COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE QUEEN'S BENCH DIVISION (COMMERCIAL COURT)
The Honourable Mr Justice Cresswell
Strand, London, WC2A 2LL
B e f o r e :
LORD JUSTICE RIX
SIR MARTIN NOURSE
| AIC LIMITED
|- and -
|ITS TESTING SERVICES (UK) LIMITED
"The Kriti Palm"
WordWave International Ltd
A Merrill Communications Company
190 Fleet Street, London EC4A 2AG
Tel No: 020 7421 4040 Fax No: 020 7831 8838
Official Shorthand Writers to the Court)
Mr Nicholas Hamblen QC & Mr Michael Ashcroft (instructed by Messrs Holman Fenwick & Willan) for the Respondent
Crown Copyright ©
Lord Justice Rix :
|2. The essence of ITS's case||20-22|
|3. The essence of AIC's case||23-27|
|4. The dispute||28|
|5. The effect of the certificate||29-44|
|6. The parties||45-48|
|7. The inspection contract||49-52|
|8. Events at the loading port||53-60|
|9. Events at the discharge port, and their consequences||61-68|
|10. The Cooper retest (and further events of 16 April)||69-82|
|11. 17 April: Mr Rackham briefs Mr Lucas. What Mr Lucas knew||83-95|
|12. 17 April: the telephone conversation. What Mr Lucas said||96-122|
|13. The follow up correspondence||123-129|
|14. The premium parcel RVP||130-131|
|15. Other witnesses of the telephone conversation||132-145|
|16. After the telephone conversation||146-153|
|17. AIC's Swiss and Galaxy's English litigation||154-163|
|18. The expert evidence||164-168|
|19. International and ITS internal guidelines||169-186|
|20. ITS's practice and duties with regard to sample retention||187-192|
|21. Mr Lucas's evidence||193-205|
|22. The judge's findings about Mr Lucas||206-215|
|23. A third element||216-218|
|24. Mr Chalmers' evidence||219-245|
|25. The judge's findings as to Mr Chalmers||246-249|
|26. The issues considered by the judge||250|
|27. Deceit: the law||251-260|
|28. Deceit: the representation||261-280|
|29. Deceit: dishonesty||281-293|
|30. A third element; and the respondent's notice||294-300|
|31. Deliberate concealment||301-314|
|32. Section 32(1)(b)||315-325|
|33. The four tests||326-327|
|34. (1) Did ITS owe a duty to disclose the relevant information?||328-351|
|35. (4) Was the information relevant to AIC's right of action?||352-362|
|36. (2) and (3): consciousness of duty and deliberate decision to conceal||363-366|
|37. Section 32(2): a fallback case||367-369|
|38. Continuing duties||370-374|
|39. Causation, remoteness and loss||375|
|41. Annex A: The transcript of the 17 April Telephone conversation||A|
"Quality and quantity at loadport: as determined by mutually acceptable independent inspectors, appointed by sellers, results to be final and binding for both parties save fraud and manifest error. Costs to be shared 50/50 buyer/seller."
"TW: Well I have a quality certificate from you that says it is on specification.
NL: We will be standing by that certificate."
"The representation that the certificate (which stated 'Fuel meets Specification') was and remained a good and valid certificate, was a false representation made by Mr Lucas who was reckless as to its truth."
2. The essence of ITS's case
3. The essence of AIC's case
4. The dispute
5. The effect of the certificate
"Before coming to the arguments I should record certain further matters of agreement. First, that test method D4052 is more modern and accurate than D1298, having a margin of error of .0001 per cent. as opposed to 0.0007 per cent. Second, that had the inspectors used method D1298, they would still inevitably have found the density test satisfied in respect of the actual samples tested."
"Once a material departure from instructions is established, the Court is not concerned with its effect on the result. The position is accurately stated in par. 98 of Mr. Justice Lloyd's judgment in Shell U.K. v. Enterprise Oil: the determination in those circumstances is simply not binding on the parties. Given that a material departure vitiates the determination whether or not it affects the result, it could hardly be the effect on the result which determines the materiality of the departure in the first place. Rather I would hold any departure to be material unless it can truly be characterized as trivial or de minimis in the sense of being obvious that it could make no possible difference to either party."
"whether the parties would reasonably have regarded the departure as sufficient to invalidate the determination".
"Turning to the present case, I am in no doubt that the fact that the use of the wrong method cannot have affected the "result" does not save the determination. As Mr. Goldstone has pointed out, it cannot be assumed that the choice of a particular method of testing is a consequence solely of the parties' desire to achieve an accurate result. There may be different reasons which have been dictated by the terms of other related contracts and/or related letters of credit. The possibility that there may be such other reasons is by no means far-fetched in the context of a commercial contract which is likely to be one of a chain. These are not matters about which the Court can or should speculate. The starting point is that if the parties have agreed that a determination using method A is to be binding, then a determination using method B will not be binding because the parties have not agreed that it will be. It follows that the determination is not binding and the appeal must be dismissed."
"TW: …because I believe this other [method ie D5191] will give a higher RVP reading.
NL: Ok well I don't know whether that is true or not, I don't think there is any correlation between the two methods…"
"The use of ASTM D323 resulted in a lower reading than that which would have been shown by the correct test and gave the impression that the cargo met the contractual specification."
That plea was presumably premised at least in part on expert advice tendered to AIC.
"The following points should be noted. It would not have been easy for a client such as AIC inexperienced in the purchase and sale of gasoline (see issue 1) to determine whether a departure from instructions was trivial or de minimis. I refer under issue 6 below to test methods which are technically equivalent and would be expected to give results that are not significantly different. If the tests ASTM D323 and ASTM D5191 had been performed correctly the results should be comparable. Once it was clear that ITS had departed from instructions as to the test method (and used D323 instead of D5191) it was perfectly understandable commercially that AIC (with its very limited experience) would look to ITS (as an independent inspection company) for an answer one way or the other as to whether ITS was standing by the certificate which said "Fuel meets specification", and act accordingly vis-à-vis Mobil or Galaxy."
"15. Before turning to the authorities most closely in point, it is convenient first to recognize two principles which inevitably touch on the issue. The first, and that on which Mr. Nolan understandably places reliance, is to be found in Lord Justice Cairns' judgment in Toepfer v. Continental Grain Co.,  1 Lloyd's Rep. 11 at p. 14:
When parties enter into a contract on terms that the certificate of some independent person is to be binding as between them, it is important that the Court should not lightly relieve one of them from being bound by a certificate which was honestly obtained and not vitiated by fraud or fundamental mistake on the part of the certifier. When, for instance, as in this case, the certificate called for by the contract is one relating to the quality of the goods sold, the business purpose is to avoid disputes about quality, and that purpose is defeated unless it is made difficult for a party to go behind a valid certificate.
16. The second, clearly countervailing, principle is surely this: inspectors should be astute to comply with their instructions and, if they depart from them, there should not then be much scope for dispute and litigation as to whether their determination is nevertheless binding. In short, the interests of finality cut both ways although, of course, one bears in mind that if a determination is set aside the underlying dispute is left unresolved."
6. The parties
7. The inspection contract
"Contractor [ie ITS] shall hold retained samples for ninety days (unless instructed otherwise by Company) [ie Mobil, and thus Mobil/AIC]."
"192. Thus in my opinion ITS' duty to take reasonable care to ensure that any certificate it issued was accurate as to those matters on which it was instructed to report, included the following implied obligations to both Mobil and AIC:
i) to determine whether Mobil had performed its contract with AIC in the relevant respects, applying the test methods ITS was instructed to apply.
ii) to exercise independent and impartial judgment and to act as an independent inspection company at all material times.
iii) to report the result of tests independently, accurately, clearly, unambiguously and objectively.
iv) to include in any certificate all information relevant to the validity and application of the test results and all information required by the test method and procedure used;
v) to make it clear whether the results reported referred to tests carried out on a single item, or on a batch of items, including where relevant details of any sampling carried out.
vi) to include in any certificate: - any departures from standard condition; reference to the test method and procedure used; any standard or other specification relevant to the test method or procedure or deviations, additions to or exclusions from the specification concerned.
vii) to issue material amendments to any certificate in the form of a further document by way of Supplement to the certificate, with a statement to the effect that the same should be passed onto any person to whom the original certificate had been provided.
viii) where a complaint or any other circumstance raised doubt concerning the quality of the tests, to ensure that the relevant work/tests were promptly audited/reviewed. Where the audit/review findings cast doubt on the correctness or validity of the test results such as to necessitate a Supplement to the certificate, to write to Mobil and AIC immediately enclosing the Supplement, with a statement to the effect that the Supplement to the certificate should be passed onto any person to whom the original certificate had been provided."
