ON APPEAL FROM BIRMINGHAM MERCANTILE COURT
Her Honour Judge Alton sitting as a Judge of the High Court
Strand, London, WC2A 2LL
B e f o r e :
Vice-President of the Court of Appeal, Civil Division
LORD JUSTICE JACKSON
LORD JUSTICE TOMLINSON
| Acre 1127 Limited
formerly known as Castle Galleries Limited
|- and -
|De Montfort Fine Art Limited
Jonathan Nash QC and Matthew Hardwick (instructed by George Green LLP) for the Respondent
Hearing dates : 8-10 November 2010
Crown Copyright ©
Lord Justice Tomlinson :
"3. De Montfort, the shares in which, at the material time, were wholly owned by Helen Swaby, a director and important witness in this case, has developed into a substantial company in the business of the sourcing, printing and sale of what has been described as commercial contemporary art. At the time in question it did not have an in house retail operation, selling generally to small retail galleries. It was considering the possibility of developing its own retail operation. Castle was an independent company incorporated by Ian and Darren Weatherby-Blythe in 2001 to sell affordable commercial fine art to the mass market. By December 2004 it had already 13 galleries in operation with two more due to open in April and May 2005. The art which it sold was broadly of the same category as that being published and wholesaled by De Montfort. It did not however purchase or stock any art work from De Montfort. It had already developed a close relationship with Washington Green from whom it sourced all the artwork which it sold. There was however no written agreement governing that relationship which had evolved without, apparently, the parties ever having had to resort to debate as to precisely what their legal relationship entailed, there having been substantial give and take on both sides. That relationship has however developed a certain importance in this particular case as it is part of the case of Castle that it was entitled, with De Montfort, to the same rights and privileges that it had previously enjoyed with Washington Green. Washington Green had been taken over some years previously by Halcyon the ultimate owner of which is a trust of which Ehud Sheleg, a director of all the relevant Halcyon companies to include Castle after its acquisition, is either the or a beneficiary.
4. The art with which I am concerned is of a commercial nature and can be split into three categories for the purpose at least of this case. Firstly there is original work produced by artists either to specific commission or ordered by reference to a style or series. Some artists may be very prolific and produce tens or hundreds of canvases in a particular style or in particular colour ways so that commissions can be placed for particular paintings with a fair degree of confidence as to the picture which will be provided: for example Jonathan Shaw's "Sailing" in, say, navy white and silver or brown copper and white which would result in the production of a predictable canvas or series of canvases. Other artists are less productive and maybe less predictable. Their work may be ordered by reference to a particular genre; for example Barsby's film noir style, launched in early 2005, where one might commission repeat canvases in a particular style which may well not be quite so repetitious as, say, a Shaw or a McGregor – another of the De Montfort artists producing substantial quantities of a particular style.
5. Another part of the De Montfort range was that of limited edition giclee prints either based upon original paintings or which may be the product of those who concentrate upon producing limited edition prints. The print run may be 200 or say 1000. These are associated with Artists proofs the quantities of which may vary depending upon the size of the print run but may number 10 or more. Some companies also produce what are called printers proofs; this is not however done by De Montfort which over the years has increasingly been printing limited editions for its artists having, by January 2005, five printing presses. It did not however print all limited editions which it published; some would be printed by others either abroad or within the United Kingdom.
6. Lastly there are sculptures which are also marketed in limited editions. These again can be split into two. Firstly there are bronzes which may be cast in a relatively small edition of 100 to 150. The same or a similar sculpture may also be produced in what has, in this case, been referred to as porcelain although I understand it to be a form of resin. The castings are all carried out abroad and shipped in to order.
7. As I have said Castle had become a very successful and expanding business. In 2003 it won an award within the Fine Arts business community which brought it to the attention of Waterford Corporate Finance Limited who approached it with a view to seeing whether it could assist financially by introducing Castle to potential sources of finance. By 2003 Darren wanted to realise his share in the value of the business whereas his brother Ian wanted to raise funds in order to invest and expand further so an injection of capital was needed. They were ultimately introduced to venture capitalists Dunedin who, on an initial review of the business, expressed some concern as to the dependence of Castle upon Washington Green from whom they sourced all their art and relied for credit.
