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Cite as: [2009] EWHC 919 (Comm)

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		Neutral Citation Number: [2009] EWHC 919 (Comm)
		Claim No: 2006 FOLIO 1221

IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
LONDON MERCANTILE COURT

8 May 2009

B e f o r e :

His Honour Judge Mackie QC
Sitting as a Judge of the High Court
____________________

	MATRIX EUROPE LIMITED (IN LIQUIDATION)
	ADOVE TRADING LIMITED
	(formerly OVERSEAS CHINA LTD)	Claimant
	-and-
	UNISERVE HOLDINGS LIMITED
	UNISERVE (NORTHERN) LIMITED
	LOGWIN AIR & OCEAN LTD (formerly BIRKART GLOBISTICS LIMITED)	Defendant
	UNISERVE (NORTHERN) LIMITED	Part 20 Claimant
	-and-
	LOGWIN AIR & OCEAN (formerly BIRKART GLOBISTICS LIMITED)	Part 20 Defendant

____________________

Mr Charles Priday and Miss Sushma Ananda (instructed by Hill Dickinson) appeared for the Claimant).
Mr Jeffrey Bacon (instructed by Clyde & Co) appeared for the First and Second Defendants.
Mr Nevil Phillips (instructed by Pysdens) appeared for the Part 20 Defendant
____________________

HTML VERSION OF JUDGMENT
____________________

This is a claim for the value of a consignment of 5,000 Bluetooth mobile telephone adaptors that were delivered to the wrong warehouse and then stolen in January 2003. Unfortunately what should have been a straightforward claim has taken more than six years to reach a trial which, despite preliminary points having been decided at an earlier hearing, occupied the court for eight days.

The Parties

The First Claimant ("Matrix") is in liquidation. It contracted to sell the goods, which are worth some £375,000, to the Second Claimant ("OCL") which has played no active part in the case. Around 9 January 2003 the Third Defendant ("Birkart") contracted with Matrix to carry the goods from Matrix's premises in Altrincham to Manchester Airport and from there, by air freight, for delivery to OCL in Hong Kong. On Friday, 10 January 2003, Birkart's sub-contractor, Cheadle Courier Company Stockport Limited ("Cheadle") mistakenly, by its sub-contractor, Mr Trevor Lancashire, delivered the goods to the warehouse of the Second Defendant (Uniserve (Northern) Limited ("UNL")) at Claverton Road, Roundthorn Industrial Estate, Wythenshawe, Manchester. The First and Second Defendants are part of the Uniserve group of companies. On 11 January 2003 4,948 of the 5,000 adaptors were stolen. Although the Third Defendant is called Logwin Air & Ocean Limited I shall refer to it as "Birkart" as it was known in 2003. At that time Birkart was based in Hayes but had recently taken space in UNL's warehouse at Wythenshaw where it did local as well as general business.

Procedural Background

On 9 October 2003 Matrix sued UNL and Birkart in the Manchester District Registry over the loss of the goods but this claim is currently only pursued against UNL, the case against Birkart being stayed. UNL brought a Part 20 claim against Birkart alleging that there was a contract between them in respect of the goods on the terms of the British Institute of Freight Forwarders ('BIFA') 2000 conditions. Some fifteen months later the case was transferred to the Mercantile List at Central London where on 2 June 2005, on reading the papers, I agreed with the parties' proposal that there be a trial of two preliminary points. Changes in UNL's pleadings and case, of which there have been many, made it necessary for Judge Knight QC to reformulate the preliminary issues in June 2006. UNL unsuccessfully sought to appeal against that order. The preliminary points were heard by Mr Justice Andrew Smith on 7 and 8 November 2007 and he gave judgment on 11 January 2008. In what I will call 'the 2008 Judgment' the Judge concluded, while expressing concern about how useful the answers to the preliminary points would be, first that Birkart did not intend to deliver the goods to UNL but that UNL intended to accept delivery of the goods and, secondly that such a delivery could have been subject to the BIFA terms. There has been a dispute between the parties about the extent to which passages in the judgment are findings of fact binding on me in the trial. I will turn to this but the position is essentially as put by Mr Justice Andrew Smith in the course of the hearing before him "no, I'm not making findings of things relevant to the main action. That surely is clear". The trial before me lasted from 9 to 18 February 2009.

Evidence

As there was some unexpected controversy about the status of some of the evidence I summarise what was before the court.

