality and value. We have only seen MR's evidence on this. It is always possible that the matter may look different after VL has produced evidence of its own, but at the moment I am prepared to accept that there is a prima facie case that the cloth which VL sold to Carillo was not Pakistani Loneta but a different sort of cloth. That is the new evidence on the basis of which MR applies for permission to appeal against Judge Kershaw's decision on liability. I remain of the opinion that the new evidence cannot have any significant impact on that particular decision, though it clearly might have a significant impact on the quantum of damages.
9. The conclusion of the judge on liability rested on three central propositions which Judge Kershaw decided: first, that certain exchanges between VL and MR in March 1998 (exchanges in which VL's Spanish agent, Senor Aldabe, was involved, as well as Mr. Virani as a director of VL being involved) created a conditional contract. Pausing at that point, I do not myself see how the conclusion that those exchanges in March 1998 created a conditional contract can be affected by evidence that the cloth which VL supplied to Carillo, pursuant to a contract made more than two years later, may not have been Pakistani Loneta but a different type of cloth. I will return to that point and I may add other points at a later stage.
10. The second thing that Judge Kershaw decided was that the condition of the contract was satisfied later in 1998. The condition, so the judge held, was satisfied by VL sending a sample length of cloth, just over one hundred metres, to a company called Colortex nominated for this purpose by MR, and by MR at a later stage indicating that the quality of the sample was "fine" (Judge Kershaw's word). Again, on that point the judge's conclusion may or may not have been correct, but I cannot see how its correctness could be affected in any way by evidence that the cloth which VL delivered to Carillo in or after May 2000 was not Pakistani Loneta cloth.
11. The third thing which Judge Kershaw decided was that, given that there was a contract and that it had become unconditional by the middle of 1998, MR was in repudiatory breach of the contract when it stated in October and November 1998 that it was not prepared to accept delivery of the cloth. I make the same comment. The judge's decision that the position adopted by MR in October and November 1998 was a breach of the contract which he had found to exist cannot be affected by evidence that some 18 months later VL delivered to Carillo a type of cloth which was not Pakistani Loneta cloth but a different type of cloth.
12. In principle, those are the reasons why I believe that the new evidence, though potentially important, does not impact on the reasons which led Judge Kershaw to conclude that MR was liable to VL for such damages, if any, as VL may have suffered.
13. I would add two further points in this connection, having regard to Mrs Heal's submissions. The first is that, as I read the judge's decision, it was no part of his analysis of the contract which he found to exist, nor was it any part of such documents bearing on the contents of that contract as were before him, that the contract made was a contract for the sale of 350,000 metres of cloth being specific Pakistani Loneta cloth held at the time of the contract by VL in its warehouse. There have been occasions in the papers when VL has said that it did have the quantity of cloth in its warehouse. But the contract was simply a contract for the supply of a quantity of cloth. It was not a contract for the delivery of cloth which was specifically in VL's possession at the time. Therefore, even if it can be inferred from what was delivered to Carillo two years later that VL may not have had the Pakistani Loneta cloth in its possession at the time of the contract, I cannot see that that in any way invalidates the contract which Judge Kershaw found to have been made. Whether VL had in its possession 350,000 metres of Pakistani Loneta or not, either way it made a contract, so the judge held, for the sale of that quantity of cloth. That is a common type of contract. I cannot see that the evidence about the supply to Carillo undermines the nature of the contract which Judge Kershaw found to have been made.
14. The second point which I wish to make is that Mrs Heal, in the course of submissions this morning, has suggested that the contract which the judge found to have been made, if it existed which she disputes, might be in some way vitiated on grounds of mistake or misrepresentation, being, I suppose, a belief and a representation on the part of VL that it did have in its possession the particular cloth which it was contracting to sell. No case based on mistake or misrepresentation has been pleaded. Indeed, I believe I am right that this particular line of argument emerged for the first time this morning. I consider that it is not presently before this court and I certainly would not be willing to give permission to appeal to this court now because of the possibility that there may be some sort of remission to the High Court to enable MR to try to develop new legal arguments which it has not developed so far. I am not ruling out the possibility of some future application of that sort, but it is not a matter on which I would be prepared to base any decision now. That is all I wish to say about the new evidence.