8. On 29 October 2004 there was a meeting between Castle, represented by Ian, and Dunedin. Mr Sheleg insisted upon attending, he having been made generally aware of the discussions between the Weatherby-Blythes and Dunedin who also wished, given his Group's importance to Castle, to meet him. I find that at this stage Mr Sheleg made it plain that he could not guarantee support for Castle's expansion plans; nor could he guarantee that Castle would always enjoy the same favourable trading terms as it then currently did. As a consequence Dunedin withdrew its offer to acquire Castle.
9. Thereafter there appeared to have been somewhat desultory discussions between Mr Sheleg and Castle as to the possible acquisition of Castle by Halcyon. Throughout the late autumn to January 2005 there was however no figure proposed by Halcyon or agreed.
10. Unbeknownst to Mr Sheleg Castle, as a consequence of the previous advice of Dunedin and as a consequence of the somewhat veiled threats which I find Mr Sheleg did make on the 29 October 2004 as to the consequences upon supplies and credit if Castle proceeded with a deal with which Washington Green/Halcyon was not comfortable, commenced discussions with De Montfort as to a possible merger of the two businesses capitalised by injection of investment funds. In addition the brothers were sufficiently concerned by Mr Sheleg's attitude and persuaded by Dunedin's advice to want to seek to secure an alternative supply in the event that Washington Green were to create difficulties were it to find out about the ongoing merger discussion with its competitor. In any event they wanted to start easing the business off its exclusive dependence on Washington Green by establishing an additional source of artwork.
11. On 6th January and again 11th January 2005 there were meetings between Helen Swaby Mark Ansell and the Weatherby-Blythes not only to discuss a possible merger but also the broad terms of a supply agreement to be entered into between the parties. Darren, who attended the 11th January meeting without Ian who was on holiday, had prepared an agenda titled Project Hart . . . Both meetings went well and, by the conclusion of that of 11th January, there were only two items on the agenda left to be resolved on the proposed supply agreement those relating to the percentages of product returns which would be permissible and the length of the agreement. In the course of the earlier visit Darren and Ian toured the premises and viewed some of the art displayed. I find, although Darren and Ian have appeared to minimise their familiarity with De Montfort's range, that they would have been broadly aware of the nature of its limited-edition ranges and familiar with some of their artists given that both operated in the same commercial fine art market, would attend the same trade shows and no doubt, as part of their business development, would have some awareness of the competition.
12. A further meeting was arranged for 19th January 2005 attended by Darren and Andrew White of Castle, Helen Swaby and representatives of her sales team. There is dispute as to the purpose of this meeting and as to its result. De Montfort contends that there was a detailed ordering process during the course of which Darren, having viewed a large range of original and limited-edition art, placed a substantial order with De Montfort effectively as the first tranche under the shortly to be executed supply agreement. Castle's case is that, as Miss Swaby well knew, the purpose of the evening was simply to identify the artists and ranges of limited edition work in which Castle would potentially be interested and which it would like to be withheld from the Spring Fair, Darren having in any event no authority to enter into any form of binding commitment without the sanction of his brother. It maintains that the brothers had already explained to Miss Swaby the without commitment reservation system which they enjoyed with Washington Green and which it had been agreed would also be operated between Castle and De Montfort at the earlier meetings.
13. In the course of the 19th January meeting manuscript notes had been kept on De Montfort's order pad of matters discussed by Ms Hill and Ms Godson. It was agreed that Miss Swaby would have the notes typed out and provide a copy of the list of artworks ordered or reserved (dependent upon who was evidence is to be believed) to the Weatherby-Blythes. Miss Swaby says that this was done and that an order, confirming the verbal order lodged by Darren on 19th, was prepared based on the manuscript notes and typed up between 20th and 25th January it having been posted by her to Castle on or about 26th January. Castle denies having ever received such a document nor is any copy of that which Miss Swaby says she sent out available to the court in either hard copy or electronic form. A substantial issue has arisen as to the circumstances in which the document, . . . originally produced and described as a copy of the order, came to be generated it being evident now that that document only came into existence in August 2005. Miss Swaby said that it was identical to and mirrored the January document all copies of which, in either electronic or hard copy form, have been lost. Castle on the other hand submitted that the purported copy was in effect a forgery constituting plain evidence that De Montfort's claim is dishonest and that there never was an order placed.