8. Events at the loading port
"Analysis was performed as [sc at] shore tanks as soon as the tanks were available. The final tank for the regular parcel was to be outside the required specifications, however after re-testing with a columetric composite of all four tanks, the results were found to be acceptable."
9. Events at the discharge port, and their consequences
"Problem: ITS as Disport Inspectors declare high RVP and Octanes. Discharge is suspended awaiting further testing…
CR [Mr Rackham] called Linden and advised Jules Balogh (Lab Manager [at ITS USA]) of loading problems with quality…ITS Linden to re-sample and re-test multilayer samples all tanks…
CR received call from Giovanni Sampino (GS) of AIC asking for list of retain samples and individual shore tank results prior to load. CR contacted Mobil and Mobil declined to issue individual shore tank results as cargo sold FOB and final document was bench blend as representative of cargo loaded. This passed to AIC."
"0845hr. GS called CR and stated that vessels retained loadport comp samples had been tested with Saybolt [another inspection house] as independent witness and results concur with load port C of Q. However not possible to perform RVP test as all samples comped in tin cans. ALSO ITS Grays loadport C of Q states RVP by ASTM D 323 whilst Colonial Pipeline Spec (stipulated load port spec) states RVP to be by ASTM D 5191.
RVP was tested by ITS lab Tech at Coryton to ASTM D 323 as an oversight and error not picked up at reporting stage by Inspection office.
Very early days yet but AIC state that vessel is held on demurrage and also if RVP method is found to be erroneously used they will hold us for total quality failure of cargo."
10. The Cooper retest (and further events of 16 April)
"JC re Kriti Palm. Harass U.K. Need low RVP."
11. 17 April: Mr Rackham briefs Mr Lucas. What Mr Lucas knew.
"John, subsequent to our telecons.
Mark, subsequent to e mail from M Stokes.
Current situation is that MV Kriti Star loaded two grades Prem/Reg ums at Coryton a/c Mobil/AIC. AIC purchased FOB on Load C of Q.
Quality by ITS at Coryton to CPC spec grades R2/M2.
On arrival New York AIC had sold to Galaxy and ITS appointed for Q and Q [quantity and quality].
Regular pcl at disport found off on RVP. Spec max 9.0 load C of Q states 8.22.
Checking with Mobil Lab tech it appears RVP done by ASTM D 393 [sic] and NOT 5191 as per CPC. C of Q checked and passed by local inspection office and C of Q states 393. This has been queried but I have not responded as yet.
AIC called in Saybolt to witness ITS in New York. Galaxy then appointed SGS.
Vessel has discharged premium pcl but Galaxy refuse to accept reg pcl. Vessel remains alongside on demurrage.
Late PM yesterday AIC served written telex notice of claim against Mobil London with cc copy to me at West Thurrock.
To date no admission of liability by ITS has been made.
Have managed to obtain original RVP samples ex Coryton and whilst these have been broached for original tests have had Grabner RVP's conducted at West Thurrock and overall average for four tanks loaded ex shore onto 17 ship tanks find RVP to be 9.33.
Am trying to stall AIC/Mobil but things becoming very heated."
"198. The experts agreed that in the light of the ship/shore quantity figures, any contamination would have been very limited and would not have caused a significant increase in the Vapour Pressure.
199. I accept Mr Revell's evidence [he was the expert witness for AIC], in relation to the broached/opened samples re-tested by Mr Cooper, as follows. The Vapour Pressure of the samples when tested would probably have been lower than when they were first tested at Coryton. The results of the Cooper re-tests established on a balance of probabilities that the tests ITS carried out before loading significantly understated the Vapour Pressure of the regular grade gasoline. (In cross-examination Mr Lucas agreed that because of the loss of light ends in the case of a broached sample, one would expect the RVP figure on re-test to be lower).
200. I accept Mr Revell's opinion that the information now available (particularly the Cooper re-test results) indicates that the original ASTM D323 tests carried out by Mr Mailey of ITS were not in accordance with the stated test procedures and that at least some of the ASTM D323 results, as reported by ITS, were probably incorrect and significantly understated the Vapour pressure in at least two of the shore tanks at Mobil Coryton.
201. The ASTM D5191 results reported by both ITS (US) And SGS at disport were broadly comparable. These two sets were also broadly similar but marginally higher than the Cooper re-test results, which were performed on broached samples. I accept Mr Revell's opinion that the ITS (US) and SGS Vapour Pressure results broadly corroborated each other and when viewed together with the Cooper re-test results confirmed that the regular motor gasoline on board the Kriti Palm was on a balance of probabilities off-specification.
202. I find that the Vapour Pressure results by test D323 stated in the ITS certificates of quality for the regular cargo were probably wrong. The results of the Cooper re-tests were a key piece of evidence, highly relevant to this conclusion.
203. I find that Mr Lucas and Mr Chambers knew, understood and appreciated the matters set out in the last four paragraphs."
"d) Mr Lucas knew that the results of the Cooper re-tests established on a balance of probabilities that the tests ITS carried out before loading significantly understated the Vapour Pressure of the regular grade gasoline; and
e) Mr Lucas knew that the Cooper re-test results indicated that the original D323 tests carried out by Mr Mailey were not in accordance with the stated test procedures and that at least some of the D323 results, as reported by ITS, were probably incorrect and significantly understated the Vapour Pressure of the gasoline in at least two of the shore tanks at Mobil Coryton; and
f) Mr Lucas knew that the ITS (US) and SGS Vapour Pressure results broadly corroborated each other and when viewed together with the Cooper re-test results confirmed that the regular motor gasoline on board the Kriti Palm was probably off-specification; and
g) Mr Lucas knew that the Vapour Pressure results by test method D323 stated in the ITS certificates of quality for the regular cargo were probably wrong and that the results of the Cooper re-tests were a key piece of evidence, highly relevant to the conclusion".
"h) Mr Lucas knew from the results of the Cooper re-tests that the cargo would probably have been shown to be off-specification, if DVPE had been tested in accordance with D5191; and
i) Mr Lucas knew that in all the circumstances then known to him it was wrong for ITS to maintain that a certificate which said "Fuel meets Specification" was and remained a good and valid certificate."
12. 17 April: the telephone conversation. What Mr Lucas said.
"I guess what I am looking from you is a confirmation that, written confirmation that Caleb Brett has indeed used the wrong test method…and I am going to have to be looking for some sort of compensation from yourselves…Are you prepared to give me that information?"
To that Mr Lucas replied:
"I could certainly give you a statement of fact, a written statement of fact what happened on the events and I would get that to you by fax if you wish or line mail."
"I would then also need a statement saying that the said cargo on the Kriti Palm does not meet and I don't believe it does meet the Colonial M2 grade."
"Ok, Tom, there is two things there. The statement of facts as to what we actually did I can produce that. Whether the material was offspec leaving Coryton or not we cannot really comment on that because our work was on the shore tanks. Ok.
"Ok well I don't know whether that is true or not, I don't know whether there is any correlation between the two methods that you are talking about at this time. Our problem now with RVP is that it is impossible to go back into any of the samples because no samples are kept under ice…"
"So I have to find out some way of proving that it actually is off specification. You are telling me that I cannot do that."
"NL. Not to the load port but you can at the discharge port.
TW. Well, I have a quality certificate from you that says it is on specification.
NL. We will be standing by that certificate."
"NL. I can't give advice on that Tom, all I know is that the loading sorry the tanks at the loading ports were analysed. The certificates were produced on a tank by tank basis and decisions were made on that information.
TW. Alright I know that that happened but that was inaccurate information.
NL. Well I can't comment on that over the telephone. I really don't know."
"TW. Or was it inaccurate information?
NL. I can't say that. I don't know.
TW. Well if the test 323 was done where test 5191 should have been done, do you not see that as inaccurate?
NL. I can't comment on that. I can't say whether it is inaccurate or not."