15. I must deal with submissions which Mrs Heal has made this morning which I had not anticipated, to the effect that permission should be granted on essentially the grounds of the original application made on 14th March, namely that there are substantial grounds for believing, simply on the basis of the material which Judge Kershaw had before him, that his decision was wrong. As to that, I have considered again the short note of the written decision by Mance LJ dated 10th May 2001. I have listened very carefully to Mrs Heal's submissions, but I do not believe that any substantial new arguments have been advanced to a degree which would dispose me to grant permission to appeal. I mention here that this application is made substantially out of time and substantially after the mistake by MR's previous solicitors was discovered. In those circumstances, it would require very convincing arguments before I would be prepared to grant permission to appeal on those original grounds.
16. One point advanced by Mrs Heal is that, on the evidential material which the judge had before him, he was wrong to find that a conditional contract was made. It would prolong this judgment excessively for me to examine that point in detail. It is certainly true that in some respects the judge has drawn inferences from material which he had before him. For my part, I consider that the inferences which he drew were inferences which it was open to him to draw. Given that an appeal now is in general limited to a review of the decision of the court below, I do not believe that it would be right to grant permission on those grounds.
17. A second issue is whether a person who played a significant role in the events which the judge held to give rise to a contract, namely Mr. Soriano, an officer or employee at the time of MR, had authority, actual or ostensible, to make a contractual offer on behalf of MR. Again, on that matter Mr. Soriano was described as a director. Making every allowance for the fact that in a Spanish company it may not carry quite the same weight as the comparable expression in England, I nevertheless believe that the judge could properly take that into account in concluding that Mr. Soriano did have authority. There was evidence before him from Virani's Spanish agent that -- admittedly not in previous business with Virani -- Mr. Soriano had in the witness's experience acted in a contract-making capacity on behalf of MR. The judge found that Mr. Soriano had actual or ostensible authority. I cannot see that that was a conclusion which it was not open to him to reach. I cannot see that an appeal limited to a review of the decision of the court below would have sufficient prospects of succeeding on this ground to justify the granting of permission to appeal.
18. Thirdly and finally, a point is sought to be made about the condition which was attached to the contract made in March. The relevant document reads as follows:

"This order is subject to approval of a sample of 150 metres to be forwarded to Colortex in April"

19. The evidence is that a sample of 310 metres was forwarded to Colortex in April. The evidence which the judge accepted, as in my judgment he was entitled to accept, was that, after the sample had been analysed, Mr. Revert of MR indicated that in terms of quality it was fine. The judge took the view that that was sufficient to satisfy the condition of approval. He read "approval" as meaning approval as to quality. That is the way I would have read it myself. An argument that MR, although it had no quarrel with the quality of the cloth, nevertheless did not approve of it because the market had turned against it in Spain, appears to me to be plainly wrong.
20. For those reasons I would reach the same conclusion as was reached by my Lord, Mance LJ, on the application which was dealt with by him on the papers last year. As regards the new issues raised in this application, for the reasons I gave earlier, I do not consider that the new evidence, important though it may be, is such as to justify permission to appeal being given so far as concerns the decision on liability. For those reasons I would refuse this application.
21. LORD JUSTICE MANCE: I agree with my Lord's reasons and conclusions. I would underline the unsatisfactory manner in which I consider that this matter comes before us on the papers. The court was notified on 21st November 2001, as well as by Mr. de Azevedo, the applicant's present solicitor, by witness statement dated 14th December of last year, and by counsel's skeleton dated 12th December last year that the only application before us would be one made on the basis that there is fresh evidence which undermines the judge's conclusion that there was a contract between the parties.
22. The fresh evidence is that the goods which the claimant asserts that it would have supplied to the applicant, and asserts that it sold in lieu two years later to an Italian firm, were not intimate blend material or Pakistan Loneta, as would be required by the contract between the parties as found by the judge. That fresh evidence has, however, no bearing on the question whether or not the parties reached a contractual agreement relating to intimate blend material or Pakistani Loneta. It is clear that the claimant was trying to sell intimate blend material to the applicant. As far as the applicant was concerned, it had no reason to think otherwise. So, even if one assumes that the claimant did not have or have available to it any intimate blend material, the applicant did not know this fact. This fact can therefore have no material bearing on the critical question whether the applicant ordered intimate blend material. The lack of any intimate blend material may go to damages but that is irrelevant to the judgment on liability. Eventually Mrs Heal accepted those points which wholly remove the only formal basis of the application before us.
23. However, without prior warning she sought, first, to suggest some case based on misrepresentation or mistake which might enable the applicant to avoid any contract and, second, to re-argue the case on which I refused permission to appeal on paper as notified by the Court of Appeal. Despite the applicant's failure to apply for an oral hearing within the seven day limit, to which the Court of Appeal Office drew attention, she sought for the first time in this connection to apply to us for an extension of that seven day period.