14. De Montfort alleges that shortly after the 19th January meeting Ian Weatherby-Blythe telephoned, during the course of which he placed an order for a number of limited-edition sculptures and, later, an order for catalogues in order to assist Castle in the marketing of the De Montfort art. Both orders are denied.
15. On the 25th January 2005 Ian Weatherby-Blythe signed the Supply Agreement, . . . at a meeting with Miss Swaby and Mr Ansell.
16. During this period merger/acquisition discussions continued not only between Castle and De Montfort but also Castle and Washington Green, neither De Montfort nor Washington Green however being aware of that fact. On 20th January Ian Weatherby-Blythe had met Mr Sheleg. Ian was, by then, reasonably confident that he had the bones of a supply agreement and a second source of art. An offer was made by Mr Sheleg for the acquisition of Castle. That offer was rejected at a subsequent meeting on or about 7th February as being too low at which time Ian Weatherby-Blythe e-mailed Mr Sheleg . . . . referring to threats which he alleged that Mr Sheleg had made once he had discovered, at that meeting, that there had been continued discussions with De Montfort. Mr Sheleg broadly accepts the accuracy of the bullet points summarised in that e-mail albeit he suggests that the points were not made as threats and were put more mildly.
17. Shortly thereafter Mr Sheleg, on behalf of Halcyon, made a further and better offer which led to the signing of Heads of Terms between those parties on or about 15th February 2005.
18. Despite having agreed Heads of Terms Castle kept its options open, protecting itself against the risk of those Heads of Agreement failing, by continuing its merger discussions with De Montfort who were unaware of the Halcyon deal until it was finally concluded in April 2005. Miss Swaby says that during this period she had a number of telephone conversations with Ian during which she asked when Castle were going to start taking deliveries of their order and was assured that this would take place shortly; Ian maintains that the only discussions taking place related to the due diligence process then proceeding between De Montfort and Dunedin. Ian finally disclosed the Washington Green deal to De Montfort in April at which time, Miss Swaby says she immediately asked what the position would be on the Supply Agreement and the order, to which Ian made an encouraging response suggesting that there would be no problem. There is an issue as to what he told Mr Sheleg at this time, to which I will refer when dealing with the credibility of Ian and Darren Weatherby-Blythe in the context of the proceedings commenced by Halcyon against the Weatherby-Blythes alleging breaches of the warranties contained in the share sale agreement ("the Warranty Proceedings").
19. On 7th May 2005 there was a meeting between De Montfort, Castle and Washington Green. The nature of the discussions, which concerned the Supply Agreement and the disputed order, are in dispute and I will deal with them later. Time passed – Miss Swaby suggests that she was attempting to contact Mr Sheleg with a view to further discussions and has produced copies of her text messages in support of that. Mr Sheleg denies being unavailable or obstructive contending that it was Miss Swaby who refused to cooperate or to permit him to inspect with a view to placing an order under the Supply Agreement. On 22nd September 2005 there was a meeting between Ian and Miss Swaby at which time he was shown a significant portion of the stock which De Montfort maintains was being held back as part of the disputed order. At this time he was shown what Miss Swaby said was a copy of the written confirmation of the disputed order. At this stage Ian was still encouraging as to the prospect of Castle taking the order goods although he has told this court that he did not believe the purported copy order shown to him was genuine. Shortly after this meeting, it was made clear that Castle would not take any part of the disputed order. Accordingly by October 2005 (if not before, Castle alleges) De Montfort had started selling off what it could of the artwork the subject of the disputed order."
"These are the terms that have been agreed between the parties to enter into an agreement for the ongoing supply of artist's original products, limited edition prints and related products ("the Agreement")
1 The Parties are De Montfort Fine Art Limited ("the Supplier") and Castle Galleries Limited ("the Customer").
2 The Agreement will commence on 20th January 2005 and will terminate on the expiration of 12 months written notice given by either Party.
3 The terms of this Agreement ("the Terms") shall remain confidential between the parties unless both parties agree in writing for the disclosure of the Terms to third parties.
4 The Customer has previously sole sourced its goods from another supplier. From the date of this Agreement the Customer has agreed to purchase goods from the Supplier and the Supplier has agreed to supply goods to the Customer under the Terms of this Agreement.
5 Goods supplied in respect of limited addition (sic) artwork where the Supplier is the Publisher will be at normal trade prices less 15%. Goods supplied where the Supplier is a distributor will vary depending on artist. Perez will have a 10% discount and Bulmer a 5% discount off normal trade prices.
