England and Wales Court of Appeal (Civil Division) Decisions

IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
His Honour Judge McKenna
(sitting as as Deputy Judge of the High Court
[2010] EWHC 1085 (QB)

		Royal Courts of Justice Strand, London, WC2A 2LL
		09/02/2011

Mr Justice David Richards :

This is the judgment of the court.

Introduction

1. The issue on this appeal is whether a contract for the storage of derv at the claimant's fuel storage facilities was made in the course of email exchanges between the parties. At the conclusion of a two-day trial His Honour Judge McKenna, sitting as a deputy High Court judge, held that it was and gave judgment against the defendant for damages for breach of contract in a sum of £197,110.77 including interest. The defendant appeals with the permission of Patten LJ, limited to the issue of whether a contract was made.

The facts

2. The claimant, Immingham Storage Company Limited, provides storage facilities for petroleum and petro-chemical products at its terminal at Immingham, Lincolnshire. The defendant, Clear plc, was at the material time engaged in trading various commodities, including fuel.
3. The judge described the initial contact between the parties in para 4 of his judgment:

"The background to this claim is that in October of 2008, Ibrahim Kamisa, then a director of the defendant, approached the claimant and enquired about commingled storage space for between 3-4,000 cubic metres of ultra low sulphur diesel at the claimant's Immingham terminal. On 30 October 2008, Mr Kamisa and Mrs Whitter, the defendant's company accountant, visited the terminal and met Mr Stringfellow, who is the claimant's commercial manager and the terminal manager, to discuss storage requirements. It is clear from the subsequent letter from Mrs Whitter of 20 November that the defendant was keen to proceed with storage of ultra low sulphur diesel at the claimant's facility and she said that the defendant would have no problem securing a supply of the correct grade of ultra low sulphur diesel."

4. There were subsequent email exchanges referring to dates in 2009 when storage capacity at Immingham might become available and likely costs.
5. On 19 December 2008, Mr Stringfellow emailed Miss Whitter as follows:

"Thanks for your previous email and your expression of wishing to progress. We have looked at this very carefully and can now confirm that the very earliest start that we can offer is the 01 May as attached. As this is the only current available capacity at Immingham at this moment in time, please can you let us have a decision by 4.00 pm 03 January 2009 to avoid reallocation to other interested parties?

Sue, in order to allocate this tankage for your usage we will need to be in receipt of a faxed, signed copy of the attached quotation by the time stated above."

The quotation, which was attached to an email sent a minute later, was a two-page document, headed in bold capitals "Subject to board approval and tankage availability". It identified the defendant as the customer, the products as Derv (commingled), the installation as Immingham West Terminal, the capacity and type of the facilities, the commencement date and minimum storage period ("Subject to availability starting on 01 May 2009 for twelve months and continuing thereafter subject to minimum notice period", identified as six months in writing by either party), and the monthly charge (£22,250 per month) and method of handling.

6. Further matters were covered in the quotation, together with a statement that "all other terms will be as per our "General Storage Conditions" Version 2008 which shall be deemed to apply to this quotation." The final sentence of the document was "A formal contract will then follow in due course". It was signed by Mr Stringfellow for the claimant and contained space for signature for the defendant under the words "we hereby accept the terms of your quotation subject to your Board approval".
7. Also attached to the email was a copy of the defendant's General Storage Conditions version 2008. This was a detailed 13-page document. It contained definitions of terms used in the Conditions which included "Agreement":

"the storage agreement between the Company and the Customer formed by the Particulars into which these Conditions are incorporated."

and "Particulars":

"the particulars of the Agreement save that in the event that such particulars have not been signed by both parties any reference to the Particulars (including the Schedule) shall be deemed to be to such particulars as are set out in (i) any formal version of the Agreement in respect of such storage signed by the Company and sent to the Customer prior to the Products first being accepted for receipt into the Installation under the terms of the Agreement; or in the event that no such formal version of the Agreement has been sent (ii) the quotation signed by the Customer in respect of such storage notwithstanding whether or not such quotation remains subject to Board Approval; or in the event that no such quotation has been signed by the Customer (iii) the last quotation issued by the Company in respect of such storage prior to the Products first being accepted for receipt into the Installation under the terms of the Agreement save to the extent that the parties have agreed in writing to vary the terms of such quotation."

