England and Wales Court of Appeal (Civil Division) Decisions

IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE CENTRAL LONDON COUNTY COURT
HIS HONOUR JUDGE LINDSAY Q.C.
Claim No. SI30162

		Royal Courts of Justice Strand, London, WC2A 2LL
		27 July 2006

Lord Justice Moore-Bick:

1. The claimant in this case, Friarwood Ltd, is a wine merchant whose business is mainly that of a wholesale supplier to the restaurant and hotel trade but which also carries on a retail business from premises in the New King's Road, London. The defendant, Champagne Cattier S.A., is an independent champagne producer in Chigny-les-Roses. In September 1998 Friarwood ordered from Cattier's agent in this country, Cellar Trends, 2,400 bottles and 600 half bottles of Cattier Brut 1^er Cru which was despatched a few weeks later in early November. On arrival in this country the wine was held in the bonded cellars of Octavian Ltd until required for sale.
2. Although a small number of bottles were drawn between December 1998 and September 1999, Friarwood did not actively promote the sale of Cattier champagne to its customers until the summer of 1999 and no substantial quantities were sold until about September of that year. Thereafter it sold the champagne in the ordinary course of its business, but by the end of December 2001 it still had 984 full bottles and 528 half bottles in stock.
3. Between October and December 2001 Friarwood received a number of complaints from customers who had bought Cattier champagne. The directors therefore held a tasting on 31^st December 2001 of one full bottle and one half bottle at the premises in New King's Road. Their reaction was that the wine had changed colour, had gone flat, and was oxidised. Friarwood's Sales Director, Mr. Charles Bowen, described it as "barely drinkable", by which he meant that it was not really drinkable at all. One full bottle and one half bottle were sent to a company called Corkwise Ltd which is one of the leading analytical chemists serving the wine trade. The samples were analysed by one of its senior employees, Mr. Geoffrey Taylor, who reported that the pressures of the full bottle and half bottle were 3.6 bar and 3 bar and the free sulphur dioxide content 3mg per litre and 2mg per litre respectively.
4. In the light of these discoveries Friarwood stopped supplying the wine to its customers and complained to Cellar Trends that it was out of condition. It proposed to send the remaining bottles back to Cattier for a full refund of the price. However, Cattier was firmly of the view that the wine had been in good condition when delivered and refused to accept that Friarwood had any grounds for complaint. As a result a dispute arose which led to the present proceedings in which Friarwood sought to recover damages in the amount of the full market value in good condition of the whole of the champagne which remained in stock at the end of 2001.
5. Friarwood based its claim on section 14(2) of the Sale of Goods Act 1979 which provides that where a person sells goods in the course of a business there is an implied term that the goods supplied are of satisfactory quality. For this purpose goods are considered to be of satisfactory quality if they meet the standards that a reasonable person would regard as satisfactory taking account of the description applied to them and all other relevant circumstances. It was common ground that in this case satisfactory quality is to be judged by the standards of a reasonable wine merchant buying non-vintage champagne from a reputable, but not top flight, producer for resale in both the wholesale and the retail market.
6. The parties relied on expert evidence from two principal sources: analytical chemists, who gave evidence of the physical and chemical properties of the wine at different stages in its life, and connoisseurs of champagne acting primarily as tasting experts, who gave evidence about the development of champagne in the bottle and who described the taste and appearance in February 2005 of the champagne supplied by Cattier to Friarwood. The tasting experts also gave evidence about the practices of the wholesale wine trade in relation to the purchase and sale of non-vintage champagne, the tastes of consumers in general and the characteristics of this particular champagne at earlier stages in its life.
7. The earliest certificate of analysis relating to champagne from the same cuvée as that supplied to Friarwood was produced in September 1998. It formed the basis of a Certificate of Purity signed by M. James Darsonville of Martin Vialatte Station Oenotechnique de Champagne in September 1998 relating to one half bottle. This certificate was apparently issued in connection with the export of the champagne to Japan. It showed the pressure to be 5.3 bar and the free sulphur dioxide content to be 5mg per litre. It was accepted that these characteristics were satisfactory. The next analysis was that carried out by Mr. Taylor in early 2002, to which I referred earlier. In May 2002 M. Darsonville measured the free sulphur dioxide content of one full bottle and one half bottle of champagne supplied by Cattier for testing at 3mg per litre and 6 mg per litre respectively. He did not measure the pressure of either bottle on that occasion. Finally, Mr. Taylor carried out an analysis of each of the bottles chosen to provide the samples for tasting by the experts in February 2005. He found that pressures were low, ranging from 2.6 bar to 3.1 bar in the case of full bottles and from 1.8 bar to 2.1 bar in the case of half bottles. In each case the free sulphur dioxide content was 2mg per litre or slightly lower.