6 Artist's original products will be at normal trade prices.
7 The Customer undertakes:
To settle all outstanding monies on the basis of 60 days net monthly
To ensure that goods purchased from the Supplier are not less than £250,0000 (sic - £250,000) per quarter, excluding VAT, from the date of this agreement
8 The Customer will be entitled to return goods throughout the period of this Agreement on the basis of a full credit for the net purchase price subject to the goods being returned within 4 months from the month of supply and not exceeding 10% of the value of that month supplies.
9 The supplier agrees to use reasonable endeavours to:
- Allow the customer fist (sic) choice of original products and limited editions
- Ensure adequate supplies of product
- Make available 75% of artists proofs
- Continue with marketing support at least equivalent to that currently enjoyed by other customers.
Collaborate with the customers to source future supplies and to keep the customer reasonably informed in artists developments and the Suppliers business as it affects this Agreement,"
When the Supply Agreement was signed on 25 January 2005 the discount allowed by the first section of Clause 5 was altered to 15%, Ian Weatherby-Blythe and Miss Swaby countersigning this alteration. In Clause 9 someone at some stage inserted the letter "r" in manuscript into the typed word "fist", the intended sense being clear.
"I should explain too that contemporary artwork can be very seasonal. Unlike traditional artwork it can quickly become unfashionable and unwanted. It is much more akin to High Street fashion with its ever-changing seasonal range of clothes – where a designer's latest output renders last season's range obsolete. This is just what happens in the contemporary artwork market. Galleries want the latest releases. Unsold stock from a previous release becomes hard to shift and often of little value. Even where it is possible to shift some stock at discounted prices it can actually damage business: absorbing demand at a reduced price and thus depressing more profitable sales of current items."
"We understand the factual position to be as follows:
1. The Supply Agreement commenced on 20 January 2005 and provision was made for its termination on the expiration of twelve months written notice given by either party;
2. You placed an initial order on or around 20 January 2005 to the value (net of discounts) of £616,564 plus VAT (£724,462.70 in total), but subsequently refused to take delivery (see a copy of our Client's Acknowledgement of Order at Appendix 2 to this letter);
3. You agreed to purchase goods from our client to a value of not less than £250,000 per quarter excluding VAT with effect from 20 January 2005.
To date, in addition to the order placed in the first quarter, you should also have placed orders in the quarter commencing 20 April 2005 for at least a further £250,000 of goods and are obliged to place a further order for at least £250,000 in the current quarter commencing 20 July 2005. Your obligations under the Supply Agreement are of course continuing, in the absence of either party giving twelve months' written notice of termination.
You are currently in serious breach of your contractual obligations and our client will be fully within its rights to apply to the Court for specific performance, damages and/or other relief.
In the circumstances, please advise within seven days of the date of this letter:
1. Whether or not you intend to remedy your breaches?"
Appendix 2 to the letter was the Forged Order, which Miss Swaby had created on 25 August 2005 after consulting her solicitors who, not unnaturally, asked for a written copy of the disputed order.
"We are instructed that Castle remains willing and able to place future quarterly orders, to the value of £250,000 per quarter, in accordance with the Supply Agreement going forward. Castle would also be interested in placing additional orders, without obligation, for product over and above £250,000 per quarter. Please confirm a convenient date and time when directors of Castle may attend to view the current stock with a view to placing orders pursuant to the Supply Agreement. Our client would also wish to inspect the product which your client alleges it is holding in respect of the alleged "purchase order form"."
The judge found that this latter request was "pure tactical window-dressing" – paragraph 81 of the judgment. Indeed she found at paragraph 77 that Mr Sheleg who had the ultimate decision-making power was never ready and willing to place orders under the Supply Agreement and that he never genuinely sought access to De Montfort's premises in order to enable Castle to review and select art. He was, she concluded, "neither seeking nor expecting facilities to enable Castle to order art in any of the relevant quarters before the end of April 2006".