"I have hired you to give me a colonial specification to prove the colonial test, you did not give me that according to your employee Chris Rackham. You gave me tests 323 which is not the colonial test."
"TW. Which, is therefore, which is therefore inaccurate. Now I have a certificate from you saying that it meets colonial specification.
NL. You have a certificate from us. I can't recall what it says."
"TW. And I have a certificate that says that on that ship the shore tank composite meets colonial M2 and R2 grades and that is something that is issued by Caleb Brett and what I am finding out at the disport by Caleb Brett that I don't have colonial so there is something there. I don't know all I am asking you to do is give me a statement saying that it does not meet. That's what I need and if you are not willing to give me that then I am going to have to get with your legal counsel quick because I have got a ship waiting to complete the discharge.
NL. Well, I guess the answer to that is Tom I can give you statements of fact which is what we have done. It is probably not going to save what you are looking for in this case or I can refer you onto somebody who would provide a service on behalf of legal counsel.
TW. What's that?
NL. Well you need to talk to somebody who can deal with this in a legal way. I think that's what you are saying to me isn't that Tom?
TW. Yea I am going to have to at this point. It is a law case for me right now. I mean I have a ship waiting to discharge."
"You either can change the certificate and tell me what I bought. If you can't do that then I am going to have to sue you…My legal counsel is a New York firm called Colt, Mallet- Prevost. My lawyer's name is Robert Gruendel."
"283. The telephone conversation must be considered as a whole. I accept Mr Hamblen's submission on behalf of AIC that the overall impression conveyed by Mr Lucas during the telephone conversation was that the certificate for the regular cargo was and remained a good and reliable certificate…
284. The representation that the certificate (which stated 'Fuel meets Specification') was and remained a good and valid certificate, was a false representation made by Mr Lucas who was reckless as to its truth. I find that Mr Lucas intended that AIC should act in reliance on the representation and I find that AIC did so…
288. For the reasons set out above, in my judgment the representation that the certificate (which stated 'Fuel meets Specification') was and remained a good and valid certificate, was false and misleading.
289. Further, I find that Mr Lucas was reckless as to the truth of this representation made during the telephone conversation…
292. For the reasons set out above I hold that ITS are liable to pay damages to AIC for deceit."
13. The follow up correspondence
"You requested that we change the certificate in relation to the above cargo. This we cannot do as this would be a fraudulent act.
You indicated that the alternative position is that you will take legal action against us. Sadly we await the next communication from you on this matter."
"1. We were informed yesterday am by Chris Rackham and confirmed by you that Caleb Brett used the incorrect test method on RVP at the loading of the Kriti Palm. Our question yesterday was very simple – was the original binding irrevocable quality certificate issued by Caleb Brett still valid or does it need to be reissued with corrected results due to Caleb Brett's error? We under no circumstance would make a request for a fraudulent document. You are as likely to incur legal action against yourself by suggesting the same as you are by providing inaccurate test information…
3. We understand that you "stand by your previous results" even though you cannot now be certain that it does or does not meet colonial specifications per Lucas/Whitaker phone conversation…
6. We hold you responsible for all costs and consequences in this matter and reserve all our legal rights and remedies in this matter.
7. Our legal counsel in London and New York is Robert Gruendel of Colt, Mallet-Prevost…"
"We, as an inspection company, can only issue certificates of quality stating what we found using the test methods we used.
In the present case, we issued certificates of quality only in relation to the shore tanks…
In all cases, it was plain on the face of the certificates that the test method was ASTM D323.
The results reported were what we found. We are unable to produce a reporting stating a result which we did not obtain by a test method which we did not use."
14. The premium parcel RVP
15. Other witnesses of the telephone conversation
"Nigel was very calm and very careful during the conversation. He obviously did not wish to give the client incorrect information but also did not want to implicate the company in respect of any liability…I am also informed that AIC say in their Points of Claim that ITS knew that the two tests gave different results but did not reveal this to the Claimant. Neither Nigel Lucas nor I knew whether there was any correlation between the two methods. We did not conceal anything from AIC."
"My role in relation to the retests on the cargo was simply to pass on the results to Mr Chalmers and Mr Loughead. Mr Chalmers, as Head of Compliance, would have taken over responsibility for handling the matter after AIC began complaining about problems with the cargo. It would have been for Mr Chalmers, along with Mr Lucas, to decide whether to inform AIC about the retests and the results of them…Mr Chalmers and Mr Lucas would certainly have been anxious to obtain the results of the retests because by 16/17 April 1996 ITS were coming under pressure from AIC and Mobil."
He appears to have forgotten that both Mr Chalmers and Mr Lucas were out of the office for much of this time. There was further oral evidence at trial of this nature: thus he thought that Mr Lucas's main briefing would have come from Mr Chalmers rather than himself, and he could not really recall his own briefing of him. He thought that his "Harass UK" log entry was Mr Chalmers chasing for a low RVP result.
"Q. So [Mr Lucas] is saying in essence, "You cannot now check the RVP of the samples". Now bearing in mind that ITS had done exactly that -
Q. – were you not a bit uncomfortable about Mr Lucas telling Mr Whitaker, "There is nothing you can do about it" even though ITS themselves had just carried out a check?
A. No, not at all. Any retests that ITS did on those samples was purely for their in-house satisfaction. The results that they gave would not be – could not be considered binding by anybody. They are RVP samples. They had previously been broached.
Q. As we discussed this morning, they were a test which you regarded as being important tests.
A. We wanted to see what we were getting, but there was no way that we could actually use those results in the public domain. They were an in-house operation.
Q. But you told us this morning, Mr Rackham, that if the retests had shown that or had supported the figures in the load port certificates –
Q. – then that information would have been communicated to AIC probably through SGS, through ITS (USA).
A. We would have informed the New York office more than likely, yes.
Q. Or AIC would have been told direct?
A. Yes, but we could not have put any confidence in those results.
Q. Given that it is likely that AIC would have been told either directly or through ITS (USA) if the retests had shown that or indicated that the RVP was less than 9 and supported load certificate of quality, did you not consider they should also be told if the results showed something else?
A. That was not a decision that I was empowered to take.
Q. I understand that. It was not your call.
Q. But did you not feel that really in fairness they ought to be informed?
A. No, I would have waited for an instruction from senior management."
"132. Mr Rackham said that he regarded the Cooper re-tests as being an important matter and that he hoped and anticipated that the results would lead to the situation being resolved. He added that had the re-tests come out in the way that he had hoped, he would have informed AIC of the results.
133. At a later stage of his evidence Mr Rackham added that "we could not have put any confidence in those results" because the samples had been broached. This answer was out of line with some of his earlier evidence."
"I can recall a heated conversation between [Mr Whitaker] and Nigel Lucas of ITS. At one point it appeared that ITS were recording the conversation, and I was concerned that Mr Lucas was trying to set up AIC in some way. I have seen an incomplete transcript of that conversation prepared by ITS. I cannot remember the precise words used, but the transcript broadly reflects my own recollection – ITS were determined to maintain their position and somehow put AIC in the wrong. My fears were confirmed when, the following day Mr Lucas sent a message accusing AIC of fraud. In fact Mr Whitaker had simply been asking Mr Lucas either to confirm that the certificates issued by ITS saying "fuel meets specification" were reliable or if they were wrong to reissue them after the correct test had been done."
"the sealed sample[s] at Caleb Brett lab belong 50% to AIC and they will have to be retained until other parties will arrive and the seals will be broken."
16. After the telephone conversation
17. AIC's Swiss and Galaxy's English litigation
"These results are "invalid" because the samples had been broached for testing at an earlier stage, but still somewhat alarming because they showed a number of results over 9 (when one would have expected the pressure to have reduced consequent upon the samples being broached)…I don't consider that any of these documents are very damaging. They clearly acknowledge our error in using the wrong test method, but this is apparent and undeniable. The ASTM D5191 test would have produced some results over 9 if we had used it, so the tests run at Chris's instigation on the broached retained samples don't seem to me to add anything."
"[It should be remembered that the Geneva Court of Appeal (and AIC and Galaxy) did not know of the Cooper re-tests and the results thereof]."
18. The expert evidence
19. International and ITS internal guidelines
"If I am to set out in a judgment the duties that an inspection agency owe when something goes wrong, should I follow the professional standards as identified in NAMAS…or what duties do you contend for? This is a matter of wide importance and plainly I need as much help as I can get."