8. None of the test results was seriously in dispute; the real question was whether the wine had deteriorated more quickly and to a greater extent than could reasonably have been expected. Mr. Taylor and M. Darsonville were unable to agree on what conclusions could be drawn from their findings about the condition of the wine in November 1998, but since the judge concluded that the real issue was one of taste, those simply provided part of the context in which the evidence of the tasting experts fell to be assessed.
9. The tasting experts in this case were two acknowledged wine connoisseurs, Mr. Julian Jeffs Q.C., who was called by Friarwood, and Mr. Tom Stevenson, who was called by Cattier. They gave evidence about the production, storage and development of champagne in general as well as giving their views on the particular qualities of the wine supplied by Cattier to Friarwood. Although I have referred to them as 'tasting experts' and shall continue to do so, their evidence ranged well beyond simply describing what they found in the course of their tasting.
10. A blind tasting was held on 9^th February 2005 of ten samples, some of which had been drawn from stocks still held at Octavian, some of which had come from stocks held by Friarwood itself and two of which (samples 6 and 7) had been supplied by Cattier from its own cellars. There was a dispute whether the two samples provided by Cattier were from the same cuvée as the champagne that had been sold to Friarwood. Eventually it was accepted by all concerned that there had been an error in relation to sample 6 which was of a different champagne and in the end the judge was unable to accept that sample 7 was representative of the champagne sold to Friarwood either. He therefore disregarded entirely the evidence derived from those two samples.
11. The final stage in the production of champagne is known as 'disgorgement'. It is the process by which the lees from the secondary fermentation are removed and is carried out shortly before the wine is prepared for delivery to customers. It was common ground that from the moment of disgorgement champagne undergoes a continuous process of development which causes a progressive darkening in colour, an alteration in taste from 'floral' through 'fruity' to 'toasty' or 'biscuity' and a reduction in pressure giving rise to a loss of mousse or 'fizz'. Although different wines age at different rates, the longer the period that has elapsed since disgorgement the more advanced these changes are likely to be. By the time Mr. Jeffs and Mr. Stevenson carried out their tasting the best part of seven years had elapsed since the champagne had been disgorged.
12. There were many matters about which Mr. Jeffs and Mr. Stevenson agreed, but there were also some critical matters on which they disagreed. In order to understand the issues which arise on this appeal it is convenient to begin by identifying the more significant matters on which they were broadly in agreement.
13. As I have already mentioned, the experts agreed that champagne undergoes an ageing process from the moment of its disgorgement, becoming richer in colour, more complex in flavour and less fizzy over the course of time. Most consumers nowadays like their champagne young with what was described as a fresh, 'floral' taste and plenty of fizz. There was a time when importers would routinely hold new stocks of non-vintage champagne for up to a year before putting them on the market in order to enable some development to take place, giving the wine what is known as 'landed-age', but this practice has virtually died out and non-vintage champagne is now normally made available for sale as soon as it is received from the producer. In the present case the wine was kept in Octavian's cellars for nearly a year before being put on the market, but the experts agreed that the conditions under which it had been kept were perfectly acceptable for long term storage. One can therefore disregard the possibility that the wine was exposed to some harmful conditions during that period.