The judgment below
(i) Miss Swaby's deception
"57. Where De Montfort's case starts to break down is in respect of commissions and quantities of artwork which were discussed on a broad brush basis only which discussion De Montfort interpreted – genuinely but I find mistakenly – as the leaving to them of substantial discretion as to the final formulation and make up of the order. There is also the overarching fact that there was no detailed discussion of prices and order values, no note taking by Castle and the request for a copy of the manuscript notes which it was agreed should be sent once transcribed. I am satisfied that the purpose of that was and was obviously so that Castle could check through to ascertain that the final list of artwork accorded with their requirements and that De Montfort had correctly interpreted those requirements where some leeway or approximation of figures, display combinations and the like had been left open for interpretation, and, no doubt also to check prices and total cost with a view then to confirming or correcting the order. I am also satisfied that both parties got carried away on the night with the sheer quantity of stock being pulled out to such extent that De Montfort did believe – wrongly – that certain things were being ordered which simply were not, namely the Llewellyn Bowens and the lilac colourway commissions.
. . . .
61. Although I find that both parties genuinely understood and believed that a firm commitment had been made in respect of some part of the artwork which had been selected on the night, there was no meeting of minds as to the scope of the overall order to be placed nor was the requirement, implicit in the agreement to provide a transcription of what had been discussed/agreed, for confirmation by Castle of the order once it had had the opportunity to review the overall package including quantities and prices and the accuracy of De Montfort's interpretation of what it needed once that transcription had been provided, been satisfied. The parties were at a very advanced stage in the ordering process but had not, on 19th January or thereafter finally agreed upon the scope of the order. "
"3. Whether it was the Defendant (as alleged by the Claimant) or the Claimant (as alleged by the Defendant) who breached the Supply Agreement. In particular:
3.1 whether the Defendant was ready and willing to place orders worth a minimum of £250,000 in respect of each of the quarters during the term of the Supply Agreement (as alleged by the Defendant);
3.2 whether the Claimant would not permit the Defendant to examine its available stock (as alleged by the Defendant);
3.3 whether the Claimant made it a condition of the supply of stock under the Supply Agreement that the Defendant had to take delivery of the disputed Order stock (as alleged by the Defendant); and
. . ."
(ii) The meeting on 7 May 2005
(iii) The finding of repudiatory breach by Castle
"Whilst I can understand that the assertion of the existence of the disputed order would inhibit or prevent the placement of another order in the first quarter and form a defence had De Montfort been permitted to add an alternative claim in respect of the first quarter, I do not understand why such an assertion would relieve Castle from its obligations in respect of subsequent quarters. Whilst Mr Tager maintained that it would amount to an assertion of a contractual position inconsistent with actual contractual obligation (Day 10 pp 115 to 11p) I do not accept that De Montfort's genuine but mistaken assertion in May 2005, if not before, of the existence of the order was inconsistent with the Supply Agreement. On the contrary it was an assertion of [?"the need for"?] compliance by Castle with its contractual obligation to purchase under the Supply Contract and breach by failure to call off. I cannot in any event understand why it would amount to a breach of an interdependent promise that would in some way suspend or eliminate Castle's obligations arising after the first quarter let alone amount to a continuing breach by De Montfort so as to entitle Castle to seek damages by way of loss of profit. In the course of submissions I asked Mr Tager what the position would have been had De Montfort not simply persisted in trying to persuade Castle to take the order but had immediately issued proceedings in respect of it; would that have amounted to a breach of the Supply Agreement? At that point it appeared that this argument was being elided with the assertion that there was insistence that Castle must take the disputed order before it would be permitted to choose any further stock – a factual assertion which I have found, as a matter of fact, not to have been the case. Assuming that there remains some separate point to the effect that mere insistence upon the existence of an obligation in respect of the disputed order can constitute a repudiatory breach of the Supply agreement entitling Castle either to a defence in respect of De Montfort's claims in respect of subsequent quarters or to sue in respect of alleged loss of profits for quarters two three and four than I find that there is nothing in the point."
". . . by failing and/or refusing to place minimum orders as provided for in the Supply Agreement without having any excuse by reason of refusal of access or the like, Castle was unarguably in repudiatory breach of the Supply Agreement. This would be so whether the obligations in respect of each quarter are or are not treated as independent or interdependent – the very persistence of Castle's failure quarter after quarter made it plain that, whatever Mr Sheleg's argument now, Castle at the time did not wish to purchase artworks under the Supply Agreement and had no intention of honouring its obligations."