"In terms of the general guidelines, I would accept that the general guidelines are for West Thurrock and NAMAS in the form in which your Lordship has now got it. Does that help?"
"12 CALIBRATION CERTIFICATES, TEST REPORTS AND TEST CERTIFICATES
12.2 The certificate or report shall be factually correct and shall be checked before issue.
12.12 Material amendments to a calibration certificate, test report, or test certificate after issue shall be made only in the form of another document, or data transfer including the statement, "Supplement to Calibration Certificate, Test Report or Test Certificate, serial number --- (or as otherwise identified)", or equivalent form of wording. Such amendment shall meet all the requirements of 12 of this Standard.
12.13 The Laboratory shall notify clients promptly, in writing, of any event such as the identification of defective measuring or test equipment that casts doubt on the validity of results given in any calibration certificate, test report or test certificate or amendment to a report or certificate.
13 HANDLING OF COMPLAINTS AND ANOMALIES
13.2 Where a complaint, or any other circumstance, raises doubt concerning the Laboratory's policies or procedures, or with the requirements of this Standard, or otherwise concerning the quality of the Laboratory's calibrations or tests, the Laboratory shall ensure that those areas of activity and responsibility involved are promptly audited in accordance with 4 of this Standard.
13.3 Where the audit findings cast doubt on the correctness or validity of the Laboratory's calibration or test results, the laboratory shall immediately notify, in writing, any client whose work may have been affected."
"4.14 Corrective and preventive action
The supplier shall establish and maintain documented procedures for implementing corrective and preventive action…
4.14.2 Corrective action
The procedures for corrective action shall include:
(a) the effective handling of customer complaints and reports of product nonconformities;
(b) investigation of the cause of nonconformities relating to product, process and quality system, and recording the results of the investigation…
(c) determination of the corrective action needed to eliminate the cause of nonconformities;
(d) application of controls to ensure that corrective action is taken and that it is effective."
The results of each test or series of tests shall be reported accurately, clearly, unambiguously and objectively to the Client in the form of a test report or test certificate…
11.4 Supplementary Certificates/Reports
Where amendments to test reports or test certificates are required after issue these shall be in the form of a separate document…and should be clearly identified. Supplementary reports and amendments shall meet all other requirements…
11.5 Validity of Certificates/Reports
The Laboratory shall notify the clients in writing of any circumstance, which casts doubt on the validity of results given in any test report or certificate, and, where possible, following corrective action, repeat the tests affected and re-issue an amended report or certificate.
HANDLING OF COMPLAINTS AND ANOMALIES
c) Subsequent investigation of the complaint shall take place as soon as possible. All findings and resulting actions shall be recorded and the client notified appropriately, preferably in writing. If necessary, corrected versions of reports shall be submitted…"
The procedures in this manual apply to field locations of the Company's Inspection Division. They encompass the organisation of operations at locations with and without laboratories, but matters concerning laboratory testing will be found almost exclusively under separate control in files on the appropriate company internet site for the particular facility."
1.1 To define the responsibilities and actions required in the event of a reported incident construed as a non-conformance with Company policy and procedure.
2.1 The procedure is designed to record, investigate and action complaints and deficiencies which may develop during the operation of the Company quality system.
5.1 Non-conformances shall be categorised as follows:
5.1.1 Category A
Failure to carry out specific requirements of a nomination…
5.3 Any event that can be classified as a possible claim against ITS…must in the first instance, be reported to the UK Regional Inspection Manager or his nominated deputy. In this case, a fully documented report shall be formulated and sent to the UK Regional Inspection Manager or his nominated deputy, as soon as possible. No other parties shall be advised until this procedure has been completed and there is agreement by the UK Regional Inspection Manager or his nominated deputy.
5.4 The distribution of completed Non-Comformance Reports (all boxes, 1 to 6), for Categories A and B only, will be…
5.5 Where corrective action is required and can be initiated locally, it shall be described in Box 6…"
"The best guide to what is comprised in the duty owed by an inspection agency (whether in contract or tort) to take reasonable care to ensure that any certificate issued is accurate as to the matters on which it is instructed to report, is found in the International Standards at the material time".
He then proceeded to quote extensively from NAMAS M10 (and from ITS's own laboratory manual which reflected it). At para 191 he said that NAMAS applied to Gray's office at West Thurrock and represented internationally accepted practice. He immediately went on to conclude (at para 192) that ITS's implied obligations to both Mobil and AIC included all those obligations set out at para 192(i) to (viii).
20. ITS's practice and duties with regard to sample retention
"258. In any event it was quite unacceptable that ITS should carry out the re-tests when
(i) if the results supported the contention that the cargo was on-specification, the results would be disclosed to Mobil/AIC, but
(ii) if the results did not support the contention that the cargo was on-specification, the results would not be disclosed to Mobil/AIC."
1.1 To describe the actions and responsibilities necessary to ensure the controlled handling of samples from the time of their being drawn to the disposal stage.
2.1 This procedure covers the transportation, labelling, registration and delivery of samples either for testing or for storage.
4.1 It is the responsibility of the Chemist/Inspector to transport samples safely to the area office reception point. It is also his responsibility to carry out registration, labelling and analysis requirements documentation. If samples are not required for testing, it is the responsibility of the Inspector to place them in the locations's sample store. It is the laboratory supervisor/chemist's responsibility to receive samples for testing and comply with laboratory booking arrangements. Subsequent to testing, it is the laboratory staff's responsibility to place unused surplus sample material in the locations's sample storage.
5.6 Samples shall be retained in storage for a minimum period of 90 days, unless the client's agreement to change this period can be obtained…
5.8 Where a client requests an extended period of retention beyond the 90 days normally granted and where this is agreed, such samples shall be segregated and clearly marked for extended retention.
5.9 Agreement to extend the normal retention time beyond the ninety day period normally granted shall be in writing and the disposal date now accepted shall be stated in the agreement."
21. Mr Lucas's evidence
"Q. What I put to you earlier this morning, Mr Lucas, was that at the time of the conversation with Mr Whitaker, you appreciated that there was clear evidence that the cargo was off-specification and that had it been tested with the correct method, it would have been shown to be off specification and that, in the light of that understanding, you knew that ITS was in no position to state that it was standing by its results. I would suggest that you deliberately made that statement intending it to be relied upon but knowing it was untrue.
A. I disagree with that proposition, and I would actually like to answer each of those questions one by one, if I may…As your client has brought an action of fraud against me I feel entitled.
Q. Of course, I am not stopping you in any way. The question was this: "What I put to you earlier this morning, Mr Lucas, was that at the time of the conversation with Mr Whitaker, you appreciated that there was clear evidence that the cargo was off specification and that had it been tested with the correct method, it would have been shown to be off specification…"
A. Can I stop you there? I did not have that information and I did not have that view…
Q. I put to you that in the light of that understanding, you were in no position to state that ITS were standing by the results.
A. We would always have to stand by our results if that is the information we had at the time.
Q. And that you deliberately made that statement intending it to be relied upon but knowing it was untrue.
A. I did not know it was untrue and I did make that statement intending it to be relied on."
"The onus I think is on communicating what you have done wrong, which is what I did to Mr Whitaker…I do not think the documents go into that, that level of detail. I think they assume a level of perfect performance…I was aware I was not talking to Mobil at the same time, so I tried to maintain a very clear independent position all the way through…The key thing here is the certificate, what you have actually signed off…"
"I would still look at these certificates as being valid but I would have discussed the issue of Cooper with him, what it really meant. The problem of going into a discussion about the Cooper results is that AIC would have required a certificate, which of course we could not produce."
"That is unusual. It is unusual to withdraw certificate unless you really have evidence that the wrong sample has been taken. For example, the wrong tank has been analysed. That bizarrely can happen…you would have to say the certificate is invalid…"
22. The judge's findings about Mr Lucas
"101. Mr Nigel Lucas
102. Mr Nigel Lucas has a degree in chemistry. In 1996 he was General Manager of ITS and was based at West Thurrock. In that role he had management responsibility for every Caleb Brett site in the United Kingdom (plus Norway and Nigeria). He held that position from 1990 to 1998. Mr Lucas reported to Mr Loughead, the Regional Director for Europe, Africa and the Middle East.