14. The experts also agreed that a trade purchaser of non-vintage champagne is entitled to expect that it will have a shelf-life of 30 months in the case of full bottles and 18 months in the case of half bottles, in other words, that it will retain most of its youthful characteristics for about that length of time, though Mr. Stevenson agreed that a customer who enjoys mature champagne could reasonably be expected to store his wines for longer. However, their agreement on this point masked a degree of difference between them about how long a merchant would expect to be able to continue selling the wine to the market at large. Although Mr. Jeffs agreed that he would not expect any merchant to keep a non-vintage champagne for more than 30 months, he also made it clear that in his view it did not mean that the wine could not be expected to be acceptable to the general market if kept beyond that period. Mr. Stevenson was of the view that a merchant could normally be expected to dispose of any particular consignment of non-vintage champagne within about 12 months of delivery; Mr. Jeffs expressed a more qualified opinion saying that in his view no merchant in modern times would be expected to buy more than he could reasonably expect to sell in a period of up to three years.
15. The critical question on which the experts disagreed was whether by the time of their tasting the champagne had aged more than could reasonably have been expected. Mr. Jeffs thought it had; Mr. Stevenson thought it had not. That led them in turn to disagree about whether it had been of satisfactory quality at the time of delivery to Friarwood more than six years earlier. The experts gave their opinion on that question because they had been asked to do so, but it was really a question for the judge to answer on the basis of all the evidence before him, not for them and I have little doubt that the fact that they were asked to deal directly with that question was partly responsible for the difficulties which have given rise to this appeal. Before coming to them, however, it is necessary to give a rather fuller summary of the views they expressed following the tasting.
16. In his report Mr. Jeffs said that non-vintage champagne can be drunk with pleasure as soon as it is shipped but that in his view it improves with cellaring for at least a year and will continue to improve for possibly as long as four years. Thereafter it remains on a plateau for some time before beginning to decline. He said that he would therefore expect full bottles of Cattier champagne disgorged in 1998 to be on a plateau until at least the end of 2001 before beginning a slow decline. He considered that all the samples tasted older than they actually were. He did not think any of them were satisfactory and in cross-examination he described the wine as having "collapsed". He was understandably cautious about offering an opinion on the actual condition of the wine at one, two or three years after delivery, but said that he would normally have expected it to be in good order on all three dates.
17. Mr. Stevenson took a different view of the samples, all of which (with the exception of sample 2 which was agreed to be a rogue bottle) he considered to be generally of at least satisfactory quality for a non-vintage champagne of that kind with more than seven years' ageing since shipment. He did not think that it had aged prematurely and was of the view that it must therefore have been suitable for consumption one, two and three years after purchase. In cross-examination he was asked about the fitness of the wine for sale in December 2001 in the light of Mr. Taylor's findings in February 2002 that the pressure had fallen to 3.6 bar in the case of the full bottle and 3 bar in the case of the half bottle. He expressed the view that although the majority of consumers would have considered the wine to be flat, a sophisticated consumer who was looking for a more mature champagne would be prepared to accept less fizz. He accepted that a bottle with a pressure of 3.6 bar was not fit for sale to the average consumer and should not therefore be offered for sale without some qualification, but he considered that it would be perfectly acceptable to more sophisticated consumers and could be offered for sale if properly described.
18. In paragraphs 161 and 162 of his judgment the judge summarises the salient features of the evidence given by Mr. Jeffs and Mr. Stevenson respectively. He records that Mr. Jeffs had expressed the view that loss of sparkle and oxidation normally takes four to five years and that he would not have expected it to have occurred in this wine which by the time of the tasting had collapsed. He would have expected some oxidation and loss of sparkle by 2005, but not to the staggering extent he had discovered. He thought this had been a bad batch. Mr. Stevenson, on the other hand, had said that, despite the fact that the pressure of all the wines tasted was unexpectedly low, the wine was satisfactory for its age. A sophisticated consumer would not regard the pressure as unsatisfactory, but the average consumer would not regard the wine as fit for sale because he would be expecting something fresh and young. The average consumer would not like mature champagne.
19. The judge said that he regarded that part of Mr. Stevenson's evidence as of crucial importance in enabling him to resolve the dispute between him and Mr. Jeffs. Having referred to section 14(2A) of the Sale of Goods Act, he said in paragraph 163