Matrix called no live evidence but relied on the witness statements of Mr Khalid Khan, the former Managing Director who was not called because he could not be located, and that of Mr Frank Steele, formerly the Warehouse Manager. He was not called because he unfortunately died early in 2008. Mr Steele's statement was made on 18 October 2004 and Mr Khan's at about the same time. Matrix also relies on the statement of Darren Sweetman who worked as a security guard for Blue Lamp Security Limited ("Blue Lamp"). His statement is dated 4 August 2003. Mr Bacon for UNL points to the fact that only Mr Khan's statement has not been signed and that the Matrix evidence should be treated with "extreme caution". He seeks to undermine the account given by Mr Khan by contrasting the witness' account of a visit to the UNL warehouse some weeks before the theft with differences of recollection about it given by a Birkart witness Mrs Kennedy. To the extent that they were material any differences seemed to me unsurprising given the lapse of time between the recollection of Mr Khan and that of Mrs Kennedy and the essential irrelevance of the visit to the issues in this case. I bear in mind that Mr Khan's statement is not signed and that the court has not had the assistance of live evidence from these witnesses. However, most of what these witnesses say is either uncontroversial or would appear so to a lay person. It is also consistent with what one would expect, from the surrounding evidence, the case to be. This is not a case where there is a clash of evidence between one side's written testimony and the other's live witnesses. I will deal with particular points on these statements when setting out the facts.

Matrix called Mr Allan Budgett, the former Managing Director of Blue Lamp Security Limited. At the pre trial review I permitted Matrix to call evidence from Mr Budgett to rebut a suggestion in the report of UNL's expert Mr Ferridge about the reputation and possible connections of Blue Lamp. I accepted Mr Bacon's request that Mr Budgett's evidence be limited to that issue and that no inference be drawn from absence of cross-examination from him.

UNL called Mr Iain Liddell, the Managing Director of the Uniserve Group and its only shareholder. Mr Liddell is also a Director of UNL. Unconventionally Mr Liddell exhibited to his witness statement statements of Trevor Lancashire, Cheadle's sub-contractor, who drove the goods to UNL and Anthony Churcher, who received them on UNL's behalf. His statement was accompanied by a Civil Evidence Act notice putting those statements in evidence on the basis that the whereabouts of the individuals was unknown. The other parties objected that the witnesses' whereabouts were known as they still live at the addresses given on their statements. The statement of Mr Churcher was withdrawn but that of Mr Lancashire remains. I approach the statement of Mr Lancashire in the same way as those submitted by Matrix but his evidence benefits from the fact that it is not disputed or questioned in any way by Matrix or by Birkart. Unconventinally Mr Bacon urges me to reject some of Mr Lancashire's written evidence even though his client submits and relies upon the statement. It follows from the withdrawal of Mr Churcher's statement that the court has no evidence from him despite the fact that he appears to be available. UNL also called Mr Harry Ashworth, Mr Arthur Latham and Mr Phillip Challis.

Birkart called Mrs Angela Kennedy, Mr Sajiv Gupta, Mr John Perkins and Mr Neil Bulfield. Birkart also relies upon the statement of Walter Marsh, a Senior Air Freight Clerk who has recently retired and is in ill heath. Although UNL was not in a position to dispute Mr Marsh's inability to attend it submits that he is not telling the truth about certain matters. I will deal with the particular criticism when setting out the facts.

Mr Bacon objected at the pre trial review to the inclusion of assessors' reports in the bundle in the usual way. The assessor's report for Matrix (but not that for UNL) was included and its useful, but not necessarily reliable, contemporaneous references to views of particular witnesses were of some assistance to all. I accept that the evidential value of such reports is low.

Experts' reports from Matrix and from UNL were submitted on security questions arising from the burglary. Both experts, Mr Graham Dow for Matrix and Mr Hugh Ferridge for UNL, gave evidence and were cross-examined.

The most useful evidence is of course that of live witnesses given in the context of the available written material. I also recognise statements from witnesses who are not called have limited value. But of even less use is speculation about what potential witnesses might have said if they had submitted statements or been required to give evidence. Further while I recognise that in unusual circumstances a party may seek to disown a witness on whom he himself sought to rely, those circumstances do not apply to this trial where there is no direct evidence to contradict the statement and it has been made only in writing not blurted out unexpectedly. I decline to add to an overlong judgment by addressing those submissions about the facts which are based on speculation and surmise not supported by evidence or commonsense.

The positions of the parties

Matrix contends that it contracted with Birkart for the goods to be taken to Manchester Airport and that they should never have gone to UNL's warehouse. Birkart admits this and Mr Justice Andrew Smith found that Birkart did not intend the goods to go to UNL. Matrix says that UNL in accepting, dealing with and storing the goods assumed a responsibility for them and owed the duties of a bailee. Matrix says that UNL should not have taken the goods in and should have identified any problem before doing so. Matrix contends that UNL's security system was inadequate and ineffective for a warehouse located in an area of high criminal activity and used to store valuable goods. It submits that UNL is not entitled to rely upon BIFA terms as against Matrix. There was no contract between UNL and Birkart for this mistaken delivery, if there was it did not contain BIFA terms. Even if UNL is right Matrix would not be liable unless Matrix consented, which it says it did not, to a sub-bailment to UNL on BIFA terms.