103. Mr Lucas said that at the time of his conversation with Mr Whitaker on 17 April he believed that the certificates that ITS produced were reliable certificates. When giving evidence Mr Lucas said that he understood that Mr Mailey was working 100% for Mobil in the blending programme and then worked 50/50 for Mobil and AIC in the independent inspection and testing. Mr Lucas explained "if one was looking at RVP being measured and the blender making decisions about what extra components to put in as the hours go by, you would have a breadcrumb trail of RVP testing which would be a nice smooth curve up to the target point he was looking for. That would have told me a volume of information about how reliable that sample would have been." Mr Lucas said that on 17 April 1996 he thought that Mr Mailey was involved in the blending exercise. If in fact Mr Lucas was mistaken as to Mr Mailey's role in April 1996 he cannot have made proper enquiries."
"Mr Lucas said if he had known (a) that Mr Mailey was not involved in the blending exercise and (b) of the Cooper re-tests and the results thereof, "he would have stood by the certificate, but we would have got into a much bigger argument then about what the Cooper results actually meant. We would have had to get into a three-cornered discussion with Mobil, AIC and ourselves to try and see what this actually would mean by way of a decision."
104. In evidence for the Swiss proceedings before District Judge Silverwood-Cope on 11 November 1999, Mr Lucas was asked the following question – "…please describe why it was (or was not) possible to check the actual RVP…?" Mr Lucas answered as follows "…it makes complete sense. I did not think you could analyse RVP 15 days later because the samples are unstable. The logic being they would not be representative of the same period after 15 days." The Swiss courts did not know that the Cooper re-tests had been carried out by ITS. It was suggested to Mr Lucas that his answer for the purposes of the Swiss proceedings was misleading because no mention was made by him of the Cooper re-tests."
105. It is appropriate to make (and I do) due allowance for the difficulties Mr Lucas faced when giving evidence because of the passage of time. Nonetheless I have marked reservations about important parts of his evidence.
106. I will return to consider Mr Lucas's evidence in some detail later in this judgment."
"282. When giving evidence Mr Lucas confirmed that on 17 April in the course of the telephone conversation he was telling Mr Whitaker that the certificate was and remained a good and valid certificate and that the fuel met specification. He added "That was my view at the time and is still my view today."
283. The telephone conversation must be considered as a whole. I accept Mr Hamblen's submission on behalf of AIC that the overall impression conveyed by Mr Lucas during the telephone conversation on 17 April was that the certificate for the regular cargo was and remained a good and reliable certificate."
"239. Mr Lucas (in my view rightly) accepted in cross-examination that the residue of the RVP samples tested by Mr Mailey were potentially important samples, and that ITS should not have done anything to them (including the Cooper re-tests) without informing their clients, Mobil and AIC."
23. A third element
"288. For the reasons set out above, in my judgment the representation that the certificate (which stated that 'Fuel meets Specification') was and remained a good and valid certificate was false and misleading.
289. Further, I find that Mr Lucas was reckless as to the truth of this representation made during the telephone conversation…
291. If, contrary to my finding set out above, Mr Rackham did not inform Mr Cooper of the Cooper re-tests and the results thereof in the course of briefing Mr Lucas prior to the telephone conversation on 17 April, he and/or Mr Chalmers should have informed AIC and Mobil of the same as soon as they became aware of the results. Mr Chalmers was provided with a transcript of the telephone conversation when it had been transcribed.
292. For the reasons set out above I hold that ITS are liable to pay damages to AIC for deceit."
24. Mr Chalmers' evidence
"I would have placed no reliance on the Cooper results…I do not know who asked for these tests to be run. I did not and certainly would not have done so. The tests appear from the email to have been done at Chris Rackham's initiative and out of curiosity. The tests were unofficial and in-house…Had I seen the results at the time and had I been in the position of deciding whether or not to publish them to Mobil and AIC, I would not have published them for these reasons. The tests were not valid by reason of the history of the samples and could not properly be given ASTM D5191 certification."
In a subsequent statement, he said:
"It may well have been my call, ultimately and at some stage, not to release the Cooper test results and most likely was. However, the better way of putting the issue is that no decision not to release the result would have fallen to be made. It just would not have occurred to me to release them. Had it occurred to me that a decision needed to be made, I certainly would not have released them for the reasons given in my first statement."
"My Lord, retesting in the way that we now understand that it was done and the way that I would have understood as soon as I got back to the office and spoke to everyone is simply not on. It is against the method, and we are either a testing house or we are not a testing house. If we are a testing house then we test things according to the method and we do not test spent samples and produce a test that we cannot stand by or give a test number to and therefore cannot use or report. It is simply a botched operation."
"I do not see myself going to AIC and telling them, "We took an inappropriate test, got inappropriate results, we cannot stand by them, but here they are". That would be highly irresponsible. It would be mischief in my eyes…
"Yes. The whole thing is of concern. I was under the impression, speaking to Mr Lucas, that he was being asked to change the certificate. That was my impression talking to Mr Lucas. Well he cannot do that, so he is in a sense stuck with the certificate that he has unless by some way it can be replaced. The certificate, as it stands, is disputed. The certificate is itself the source of the dispute, if you like. To alter that certificate would be wrong. It is valuable evidence of what was said at the time and what was tested at the time and what were the results at the time, and he may not alter that."
"One factor, of course, is that the wrong test has been used so it cannot possibly meet specifications, can it?"
"Well the certificate is in a sense contradictory on its face anyway because of the method number. I am not sure you can actually say that the fuel meets specification on the basis of the certificate as it stands, no. I would have expected that to be the grounds of the dispute."
"My strong impression at that time and today is that what was being asked was that a published certificate was to be changed and somehow made better. We may not do that. At this time we are already in a dispute, we have already appointed lawyers, the opposition already have in their hands a certificate with obvious problems on it and they have all the other information to enable them to handle their dispute."
"whether it is acceptable for ITS to say that it is standing by the certificates in circumstances where ITS knows that there is something wrong with one of the published results. Is that acceptable or not?"
and Mr Chalmers replied:
"Phrased like that, no."
"We are already in contention. Everybody knows the whole surrounding situation. We have appointed lawyers and we were handling matters from there. We have a certificate which does not look correct because it is out of line with the other figures, we have no way of rechecking that is valid in my eyes and we do not know whether the test is the problem or not, but we cannot find anything wrong with the test. There is at this point a great deal more work to be done, in other words."
"Q. I would also suggest to you, Mr Chalmers, that you deliberately did not disclose them in the knowledge and the intent that AIC would be misled thereby."
A. Again, I think you are wrong. No, I do not agree with you."
"Hearing about the matter now, I would say that:
a) I would have regarded the samples as potentially important and would not have regarded it appropriate to take them and use them.
b) It is not correct, technically, to retest a previously opened sample for RVP. Samples intended for RVP testing must be taken specifically for that purpose and used only once.
c) It would not be surprising that different results would be obtained if previously broached samples were used for testing."
It is plain from the whole of that passage that "potentially important" cannot be extracted alone. It appears to mean that the testing samples could possibly be important (in the event of a dispute?), but that that possibility must be qualified by the facts that the samples cannot properly be revisited and could throw up misleading discordant results. It will be recalled that Mr Lucas, unlike Mr Chalmers, had agreed with Mr Loughead's comment: see para 198 above.)
"I have thought about this a whole lot. Most of my thinking was based on what Mr Lucas understood about what was being asked of him. In the sense that I do not think they could change the certificate to make it better, which is what they were apparently asking, or what Mr Lucas believed they were asking, I do not believe they could have changed it. By the 17th, we were in a full-blown dispute…Sadly there is no way of retesting…There is nothing that we can point to that Mr Mailey obviously did wrong in the test, which is why in my statement I said that the figure is right…It is a very difficult position to answer a question straightly on…I think we would have to set it aside as being a certificate in dispute. I think that would be my approach…What I mean is we would have to acknowledge, "Look, there is a dispute. The certificate you have is the subject of a dispute". I am not sure that we can simply scrap it, as it were, because Mr Lucas – in a sense I agree with him, this refers to shore tanks. There is a tremendous amount happens between the shore tanks and the ship's tanks…"
"Q. Now, leaving aside the position that Mr Lucas was in, what do you consider should have happened in relation to this certificate? In appropriate commercial terms, should ITS have stood by it or should they have written a letter withdrawing it or what should they have done?