8. Miss Whitter replied on 22 December 2008 to say that she had forwarded everything to Mr Kamisa, Mr Kara, the managing director, and Mr Butt, the company secretary. She noted the deadline and stated that they appreciated "your attention to our storage needs in the current market!"
9. On 5 January 2009, at 3.59 pm, Miss Whitter emailed to Mr Stringfellow as follows:

"I can confirm that we wish to proceed and we are just waiting for Imran to return from his meeting so that he can sign the quotation. He was abroad last week and therefore unable to do this before now."

This was followed up at 4.09 pm with a further email:

"Further to my last email, Mr Butt (our Company Secretary) has spoken to Imran who has authorised him to sign the quotation on behalf of the company. This has been faxed to you."

10. Mr Stringfellow replied at 4.27 pm on the same day:

"Thanks for this and we can confirm safe receipt of your faxed agreement to proceed. We will now seek both our own internal Board Approval to proceed, along with availability of the necessary capacity and expect to be reverting to you by the end of the week latest, so as to confirm (subject to the foregoing) all aspects of our new contract together."

11. On 9 January 2009, Mr Stringfellow emailed Miss Whitter as follows, under the subject heading "Contract confirmation":

We are delighted to be able to accept your offer to take up 4,000m³ commingled Derv storage at our Immingham Terminals (ISCo), starting from 01 May 2009 latest. Whilst remote at present, there may be the opportunity to start a little earlier than 01 May 2009 and we will keep in close contact with you on this point and also inform you of the exact tankage allocated as this becomes available. However, for the avoidance of misunderstanding, from no later than 01 May 2009 you are assured of 4,000m³ of commingled Derv at ISCo and can now proceed to source your product accordingly.

In further confirmation of the above, our full contract for this business will now be raised over the next few days by our Head Office and sent for your signature and return.

Sue, trust the above clarifies the situation and meets with your satisfaction. Our Terminal Management/Operations Department will be in contact with you in due course, to appraise you of the necessary areas we need to cover, in order to prepare the tankage for your service."

Miss Whitter replied on the same day, using the same subject heading:

"Great news, thanks! We will notify the various parties accordingly and work towards our first shipment in May. I would be grateful if the contract could be sent electronically if possible as this will facilitate its swift return."

12. On 23 January 2009, a legal adviser employed by the claimant wrote to Miss Whitter as follows:

"Please find enclosed two originals of the contract, signed by our Managing Director, for the storage of your Products at our Immingham East Terminal. The contract will formalise the existing situation between us as detailed in our quotation to you."

There was enclosed a five-page document headed Storage Agreement Particulars, with the General Storage Conditions 2008 which were incorporated by reference in the written agreement.

13. Miss Whitter emailed Mr Stringfellow on 26 January 2009 to say that they had "received the contract and will be arranging for this to be signed and returned this week".
14. In fact, this contract was never returned to the claimant. The defendant was unable to source the appropriate fuel for commingled storage and made no delivery to Immingham. The claimant had the capacity available for the defendant and raised invoices for monthly storage charges on 1 May and 1 June 2009. Neither was paid and on 25 June 2009 the defendant denied the existence of any contract, stating:

"As you are well aware, the acceptance of your quotation in principal [sic] does not constitute a formal contract which was never signed by an officer of this company and therefore no agreement exists between us."

The parties' cases

15. The claimant's case at trial, and on appeal, is that a contract was made by the acceptance in Mr Stringfellow's email of 9 January 2009 of an offer constituted by the return on 5 January 2009 of the quotation signed on behalf of the defendant.
16. The defendant's case is that the return of the quotation signed on its behalf was not an offer capable of acceptance so as to form a contract, because of the inclusion in the quotation of the sentence "A formal contract will then follow in due course".
17. Further, even if it constituted an offer, the defendant's email response on 9 January 2009 was not an acceptance of the offer, because it stated that "our full contract for this business will now be raised …and sent for your signature and return".

The judgment

18. There was before the judge no real issue as to the applicable legal principles. As regards the significance of a provision for the execution of a further written contract, the judge cited from the judgment of Parker J in Von Hatzfeld-Wildenburg v Alexander [1912] 1 Ch 284 at 288:

"It appears to be well settled by the authorities that if the documents or letters relied on as constituting a contract, contemplate the execution of a further contract between the parties, it is a question of construction whether the execution of the further contract is a condition or term of the bargain or whether it is a mere expression of the desire of the parties as to the manner in which the transaction already agreed to, will in fact go through. In the former case, there is no enforceable contract either because the condition is unfulfilled or because the law does not recognise a contract entering into a contract. In the latter case, there is a binding contract and the reference to the more formal document may be ignored."