"No one would doubt that Mr. Stevenson is an exceptionally sophisticated consumer of champagne. The criticism can be justifiably be made that Mr. Stevenson has been approaching this case through the perspective of the sophisticated consumer rather than the reasonable person as identified in section 14(2A). In this context I agree with the submission of Mr. Kynoch in paragraph 6.viii-ix of his closing submissions. No similar criticism is made of Mr. Jeffs' approach. Accordingly I prefer the evidence of Mr. Jeffs on the taste issue."

(In the paragraphs of his closing submissions to which the judge referred Mr. Kynoch had argued that when judging this champagne Mr. Stevenson had fallen into the error of applying the standards of a sophisticated consumer who would contemplate buying old champagne at auction rather than those of a reasonable person in the form of the average consumer.)

20. Mr. Janusz submitted on behalf of Cattier that it was at this point that the judge himself fell into error. Both experts were asked to taste the wine in 2005, to describe what they found and, by reference to its condition at that time, to express an opinion of its quality when delivered to Friarwood in the latter part of 1998. They were also asked to provide the judge with the information necessary to enable him to understand how champagne develops following disgorgement and thereby to reach his own decision about its quality at the time of delivery taking into account all the circumstances in which it had been purchased. Mr. Janusz submitted that, in describing the response of a sophisticated consumer to a champagne which had lost its floral taste and much of its fizz, Mr. Stevenson had merely been pointing out that a wine in that condition would be attractive to some people and could not be regarded as altogether unfit for sale. He had not been judging the quality of the wine in 1998 or at any point thereafter by reference to the standards of sophisticated consumers since he readily acknowledged that old champagne would not appeal to the average consumer and could not be offered for sale without an appropriate qualification. He also submitted that, when deciding whether the wine was of satisfactory quality within the meaning of the statute, the judge had failed to take into account the limited period for which most wine merchants could normally be expected to hold non–vintage champagne in stock.
21. Mr. Kynoch submitted that the judge was entitled to prefer the evidence of Mr. Jeffs to that of Mr. Stevenson for the very reason that he gave, namely, that Mr. Stevenson had applied the standards of a sophisticated consumer rather than those of a reasonable consumer in giving his opinion of the quality of this champagne. He submitted that although the question of shelf-life had been raised in relation to quantum, it had not been overtly raised in relation to liability and he appeared to argue that it was not open to Cattier to contend that the wine was of satisfactory quality if it would retain its characteristics for 12 to 18 months from delivery.
22. As the judge observed, fizz and taste are the crucial issues in this case and the evidence of the tasting experts was therefore of central importance. Mr. Stevenson is acknowledged to be one of the world's leading authorities on champagne. That does not mean that the judge was bound to accept his views, of course, but it does mean that they carry particular weight and should not be rejected without good reason. That is not to diminish the evidence of Mr. Jeffs, however, who is also a distinguished authority in this field. His views likewise deserve considerable respect and should not be rejected without good reason.
23. It has often been said that there is no arguing about matters of taste and one cannot help feeling some sympathy for the judge who was faced with having to find a rational basis on which to choose between experts on a matter of this kind with only a limited amount of independent evidence to guide him to a conclusion. There were really only two courses open to him. One was to conclude that it was not possible to make a reliable finding about the quality of the wine in November 1998 by reference to an analysis carried out in February 2002 and a tasting that took place in February 2005. That would have led him to hold that Friarwood had failed to discharge the burden of proving that at the time of delivery the champagne was liable to age prematurely and was therefore not of satisfactory quality. The other was to prefer the evidence of one of the experts on the grounds that it carried more weight than that of the other, for example, because it accorded better with the other evidence before him, or because it was simply more coherent and compelling or because the witness in question could bring a greater degree of knowledge and experience to bear. He was fully entitled to prefer the evidence of one expert to that of the other, provided he did so on sustainable grounds.