A. I think we should have been much clearer in what we were saying. We did tell them the wrong tests had been used. Sitting here today, I think I agree with you that we could have written them a letter spelling out exactly that, that the wrong tests had been used and that there was therefore, in view of the other tests in America and the result we have here, an area of doubt.
Q. And "the result we have here" means what?
A. The RVP result, my Lord.
Q. In this certificate?
Q. So you are recognising – all I am asking for is your help – but you say in your witness statement quite rightly that you have enormous experience of the professional standards that apply in this important area.
A. Yes my Lord.
Q. Are you saying that as of today you recognise that you should have written a letter saying, "We can no longer stand by this certificate"?
A. Sitting here today, I think I would have to recognise that."
"Q. Maybe this is unfair, and I certainly do not intend to be unfair, but it might be said that one problem was that ITS was standing by a certificate which said "Fuel meets specification"?
A. I would have to accept that. I would have to accept that, sir.
Q. So you would recognise that was unfortunate?
A. It is very unfortunate. The whole Whitaker conversation set the tone of things and created the understanding that what they were wanting us to do was something that we could not."
25. The judge's findings as to Mr Chalmers
"107. Mr John Chalmers
108. Mr Chalmers has a marine background. In March 1996 he was employed by ITS as Claims Manager. In addition he had responsibilities for claims for the Group at large. He also served as UK Quality Assurance Manager and Safety Adviser and had a wide role in Europe in terms of Quality Assurance. His title was Technical Manager Eastern Hemisphere/Safety Manager UK.
109. It is appropriate to make (and I do make) due allowance for the difficulties Mr Chalmers faced when giving evidence because of the passage of time. Nonetheless I have marked reservations about certain parts of his evidence.
110. The entry in Mr Rackham's logbook at 13.33 hours on 16 April ("JC re Kriti Palm. Harass UK need low RVP") I find probably refers to a telephone conversation between Mr Rackham and Mr Chalmers. In cross-examination Mr Rackham accepted that the note suggested that Mr Chalmers was anxious to get the results. The contemporary note in Mr Rackham's logbook is to be contrasted with Mr Chalmers' evidence that the Cooper re-tests were a "botched up job on a spent sample" and that he would probably have "blown up all over the telephone" when he became aware of the re-tests.
111. Mr Chalmers agreed that Mr Rackham was experienced and would know whether it was appropriate to re-test or not.
112. Mr Chalmers accepted that he was of the view that something was wrong with the result at Coryton because that result was out of line with other results.
113. When asked whether it was acceptable for ITS to say that it was standing by its certificate in circumstances where ITS knew there was something wrong with one of the published results, Mr Chalmers said "phrased like that, no". At a later stage his evidence was as follows:
Q. …should ITS have stood by [the certificate] or should they have written a letter withdrawing it or what should they have done?
A. I think we should have been much clearer in what we were saying. We did tell them the wrong tests had been used. Sitting here today, I think I agree…that we could have written them a letter and that was therefore, in view of the other tests in America and the result we have here, an area of doubt.
Q. And "the result we have here" means what?
A. The RVP result…
Q. Are you saying that as of today you recognise that you should have written a letter saying, "We can no longer stand by this certificate"?
A. Sitting here today, I think I would recognise that."
114. I will return to consider Mr Chalmers' evidence in some detail later in this judgment."
26. The issues considered by the judge
27. Deceit: the law
"In my opinion it would not be right in an action of deceit to give a plaintiff relief on the ground that a particular statement, according to the construction put on it by the Court, is false, when the plaintiff does not venture to swear that he understood the statement in the sense which the Court puts on it."
"the test as to whether a statement of opinion involves such a further implied representation [of fact (e.g. that the person stating the opinion has reasonable grounds for his belief)] will involve a consideration of the meaning which is reasonably conveyed to the representee; and the material facts of the transaction, the knowledge of the parties respectively, their relative positions, the words of the representation and the actual condition of the subject-matter are all relevant to this issue"
citing Smith v. Chadwick (1884) 9 App Cas 187, Bisset v. Wilkinson  AC 183, and Brown v. Raphael  Ch 636 (CA).
"First, in order to sustain an action in deceit, there must be proof of fraud and nothing short of that will suffice. Secondly, fraud is proved when it is shown that a false representation has been made (1) knowingly, (2) without belief in its truth, or (3) recklessly, careless whether it be true or false."
"Not caring, in that context, did not mean not taking care, it meant indifference to the truth, the moral obliquity of which consists in a wilful disregard of the importance of truth, and unless you keep it clear that that is the true meaning of the term, you are constantly in danger of confusing the evidence from which the inference of dishonesty in the mind is to be drawn – evidence which consists in a great many cases of gross want of caution – with the inference of fraud, or of dishonesty itself, which has to be drawn after you have weighed all the evidence."
"A man may be said to know a fact when once he has been told it and pigeon-holed it somewhere in his brain where it is more or less accessible in case of need. In another sense of the word a man knows a fact only when he is fully conscious of it. For an action of deceit there must be knowledge in the narrower sense; and conscious knowledge of falsity must always amount to wickedness and dishonesty. When Judges say, therefore, that wickedness and dishonesty must be present, they are not requiring a new ingredient for the tort of deceit so much as describing the sort of knowledge which is necessary."
"Built into the preponderance of probability standard is a generous degree of flexibility in respect of the seriousness of the allegation. Although the result is much the same, this does not mean that where a serious allegation is in issue the standard of proof required is higher. It means only that the inherent probability or improbability of an event is itself a matter to be taken into account when weighing the probabilities and deciding whether, on balance, the event occurred. The more improbable the event, the stronger must be the evidence that it did occur before, on the balance of probability, its occurrence will be established. Ungoed-Thomas J. expressed this neatly in In re Dellow's Trusts  1 W.L.R. 451, 455: "The more serious the allegation the more cogent is the evidence required to overcome the unlikelihood of what is alleged and thus to prove it."
28. Deceit: the representation
"We understand that you "stand by your results" even though you cannot now be certain that it does or does not meet colonial specification per Lucas/Whitaker phone conversation…"
"We, as an inspection company, can only issue certificates of quality stating what we found by the test methods we used…In all cases, it was plain on the face of the certificates that the test method was ASTM D323. The results reported were what we found."
29. Deceit: dishonesty
30. A third element; and the respondent's notice
31. Deliberate concealment
(1) at para 317: he said that ITS deliberately concealed "a fact relevant to AIC's right of action against ITS". The point is made quite generally.
(2) at para 324: he said that AIC's "allegations of breach of contract/negligence…are now to a critical extent premised on the Cooper re-tests and the results thereof". Again the point is made quite generally.
(3) also at para 324: he said that AIC "were not able to plead in 1996" that the certificated results were probably wrong. I am unable to understand why the judge makes that assertion, given the disport results obtained by test D5191. It appears that this assertion may be involved in the judge's mind with the idea that in 1996 AIC believed that the D5191 test might have given a higher reading than the D323 test and thus that D5191 results did not by themselves invalidate the certificated D323 results as such. If so, this is irrelevant, since the Cooper retest, like the disport retests, were by D5191 and thus were neutral on that question. In any event, AIC was able to plead, and did plead prior to learning of the Cooper retest, that the certificated results were probably wrong, eg (at para 22 of the amended particulars of claim dated 1 August 2003) that "In breach of duty the Defendant failed to exercise reasonable care in carrying out the analysis and in issuing the Certificates in respect of the cargo…Further, had the RVP been tested in accordance with ASTM D5191 it would have shown a result in excess of the contractual maximum of 9.0 psi". I will revert below to the puzzle created by the judge's assertion. For the present, it is again to be observed that the judge's point is wholly general.
(4) at para 325: the judge said that the Cooper retest results "established on a balance of probabilities" that the certificated tests significantly understated the RVP. But nothing was "established" until trial. Establishment of facts on the balance of probabilities is the burden of trial. The question would prima facie appear rather to be what could have been pleaded: again, I will revert to this below. Again, the point made is entirely general.
(5) at paras 326/329: the judge made further points as to the effect of available evidence on the establishment of facts on the balance of probabilities. In particular, at para 328 he repeated his finding, made earlier, that the Cooper retest results were "a key piece of evidence, highly relevant" to the trial conclusions, and that "viewed together" with the disport results they confirmed that the certificated D323 results were probably wrong (para 327). Again, the points made are entirely general.