24. As to the first point, all Mrs Heal can refer us to is the claimant's evidence at the trial, as well as to statements in the context of the proceedings relating to quantum, that the goods which would have been supplied to the applicant were goods which went some two years later to Italy. Those goods at least seem not to have been intimate blend but that is no basis for a case, as it seems to me, based on either mistake or misrepresentation. No step has been taken to raise any such case, or to avoid any contract, as against the claimant, or to formulate any application to us, on any such basis. It would be wrong for us to consider a wholly unformulated application for permission to appeal at the present stage.
25. The consultant with the applicant's former solicitors, Mr. Gallardo, who later moved to the applicant's present solicitors, appear to have let the applicant down, since it was evidently intended within the relevant seven day period to renew the application for permission to appeal orally. The fact that the applicant had been let down was appreciated by the applicant's present solicitors on 18th October 2001. Still, however, no step was taken to renew or to seek any necessary extension of time to renew the application for permission to appeal. When counsel was instructed at the end of October 2001, she advised that the time limit was final. When the application was made to the court on 21st November 2001 it was on the sole basis of new evidence. An application for an extension of time within the seven day period therefore faces some difficulty. It seems to me that it requires us to consider with care whether there is any basis for believing that an appeal on the substance of the judgment below might succeed.
26. Turning to this aspect, I agree with the substance of what my Lord has said. I have reviewed the reasons that I gave in writing in my note dated 10th May. In brief, I add, as to the inference mentioned in the first paragraph, that there was some communication between Mr Soriano and Mr Aldabe. Mr Aldabe was not called by the applicant. He could not be found. However, unless Mr Aldabe was acting on a frolic of his own, some communication must have taken place between him and Mr Soriano, as his written statement would lead one to infer, and as indeed the communication which he sent to the claimant (which is at D4), consisting of the memorandum or order form dated 25th March 1998, also leads one to think. It is suggested, without any positive basis, that he might have been acting on a frolic of his own in order to obtain commission. His prospects of obtaining commission without any communication with his client or therefore with the potential buyer would seem to be extremely unlikely.
27. As to the second point, lack of authority, the evidence of Mr. Aldabe by written statement was that he regularly dealt with Mr Soriano. He appears to have gone too far in suggesting, at least when one reads his witness statement literally, that he dealt with him in the context of previous contracts made with the claimant, since this was the first such contract. But there is no reason to doubt what he said about previous dealings with Mr Soriano, with whom he says he dealt, without any suggestion that Mr Soriano needed further authority as a director and purchasing manager before concluding contracts. Mr Soriano had on the face of it, and he would be assumed to have, clear ostensible authority to make purchases and contracts. I take fully on board Mrs Heal's point that this was a large contract, but I do not think that that in itself alters the position. I also recognize that the judge found that there was an internal limitation on his authority to a small sum. There is no reason to think that Mr Aldabe had any reason to know about that. On the face of it, he was entitled to rely on Mr Aldabe's ostensible authority to contract the business.
28. As to the third point, relating to the condition of the contract providing for approval of a subsequent larger sample, the important background to the judge's findings lies in his conclusion based on the evidence of Mr Virani as to the context in which that term appears in the document dated 25th March 1998 and in the contract generally. Mr. Virani's evidence was that he had with him a smaller sample which was approved, but that a larger sample was required to check on quality, matters such as the number of defects per metre and so on. It was agreed that the sample would be sent direct to the applicant's processing factory. Mr Virani offered a choice between a situation where there was no contract for the intimate blend in relation to which he was offering a contract -- the applicant would then have been at risk of price increases -- and a situation where there was a firm contract but with a let out relating to the quality if, when viewed objectively, the larger sample was not approved. The judge found that the applicant, through Mr. Soriano, indicated an interest in the latter approach and that was what came to pass. In those circumstances, it does not seem to me that the condition can sensibly have extended to the approval of an essential specification of the material contracted which was that it should be intimate blend. In all other respects the sample was approved. When it was approved it was, according to Mr Aldabe, expressly approved on the basis that the order remained but that a delivery schedule was being postponed, because the customers of the applicant were now voicing doubts about whether they wished to receive intimate blend as opposed to some other material. In other words, Mr Soriano acknowledged the existence of a binding order, albeit one in relation to the fulfilment of which the applicant was temporising.
29. For those reasons I agree that we should not extend time for this renewed application for permission to appeal and that the application which we have heard today fails.
Order: Applications refused.