19. The factors which led the judge to his conclusion that a contract was concluded by the claimant's email of 9 January 2009, set out in paragraphs 22-25 of his judgment, may be summarised as follows. First, an objective reading of the email exchanges establish that a contract was made. Secondly, the quotation was clearly marked as subject to two matters only, the approval of the claimant's board and tank availability. It was not stated to be subject to contract or subject to execution of a formal agreement. The use of the word "formal" was itself an indication of the intention to create a contract before the further written contract was signed. Thirdly, Miss Whitter and Mr Butt thought it necessary to obtain the authority of Mr Kara, the defendant's managing director, before Mr Butt signed the quotation on behalf of the defendant. Fourthly, although a small point, an exchange of emails on 30 January 2009 between Mr Stringfellow and Miss Whitter was consistent only with a contract having already been made. Fifthly, if the defendant had really thought that there was no contract between the parties, it would have been pleading with the claimant to keep the storage capacity available to it, and if the claimant had thought that there was no contract it would not have kept the storage available, given the demand for storage at that time. Sixthly, the judge rejected the defendant's reliance on differences between the quotation and the formal contract, which he characterised as more apparent than real.

The defendant's submissions on appeal

20. The defendant submits that the judge's conclusions were wrong for a number of reasons. First, it repeats its submission that the quotation when signed on behalf of the defendant was not an offer capable of acceptance so as to form a contract because it stated that a formal contract would follow in due course. It was this subsequent formal contract which would be the "Particulars" referred to in the General Storage Conditions. Signing and returning the contract was therefore just an expression of initial interest and an informal document to be signed subject to contract.
21. Secondly, and in any event, the claimant's email of 9 January 2009 could not constitute an acceptance, because it provided for a "full contract" to be subsequently prepared and signed. The defendant was in that way preserving its ability to contract on terms that differed from or supplemented those in the quotation. That this must be taken objectively as the claimant's intention is borne out by the differences between the quotation and the agreement later sent to the defendant. The significance of the later agreement is demonstrated by the fact that the claimant chased the defendant to sign and return it. Equally, the defendant would not know on 9 January 2009 the terms which would be included in the formal agreement.
22. Thirdly, the judge was erroneously influenced by the evidence of the negotiations between the parties, rather confining himself to an objective analysis of the language of the quotation and the claimant's email of 9 January 2009 to decide whether a contract had been formed.
23. Fourthly, the judge wrongly had regard to the parties' conduct after 9 January 2009 in deciding whether a contract was made on that day. If it was legitimate for him to do so, he failed to place sufficient weight on various matters which were incompatible with an intention by the parties to enter into a contract on 9 January 2009.