"I find that Mr Lucas and Mr Chalmers made a deliberate decision not to disclose the fact of the Cooper re-tests and the results thereof to AIC and Mobil in circumstances in which the retests and the results should have been disclosed to AIC and Mobil, and Mr Lucas and Mr Chalmers knew that the re-tests and the results thereof should have been disclosed to AIC and Mobil. I further find that Mr Lucas and Mr Chalmers were aware that ITS was under such a duty and that Mr Lucas and Mr Chalmers made a deliberate decision not to disclose the re-tests and the results thereof."
32. Section 32(1)(b)
"(1)…where in the case of any action for which a period of limitation is prescribed in this Act, …
(b) any fact relevant to the plaintiff's right of action has been deliberately concealed from him by the defendant,…
the period of limitation shall not begin to run until the plaintiff has discovered the…concealment…or could with reasonable diligence have discovered it."
"In my opinion, section 32 deprives a defendant of a limitation defence…where he takes active steps to conceal his own breach of duty after he has become aware of it…But it does not deprive a defendant of a limitation defence where he is charged with negligence if, being unaware of his error or that he has failed to take proper care, there has been nothing for him to disclose."
"…deliberate concealment for section 32(1)(b) purposes may be brought about by an act or an omission and that, in either case, the result of the act or omission, i.e. the concealment, must be an intended result…A claimant who proposes to invoke section 32(1)(b) in order to defeat a Limitation Act defence must prove the facts necessary to bring the case within the paragraph. He can do so if he can show that some fact relevant to his right of action has been concealed from him either by a positive act of concealment or by a withholding of relevant information, but, in either case, with the intention of concealing the fact or facts in question. In many cases the requisite proof of intention might be quite difficult to provide. The standard of proof would be the usual balance of probabilities standard and inferences could of course be drawn from suitable primary facts but, nonetheless, proof of intention, particularly where an omission rather than a positive act is relied on, is often difficult. "
"(iv) The requirement is that the fact must be "deliberately concealed". It is, I think, plain that, for concealment to be deliberate, the defendant must have considered whether to inform the claimant of the fact and decided not to. I would go further and accept that the fact which he decides not to disclose either must be one which is his duty to disclose, or must at least be one which he would ordinarily have disclosed in the normal course of his relationship with the claimant, but in the case of which he consciously decided to depart from what he would normally have done and to keep quiet about it."
"But in many cases there may be no running relationship, and, even where there is, it may not involve any general duty to inform the other party of relevant facts. On the face of it, "concealment" in such a context might seem to require active conduct, rather than a mere decision to remain silent – even in circumstances where it would be normal or moral to speak."
33. The four tests
(1) Did ITS owe a duty to disclose the relevant information?
(2) Were Mr Lucas and Mr Chalmers aware of that duty?
(3) Did Mr Lucas and Mr Chalmers take a deliberate decision, in spite of their knowledge of ITS's duty, not to disclose the relevant information?
(4) Was the information relevant to AIC's right of action?
34. (1) Did ITS owe a duty to disclose the relevant information?
"For the sake of achieving certainty in the great majority of cases, it is worth while to take the risk that occasionally a wrong decision will be given and that there will be no means of reconsidering it."
35. (4) Was the information relevant to AIC's right of action?
36. (2) and (3): consciousness of duty and deliberate decision to conceal
"I respectfully agree that it is difficult to think of a case of deliberate concealment for section 32(1)(b) purposes that would not involve unconscionable behaviour and that most cases of deliberate commission of breach of duty for section 32(2) purposes would be in the same state."
37. Section 32(2): a fallback case.
"For the purposes of subsection (1) above, deliberate commission of a breach of duty in circumstances in which it is unlikely to be discovered for some time amounts to deliberate concealment of the facts involved in that breach of duty."
38. Continuing duties
"332. I answer this issue in the negative. AIC's claim in deceit succeeds. In addition to AIC's points about continuing duties, facts relevant to the claimant's right of action were deliberately concealed by ITS in the circumstances and for the reasons set out above (issues 31-34)."
39. Causation, remoteness and loss
Sir Martin Nourse:
"I find that Mr Lucas and Mr Chalmers made a deliberate decision not to disclose the fact of the Cooper re-tests and the results thereof to AIC and Mobil in circumstances in which the re-tests and the results thereof should have been disclosed to AIC and Mobil, and Mr Lucas and Mr Chalmers knew that the re-tests and the results thereof should have been disclosed to AIC and Mobil. I further find that Mr Lucas and Mr Chalmers were aware that ITS was under such a duty and that Mr Lucas and Mr Chalmers made a deliberate decision not to disclose the re-tests and the results thereof."
Lord Justice Buxton:
The course of the appeal
The claim in deceit
The elements of the tort
The tort involves a perfectly general principle. Where a defendant makes a false representation, knowing it to be untrue, or being reckless as to whether it is true, and intends that the claimant should act in reliance on it, then in so far as the latter does so and suffers loss the defendant is liable for that loss.
And in more detail as to the mental element of the tort, no-one has improved, or sought to improve, on the analysis of Lord Herschell in Derry v Peek (1889) 14 App Cas 337 at p376:
First, in order to sustain an action of deceit, there must be proof of fraud and nothing short of that will suffice. Secondly, fraud is proved when it is shown that a false representation has been made (i) knowingly, (ii) without belief in its truth, or (iii) recklessly, careless whether it be true or false. Although I have treated the second and third as distinct cases, I think the third is but an instance of the second, for one who makes a statement under such circumstances can have no real belief in the truth of what he states. To prevent a false statement from being fraudulent, there must, I think, always be an honest belief in its truth.
i) The false statement must be clearly identified.
ii) The primary facts relied on as establishing the terms of the statement, and the falsity of it, must be proved by cogent evidence.
iii) Where knowledge of a fact held by the speaker is relied on to make his statement deceitful, he must be "fully conscious" of that fact and have conscious knowledge of the falsity of his statement: Armstrong v Strain  TLR 856 at p 871, per Devlin J.
The judge's findings
i) "the overall impression conveyed by Mr Lucas during the telephone conversation on 17 April was that the certificate for the regular cargo was and remained a good and reliable certificate": Judgment, §283.
ii) "the overwhelming probability" was that Mr Rackham informed Mr Lucas of the results of the Cooper re-tests in the course of briefing Mr Lucas before the telephone conversation: Judgment, §274.
iii) Mr Lucas therefore knew from the Cooper re-tests that the RVP results stated in the ITS certificates were probably wrong; and that the Cooper re-tests were a key piece of evidence, highly relevant to that conclusion: Judgment §§ 202-203 and 283 (d)-(h), set out in §§ 90 and 93-94 above.
iv) Mr Lucas therefore also knew that in all the circumstances known to him it was wrong for ITS to maintain that a certificate which said "Fuel meets Specification" was and remained a good and valid certificate: Judgment, § 283(i).
v) The representation that the certificate was and remained a good and valid certificate was a false representation made by Mr Lucas who was reckless as to its truth: Judgment, §284.
vi) Mr Lucas intended that AIC should act on that representation and AIC did so: Judgment, §284.
The approach of this court
The principle is well settled that where there has been no misdirection on an issue of fact by the trial judge the presumption is that his conclusion on issues of fact is correct. The Court of Appeal will only reverse the trial judge on an issue of fact when it is convinced that his view is wrong. In such a case, if the Court of Appeal is left in doubt as to the correctness of the conclusion, it will not disturb it: per Lord Steyn in Smith New Court v Scrimgeour Vickers  AC 254 at pp 274H-275A
The need for appellate caution in reversing the Judge's evaluation of the facts is based upon much more solid grounds than professional courtesy. It is because specific findings of fact, even by the most meticulous Judge, are inherently an incomplete statement of the impression which was made upon him by the primary evidence. His expressed findings are always surrounded by a penumbra of imprecision as to emphasis, relative weight, minor qualification and nuance…..of which time and language do not permit exact expression, but which may play an important part in the Judge's overall evaluation: per Lord Hoffmann in Biogen v Medeva  RPC 1 at p 45.