24. The critical issue on which the experts differed was whether by February 2005 the champagne supplied to Friarwood had aged to a greater extent than could reasonably have been expected. If it had, it was evidence from which the judge could have concluded (though he would not have been bound to do so) that it had not been of satisfactory quality at the time of delivery. Whether by the time of the tasting the wine had aged more than could reasonably have been expected was a question which turned not on the sort of consumers (if any) to whom it would still appeal, but on the extent to which it had undergone changes in its colour and taste, had lost pressure and had become oxidised. Changes of this kind should be capable of reasonably objective assessment, but inevitably the experts tended to describe them in terms which were to some extent subjective.
25. Having regard to the contents of Mr. Stephenson's report, the note of the experts' discussion and the transcript of his cross-examination, I agree with Mr. Janusz that the judge was wrong to reject his evidence on the grounds that he had applied the wrong test. Mr. Stephenson did not mention the sophisticated consumer in his report (though when commenting on Mr. Taylor's analysis of the samples tasted in 2005 he did say that the low pressures he had recorded would not worry most connoisseurs of mature champagne) and there is no reference to him in the note of his discussion with Mr. Jeffs. The sophisticated consumer emerged for the first time in the course of cross-examination when Mr. Kynoch suggested to Mr. Stevenson that champagne with a pressure of only 3 bar would be regarded as flat by the ordinary consumer and was therefore not fit for sale. Mr. Stevenson's response was to point out that some consumers prefer their champagne aged and would expect old champagne to have a much reduced pressure. They would not regard a pressure of 3 bar, or even lower, as by any means unacceptable, so that bottles with pressure as low as that, or even significantly lower, would still be fit for sale provided that they were properly described. At the same time he expressly accepted that bottles with a pressure of 3 bar would not be acceptable to the majority of consumers who prefer their champagne fresh and floral with a distinctive fizz.
26. I think it is clear that when Mr. Stevenson referred to the sophisticated consumer he was merely resisting the suggestion that old champagne with much reduced fizz was wholly unfit for sale and was not applying the test of the sophisticated consumer to the question whether the champagne was of satisfactory quality at the time of delivery. However, the experts should not really have been drawn into that arena at all. Part of the problem in the present case stems from the fact that the experts were invited to express an opinion on whether the champagne was of satisfactory quality when it was delivered to Friarwood and at various dates thereafter. However, as I have already observed, those were questions for the judge. All the experts could properly be asked to do was to describe the champagne at the time of the tasting, comment on its qualities in the light of its age, and give the court such assistance as they could from their own experience about the way in which non-vintage champagne develops over the course of time. Insofar as such matters fell within the scope of their expertise they could also be asked to give evidence of wine merchants' practices and consumers' preferences. On the basis of their evidence and of the other evidence before him (including the evidence obtained from Mr. Taylor's analyses, the evidence of M. Darsonville, Mr. Bowen's evidence about the storing and marketing of the champagne and the number and timing of returns and so on) it was for the judge, applying the correct legal test, to decide whether the wine was of contractual quality at the time of delivery.
27. Based on his tasting Mr. Stevenson was of the view that in February 2005 the champagne was of at least satisfactory quality for a non-vintage champagne of its type and age, but Mr. Jeffs thought otherwise. It was necessary, therefore, for the judge to deal directly with this conflict of evidence and decide, if he could, whose evidence he preferred and on what ground. Unfortunately, however, he rejected Mr. Stevenson's evidence on that important question because he thought, incorrectly in my view, that he was applying the wrong test in seeking to answer a different question. As a result he did not really grapple with the difference between the experts on what was a fundamental issue in the case and in those circumstances I do not think that his decision can stand.