Discussion

24. It is the first and second of these submissions on which this appeal turns. As regards the first submission, dealing with the status of the quotation, we have earlier summarised its contents in a little detail. It deals with all the terms of any significance to a contract of the type proposed in this case. The defendant does not instance any matter which has not been expressly covered. Moreover, it deals also with matters of detail, by providing that "all other terms will be as per our General Storage Conditions Version 2008 which shall be deemed to apply to this quotation".
25. The only conditions to which the quotation was expressed to be subject were board approval by the respondent and confirmation of tank availability. Both were certain, required no further discussion or negotiation between the parties and required action only by the respondent. They could be, and were, swiftly satisfied before the claimant's acceptance of the defendant's offer. They were conditions precedent of an entirely conventional type, consistent with an intention that, once satisfied and once the respondent communicated its acceptance, a contract would exist between the parties on the terms of the quotation. The judge was right to draw attention to the absence of a condition such as "subject to contract". The terms on which the quotation was signed ("We hereby accept the terms of your quotation subject to your Board approval") made clear the limited conditionality.
26. These factors point, overwhelmingly in our judgment, to an intention to create a contract if the claimant accepted the defendant's offer. Set against those factors, the provision that a "formal contract will then follow in due course" does not indicate that the claimant's acceptance of the signed quotation will be no more than an agreement subject to contract. It is, as stated by Parker J in Van Hatzfeldt-Wildenburg v Alexander, "a mere expression of the desire of the parties as to the manner in which the transaction already agreed to, will in fact go through".
27. The defendant submits that this conclusion is inconsistent with the definitions of "Agreement" and "Particulars" in the General Storage Conditions. It is submitted that the definitions require the formal agreement to have been signed by both parties, save where fuel or other products have been accepted into storage, before a formal agreement has been signed. It is submitted that the definition of "Particulars" shows that the quotation would not in any other circumstances have contractual effect.
28. This submission is not, in our view, well-founded. It is inconsistent with the terms of the quotation, providing that the General Storage Conditions "shall be deemed to apply to this quotation". The defendant's submission, if correct, would mean that they did not apply to the quotation. Further, the submission involves a misreading of the definition of particulars. It neither provides nor implies that the quotation, once signed by the customer and accepted by the claimant, will not constitute "the Particulars into which these Conditions are incorporated". The quotation, once signed by the customer and accepted by the claimant, will constitute the particulars (as defined) unless and until either the formal agreement is signed by both parties, or goods have been received at the installation after a draft formal agreement has been sent to the customer but before it has been signed and returned, in which event the draft formal agreement becomes the particulars (as defined).
29. The defendant's second submission is that the provision in the claimant's email of 9 January 2009 for a subsequent "full contract" precluded the conclusion of a contract at that stage. It is said that not only did it make any agreement conditional on signature of a full agreement, but it also introduced a variation to the terms of the offer. It was neither unqualified nor corresponded with the offer, and so could not be an effective acceptance. This submission is not well-founded. The reference to sending a "full contract" did no more than carry forward the provision in the quotation that "a formal contract" would follow in due course. It did not introduce a variation to the terms of the offer, but corresponded with them. Just as the provision for "a formal contract" did not prevent the signed quotation from being an offer to contract, so the reference to a subsequent "full contract" did not prevent the email of 9 January 2009 from being an acceptance of the offer which immediately created a contract.
30. Further, the reference to a full contract must be read in the context of the entire email, which strongly supports the conclusion of a contract at that stage. First, as Mr Infield points out, the subject of the email is "contract confirmation". Secondly, the text of the email begins "We are delighted to be able to accept your offer to take up 4,000m³ of commingled Derv storage at our Immingham Terminals (ISCo), starting from 01 May 2009 latest". Thirdly, the defendant is told "from no later than 01 May 2009 you are assured of 4,000m³ of commingled derv at ISCo and can now proceed to source your product accordingly". Fourthly, "our full contract for this business" will be raised "in further confirmation of the above". Moreover, in his email of 5 January 2009, Mr Stringfellow had said that he expected to revert shortly so as to confirm, subject to board approval and tank availability "all aspects of our new contract together".
31. The defendant's reliance on differences between the quotation and the formal contract provided on 23 January 2009 does not assist it. If the formal contract was inconsistent with the quotation or contained additional provisions not found in the quotation, the defendant would not be bound to accept them. Its consent would be required to any variation in the terms of the contract contained in the quotation. As it happens, all of the points of suggested difference are minor and no objection was raised to any of them by the defendant.
32. These conclusions are sufficient to dispose of the appeal in favour of the claimant, and we will refer only briefly to the other submissions made by the defendant.
33. We are puzzled by the defendant's third submission, that the judge was erroneously influenced by the parties' pre-contractual negotiations. The judge quite properly set out some of the events which led to the claimant sending its quotation to the defendant on 19 December 2008. This does no more than put the quotation in context. There is nothing in the judgment to suggest that the judge had regard to the course of negotiations, such as they were, prior to 19 December 2008, to determine whether a contract was made on 9 January 2009. Having said that, where the issue is whether the parties intended to create legal relations, there would be nothing wrong in taking account of earlier negotiations for that purpose.
34. The defendant's fourth submission was that the judge wrongly had regard to the parties' conduct and exchanges after 9 January 2009 in determining whether a contract was concluded on that day. It is clear from the judgment that he did take account of subsequent conduct and exchanges. Whether or not he was entitled to do so, we are satisfied that the existence of a contract made on 9 January 2009 is clearly established by reference only to the exchanges on 5 January and 9 January 2009.
35. We therefore dismiss the appeal.