The further arguments on appeal - discussion
i) Should the judge have found that it was De Montfort who repudiated the contract by bolstering the demand for performance of the non-existent order by production of the Forged Order, and
ii) Even if De Montfort was not in repudiation of the contract, was the judge correct in the light of the situation concerning the first quarter order to regard Castle's failure to place orders in the second, third and fourth quarters as itself repudiatory of the Supply Agreement.
1) there must be a common assumption as to the existence of a state of affairs;
2) there must be no warranty by either party that that state of affairs exists;
3) the non-existence of the state of affairs must not be attributable to the fault of either party;
4) the non-existence of the state of affairs must render contractual performance impossible;
5) the state of affairs may be the existence, or a vital attribute, of the consideration to be provided, or circumstances which must subsist if performance of the contractual venture is to be possible.
"The fact that there was a dispute, and a significant dispute, over the first quarter of the Supply Agreement . . . should have made no difference whatsoever to whether or not De Montfort were able, and willing, to supply a minimum of £250,000 worth of product for the second quarter and subsequently. . . . the supply under each quarter was separate and was able to stand alone. . . . De Montfort could easily have isolated this dispute over the disputed order and continued to supply under the Supply Agreement."
This was said in the context of a misconceived argument to the effect that De Montfort made it a condition of further supply under the Supply Agreement that the disputed order be first performed as an excuse not to comply with its own obligations under the Supply Agreement, which it wished no longer to perform in the light of the acquisition of Castle by Halcyon. Nonetheless, it would in the light of this evidence be unjust to De Montfort and perhaps difficult to conclude that the Supply Agreement was avoided by common mistake.
Further discussion – repudiatory breach
"If the breach is accepted, the innocent party is relieved from further performance of his obligations under the contract. He is likewise relieved from proving, in any action against the party in default, that he was ready and willing at the date of the renunciation to perform the contract in accordance with its terms. It follows that it is no defence to liability in such an action to show that, if the contract had not been renounced, the innocent party would not at the time fixed for performance have been able to perform it, aliter, if at the time of the renunciation there was already a breach of contract (albeit unknown) on the part of the innocent party."
The present case is of course different since Castle did not accept the repudiatory breach until eighteen months later and did not at any stage in the interim seek performance of the contract or assert an entitlement to damages for its breach. Its counterclaim for loss of profits in respect of part of this period has in such circumstances an air of complete unreality. As a matter of analysis however in my judgment it fails for the same reason that a claim by an innocent party who was at the time of repudiation already irremediably disabled from performance fails. In this regard I have found most helpful the exposition of the principles by Sankey J in Cooper's case. That was a case in which the plaintiff sellers of toothbrushes to be manufactured in Japan and despatched to the United Kingdom had, before what was assumed to be a repudiation by the defendants on 16 April 1919, put it out of their power to perform the contractual shipment, which was required to be made by the end of April. The plaintiffs, thinking that the defendants were trying to cancel the contract, although they had not done so, had in March stopped the shipment and cancelled the letter of credit in favour of their Japanese manufacturer suppliers. It was therefore a case of actual inability to perform, but it was brought about by an unwillingness to perform. In my judgment Sankey J's remarks must be equally applicable in the perhaps unusual case where an innocent party does not accept the repudiation, but does not thereafter press for performance and yet belatedly claims damages in circumstances in which it can be shown, as here, that he had had since before the repudiatory breach a settled intention not to perform the contract. At page 593 Sankey J said this:-
"In my view, Braithwaite's case only lays down or reiterates a rule something in the nature of an estoppel or waiver as applicable to a certain state of facts. It means no more than this, that, if one person by an anticipatory breach of contract induces another person to whom he has contracted not to complete the contract, the first person cannot be heard to say subsequently that the second person is not ready and willing to perform it: see Cort v The Ambergate Rly Co (1851) 17 A & E (NS) 127, and at p. 144 where Lord Campbell says:-
"We are of opinion, however, that the jury were fully justified on the evidence in finding that the plaintiffs were ready and willing to perform the contract, although they never made and tendered the residue of the chairs. In common-sense the meaning of such an averment of readiness and willingness must be that the non-completion of the contract was not the fault of the plaintiff, and that they were disposed and able to complete it if it had not been renounced by the defendants."