28. That being so, it is necessary to consider how best to dispose of the matter. Mr. Janusz invited us to resolve the dispute between the experts on the basis of the material before us which includes transcripts of the evidence given at the trial. He recognised, however, that we should inevitably be at a serious disadvantage in not having heard the experts for ourselves. That is a particular concern in this case because of the nature of the issues to which their evidence was directed. Moreover, although the claim in this case is modest in financial terms, the dispute is of some importance to Cattier since the outcome may affect the reputation of its product.
29. For my own part I should be reluctant to substitute my own findings of fact for those of the judge without having heard the experts since I doubt whether to do so would be fair to either party. I can therefore see no alternative but to direct that there be a retrial in this case. In those circumstances I do not think it necessary or appropriate to deal with Mr. Janusz's second ground of appeal which raises the question how long a non-vintage champagne of this kind must be capable of retaining its youthful characteristics in order to be of satisfactory quality within the meaning of section 14(2A). The judge did not directly address that issue at all. He simply moved straight from his finding that Mr. Jeffs had applied the correct test (meaning, as I understand him, the standards of the reasonable consumer rather than those of the sophisticated consumer) to accepting his evidence that the wine had aged prematurely by February 2005 and thence to the conclusion that it had been properly withdrawn from sale at the end of December 2001. What he did not decide was how long a reasonable wine merchant would expect this champagne to remain saleable to ordinary consumers and whether it had prematurely ceased to have that quality. These were potentially important questions because on one view of the evidence a reasonable wine merchant would expect to dispose of champagne of this kind within 12 months of delivery (in this case by the end of November 1999) and in any event would not expect it to retain its appeal to the general market for more than 30 months (in this case beyond May 2001). Whatever may be the correct view about the period for which a champagne of this kind needs to be capable of retaining its acceptability to the market at large in order to be of satisfactory quality, however, it is that period which provides the yardstick by which the development of this particular consignment is to be measured.
30. As I have already indicated, there was a degree of consensus between the experts on this point and some assistance is also to be gained from the evidence of Mr. Bowen who acknowledged that he expected the consignment to last the best part of 12 months once it was put on the market. It is tempting, therefore, to make a finding on this issue on the basis of the evidence before us which, depending on its nature, might spare the parties the expense of a retrial. However, as I also indicated earlier, the experts were not wholly in agreement on this question and, as Mr. Kynoch pointed out, it was not originally raised by Cattier in relation to the issue of liability. Having regard to the way in which the case was argued below, I am not persuaded that it would be right for us to make our own findings on this question. I think it is fairer to both parties to leave it to be determined after full argument in the light of the evidence given at a retrial.
31. For these reasons I have reached the conclusion that the appeal should be allowed. Cattier also sought to challenge the judge's order for costs on the grounds that Friarwood had knowingly exaggerated its claim and had failed in some respects to comply with its obligation to give disclosure. I was not impressed by those arguments. The main issue in the case, and the one which occupied the bulk of the court's time, related to the quality of the champagne at the time of delivery. The amount at stake in financial terms was quite small and although Friarwood failed to recover a significant proportion of its claim in financial terms, it did succeed on the issue of liability. Any reduction in the costs awarded to it could at best only have been modest and in my view the judge's order was well within the scope of his discretion. However, in view of the conclusion I have reached on the primary ground of appeal the judge's order for costs will have to be set aside in any event. I would order that the costs of the trial be reserved to the judge hearing the retrial.

Lord Justice Richards:

32. I agree.

Lord Justice Tuckey:

33. I also agree. It is most unfortunate that our decision means that there must be a retrial, but for the reasons given by Moore-Bick L.J. I think this is unavoidable. One can deduce from the costs already incurred that the outcome of this litigation means more to the parties than the amount of money at stake. Costs will now increase, but a retrial will, I hope, result in a judgment which properly resolves the issues between the parties.