Mr Sampino of AIC said in his witness statement "… we found out … that the method used to test the cargo's RVP at the load port was not the method stated in the CPS. However, I also remember Mobil insisting that the cargo was on-spec and ITS saying they would stand by the certificates of quality. ITS even accused Tom Whitaker of asking them to commit fraud, just because he asked them to correct the certificates of quality if they were not accurate … in the circumstances, despite Galaxy's complaints, we had no choice but to pay Mobil. Mr Hatcher and Mr Whitaker took that decision, but I would not have acted differently. A company like AIC does not refuse to pay an oil major without a very good reason, and certainly not when it is being told by the oil major that there is nothing wrong with a cargo and cargo inspectors are standing by certificates of quality that are to be final and binding.
Further, there was unchallenged evidence from a Mr Payne, a person intimately involved in dealing with the Kriti Palm, that having been told that ITS was standing by its results, and that it was impossible to retest the samples, AIC felt obliged to pay Mobil, and thereafter became drawn into litigation with Galaxy on the basis of the certificate: see §§ 154ff above.
Mr Lucas's knowledge
Were the Cooper retests regarded as important?
Was Mr Lucas told about the Cooper retests?
the overwhelming probability is that Mr Rackham informed Mr Lucas of the Cooper retests and the results thereof in the course of briefing Mr Lucas prior to the telephone conversation on 17 April.
Before us, this finding was strongly attacked. It was said to be inconsistent with the attitude taken by Mr Lucas both in the telephone conversation and in his "follow up" fax (§§ 123-124 above), to the extent that if he then knew of the Cooper retests both the conversation and the fax were cynical exercises in deceit; and inconsistent with, or at least unlikely in the context of, the hurried encounter with Mr Rackham, in a matter about which Mr Lucas previously knew nothing, and under the exigencies of the customer's demands.
Does that knowledge entail dishonesty on Mr Lucas's part?
The limitation issues
The law, and the questions that it poses in this case
(1)….where in the case of any action for which a period of limitation is prescribed in this Act, either-
a) the action is based upon the fraud of the defendant; or
b) any fact relevant to the plaintiff's right of action has been deliberately concealed from him by the defendant,….
the period of limitation shall not begin to run until the plaintiff has discovered the fraud [or] concealment….(as the case may be) or could with reasonable diligence have discovered it.
(2) For the purposes of subsection (1) above, deliberate commission of a breach of duty in circumstances in which it is unlikely to be discovered for some time amounts to deliberate concealment of the facts involved in that breach of duty.
I find that Mr Lucas and Mr Chalmers made a deliberate decision not to disclose the fact of the Cooper re-tests and the results thereof to AIC and Mobil in circumstances in which the re-tests and the results thereof should have been disclosed to AIC and Mobil, and Mr Lucas and Mr Chalmers knew that the re-tests and the results thereof should have been disclosed to AIC and Mobil. I further find that Mr Lucas and Mr Chalmers were aware that ITS was under such a duty and that Mr Lucas and Mr Chalmers made a deliberate decision not to disclose the re-tests and the results thereof.
And he further held, at his §§ 317 and following, that the fact of the Cooper retests was a fact relevant to AIC's right of action against ITS.
In my opinion, section 32 deprives a defendant of a limitation defence in two situations: (i) where he takes active steps to conceal his own breach of duty after he has become aware of it; and (ii) where he is guilty of deliberate wrongdoing and conceals or fails to disclose it in circumstances where it is unlikely to be discovered for some time. But it does not deprive a defendant of a limitation defence where he is charged with negligence if, being unaware of his error or that he has failed to take proper care, there has been nothing for him to disclose.
Lord Scott said:
Subsection (2), however, provides an alternative route. The claimant need not concentrate on the allegedly concealed facts but can instead concentrate on the commission of the breach of duty. If the claimant can show that the defendant knew he was committing a breach of duty, or intended to commit the breach of duty - I can discern no difference between the two formulations; each would constitute, in my opinion, a deliberate commission of the breach - then, if the circumstances are such that the claimant is unlikely to discover for some time that the breach of duty has been committed, the facts involved in the breach are taken to have been deliberately concealed for subsection (1)(b) purposes.
In Williams Park J said, at §14(iv):
The requirement is that the fact must be 'deliberately concealed'. It is, I think, plain that, for concealment to be deliberate, the defendant must have considered whether to inform the claimant of the fact and decided not to. I would go further and accept that the fact which he decides not to disclose either must be one which it was his duty to disclose, or must at least be one which he would ordinarily have disclosed in the normal course of his relationship with the claimant, but in the case of which he consciously decided to depart from what he would normally have done and to keep quiet about it.
The last part of that statement, with its reference to disclosure in the ordinary course of duty, is controversial, but the narrower test of breach of duty was endorsed in the same case by Brooke LJ, who said at his §51:
The claimant did not know a fact relevant to her cause of action until a date less than six years before this action was brought, and the reason why she did not know it was that Mr Brown intentionally concealed it from her when he was under a duty to tell her about it. These facts appear to me to fall within the compass of Lord Scott's exposition of the effect of section 32(1)(b) of the 1980 Act in paragraph 60 of his speech in Cave.
i) Was ITS under a duty to AIC to reveal the existence and content of the Cooper retests?
ii) Did ITS, knowing of that duty, decide not to reveal the existence and content of the Cooper retests?
iii) Were the Cooper retests relevant to any and if so which of the rights of action asserted by AIC that are otherwise statute-barred?
ITS's duty to reveal the Cooper retests
"Was ITS retained by Mobil and AIC in any kind of advisory capacity? What was the proper scope of the contractual duties owed by ITS to AIC?"
Thinking about the matter now, I would say that I regarded the samples as potentially important and would not have regarded it as appropriate to take them and use them.
Mr Lucas agreed, Day 6 page 18 line 22, that as potentially important samples ITS should not have been doing anything to them without informing its client. And he agreed that that information to the client would have included telling AIC what the Cooper retests had shown. That was confirmed in an exchange in cross-examination in the context of the conversation with Mr Whitaker, Day 5 pages 146-147:
Q. Obviously if you had been aware of evidence that the cargo was indeed off-spec in the shore tanks, then you would have been in a position to comment, would you not?
A. If the Mailey results were wrong, then yes, we would have been having a different conversation, Tom Whitaker and I.
Q. If you had had knowledge of the Cooper retests, you would indeed have had evidence, would you not, that the cargo was indeed off-spec in the shore tanks?
A. The point that I would have had to make to Tom Whitaker was that we have got this unusual set of results and I am struggling to rely upon it and I certainly could not produce a certificate from it. That is what I would have had to say to Tom.
Q. But you would have to tell him what you had found?
A. Of course.
Q. With those qualifications?
The decision not to perform that duty
It is now clear…that the word "fraud" in s. 26(b) of the Limitation Act 1939 is by no means limited to common law fraud or deceit. Equally, it is clear, having regard to the decision in Beaman v ARTS Ltd  1 All ER 465, that no degree of moral turpitude is necessary to establish fraud within the section.
It is accepted that that jurisprudence was successfully captured by the terms of the 1980 Act, referring as it does to deliberate concealment rather than to fraud.
Q. I suggest to you, Mr Lucas, that you and Mr Chalmers did consider at the time whether AIC should be informed about these retest results and you decided that they should not be.
A. I can tell you that I have no recollection of ever making that decision.
Q. And that you decided that they should not be even though you appreciated, in the light of what you had said to Mr Whitaker and your certificate, that it is something they ought to have been told about?
A. That is not true.
The relevance of the Cooper retests to AIC's rights of action
the gist of the action of false imprisonment is the mere imprisonment. The plaintiff need not prove that the imprisonment was unlawful or malicious; he establishes a prima facie case if he proves that he was imprisoned by the defendant. The onus is then shifted to the defendant to prove some justification for it.
The same analysis was adopted by Russell LJ at p 7D, holding that the "right of action" was complete at the moment of arrest.
One should look at the way the plaintiff puts his case, distil what he is complaining about and ask whether he had, in broad terms, knowledge of the facts on which the complaint is based.
It is thus for the claimant to formulate the particular acts of negligence or breach of duty of which he complains. Unless those are incoherent in law, or abusive in that they completely overlap with an already pleaded complaint, so that they would in any event be struck out (on which see §456 above), the claimant is entitled to proceed with them, and to seek the protection of section 32 in respect of those claims if they were made unavailable to him by a breach of duty on the part of the defendant.