Suppose, for example, A orders a number of wooden boxes from B to be delivered within a certain time and B purchases the wood to make the boxes, but before he has actually made them A repudiates the contract and is sued for damages; he cannot then be heard to say that B was never ready and willing to complete the contract and deliver the boxes within the stipulated time, if and because the reason for B not being ready and willing is that A has repudiated the contract; and it is therefore necessary for B to prove that he was ready and willing to complete. It was held in Braithwaite's case that the facts there disclosed did constitute a waiver by the defendants of the performance by the plaintiff of the conditions precedent which would otherwise have been necessary to the enforcement by him of the contract (see the judgment of the Master of the Rolls at p 551). No new law was there laid down, but the Court merely applied familiar principles to particular and somewhat peculiar facts. The true rule is that, although it is not necessarily obligatory for a man whose contract has been repudiated to go on with and complete it or to prove that he was always able and willing to complete in order to succeed in his action, it is none the less open to the party repudiating to show that the other was never in a position to complete and could not possibly have done so at any time; and if he can show this he is not liable in damages.
That I find to be the position in the present case. The plaintiffs were never ready or willing during the month of April to complete the contract; and defendants' repudiation in no way prevented the plaintiffs from being ready and willing to complete."
That reasoning is in my judgment equally apposite here. In answer to Castle's counterclaim De Montfort is entitled to rely upon Castle's lack of readiness and willingness to perform which was in no way induced by or consequent upon De Montfort's own repudiatory conduct. See also Fercometal Sarl v Mediterranean Shipping Co  AC
788 where the above passage from the judgment of Lord Campbell CJ in Cort v Ambergate is cited with apparent approval by Lord Ackner.
"Had I been persuaded that the disputed order was enforceable I would not have been satisfied, on the limited evidence, that the sales of the order stock that were achieved by De Montfort were at the expense of other orders which would have been placed by client galleries. Such confusion surrounds the question as to precisely what stock De Montfort had in fact allocated to the disputed order, what stock it had or had not commissioned, what stock it had sold and when and what stock remains. There is no information as to the prices achieved on sale or to whom the stock was sold, even by way of sample sales. It appears that De Montfort kept no records. The only evidence that sales were at the expense of other orders which would have been placed is the oral evidence primarily of Miss Swaby. That would not be sufficient to satisfy this court that, for example, the fact that a large number of Barsbys were sold off to third parties meant that De Montfort was unable to see other artwork either by Barsby or other popular artists."
"4. What sums (if any) are recoverable in the Claimant's claim (in the event of that party's success its claims). In particular:
4.1 (in the event that the Claimant established that the Defendant is in breach of the disputed Order) whether the Claimant suffered recoverable lost profits in the sums alleged in the Amended Schedule attached to the Particulars of Claim (or any other sums); and in particular
4.1.1 whether the Claimant has taken reasonable steps to mitigate its losses;
4.1.2 whether (and if so to what extent) the sales of the Order stock that were achieved by the Claimant were at the expense of other orders which would have been placed by its client galleries;
4.1.3. whether it should be assumed, in the calculation of damages, that the Defendant would have exercised its right under clause 9 of the Supply Agreement to return 10% in value of the goods to be supplied thereunder; [now conceded]
4.2 (in the event that the Claimant established that the Defendant is in breach of the Supply agreement) whether the Claimant suffered recoverable lost profits in t he sums alleged in the Amended Schedule attached to the Particulars of Claim (or any other sum) (such issue to include the same sub issue as identified at 4.1.3. above)."
Consistently therewith no argument was addressed at trial to the effect that De Montfort would have achieved substitute sales in respect of the subsequent quarters, which would have reduced or eliminated its loss, a point upon which the burden of proof lay upon Castle.
". . . It was an important feature of the Supply Agreement that Castle Galleries had the right to pick and to choose 100% of the best of De Montfort's original art work and limited edition prints and 75% of APs. These products would be the most sought after by the rest of De Montfort's customers and, if not purchased by Castle Galleries, would have sold to De Montfort's other customers in any case. Therefore, there should have been no difficulty whatsoever in De Montfort selling this stock to their existing customers, and therefore no loss. The same arguments as set out above in relation to de Montfort's claim for lost profits under the disputed order apply with equal force in relation to this aspect of De Montfort's claim."
It is furthermore the case that this evidence was unchallenged. But as the judge observed in her supplementary judgment, this evidence did not relate to a pleaded issue, was consequently neither cross-examined nor further explored and was not relied upon in submissions.
Lord Justice Jackson :
Lord Justice Maurice Kay :