UNL's position has changed frequently over the years. At the trial UNL contended that the contract between Matrix and Birkart was not in the terms the parties to it agreed it to be. UNL contend that Matrix authorised the use of UNL's warehouse and had vetted it for security. If goods went to UNL even in error Matrix would not have complained about that. Mr Lancashire was told to take the goods to UNL's warehouse at Wythenshawe or, alternatively, his instructions were to that effect. UNL admits that it took in the goods as sub-bailee for Birkart but says that Matrix consented to such a bailment and that any liability of UNL is limited by clause 27 of the BIFA terms. These terms apply because they are incorporated, if not expressly, by course of dealing or by implication. Moreover, the arrangements at UNL's warehouse complied with good practice and met all the duties owed by a bailee.

Birkart agrees with Matrix about the contract between them and accepts that the goods should have gone directly to the airport and not to the UNL warehouse, as the 2008 Judgment establishes. Birkart say that the unintentional misdelivery to UNL was not under any contract. A freight consolidating arrangement called Group 99 between companies including Birkart and UNL would not have applied to air freight. There is no course of dealing as UNL alleges between the parties incorporating the BIFA terms.

Facts which are agreed or which should not be seriously in dispute – 9 and 10 January 2003

In the afternoon of Thursday, 9 January 2003 Matrix telephoned Birkart to arrange for a courier to collect a consignment of goods the next day. Mr Steele of Matrix said he spoke to "Dave" at Birkart but Mrs Kennedy of Birkart could not say who that might be. At the November 2007 hearing Mr Checkley, an Air Freight Supervisor at Birkart recalled that the instructions were given by Mr Khan not Mr Steele. I attach no importance to these points of detail. Matrix and Birkart are agreed about what the terms of their contract were and as both Mr Justice Andrew Smith and I observed at the different hearings it would have been odd for the parties to agree that the goods went anywhere other than the airport. Mr Khan says "as far as I was concerned the consignment was to be delivered directly to the handling agent at the airport and would not be in storage at any point prior to this .I cannot explain why or how the goods came to be at the premises of Uniserve". I have no reason to disbelieve this. It is precisely what one would expect someone in Mr Khan's position to anticipate.

Birkart delegated carriage of the goods to Cheadle and directed them to pick up the goods and take them to Robins Transport Limited ("Robins") (as the Judge found relying, amongst other material, on notes made by Mr Royan of Cheadle who gave evidence at the 2008 hearing). Cheadle used Mr Trevor Lancashire, a self-employed driver. (UNL's closing submissions ask the court to find that at Cheadle Mr Lancashire was given instructions to collect the goods and take them to Birkart – although there is another submission that the court might find that nothing was said between Mr Royan and Mr Lancashire. There is no evidence to support either submission and that of Mr Lancashire contradicts it, asserting that he was told to take them to Wythenshawe.)

Mr Lancashire collected the goods from Matrix at about 11.45 on 10 January 2003 and was given a commercial invoice dated 10 January issued to OCL and marked "FAO Wally". This showed the value of the goods as '375,000' but did not state the currency. A copy of this document had also been faxed to Mr Marsh of Birkart which Mrs Kennedy confirmed was held in her company's files. (This was controversial but should not have been. There is no other apparent reason why Birkart's files should contain a copy of the invoice, seemingly faxed, and in a form not initialled to show receipt.) Mr Steele gave Mr Lancashire a copy of the sales invoice which he says was marked "FAO Wally" because he thought the vehicle was going straight to the airport where Wally of Birkart would be and he would need a copy of the invoice to arrange customs clearance. Mr Lancashire accepts that he was given the "FAO Wally" commercial invoice and he also signed a copy of the Matrix delivery note. There is no evidence to support the claim that Mr Lancashire also took away the Matrix delivery note.

Mr Lancashire took the goods to the UNL warehouse at Wythenshawe where, on his account he was met by Mr Churcher of UNL who unloaded the goods. According to Mr Lancashire Mr Churcher accepted the commercial invoice and signed it as well as a POD marked to "BIRKART, CLAVERTON ROAD, ROUNDTHORN IND EST, WYTHENSHAWE". As Mr Lancashire recalls "the fork lift truck driver signed my POD and asked me if this was a Birkart job and I told him that it was". (A hopeless contention by UNL that the handwritten POD was filled out by Mr Steele was withdrawn by Mr Bacon early in the trial.) Mr Churcher did not pass this on to his colleagues Mr Challis or Mr Ashworth and placed the goods, despite the fact that they were air freight, in the bay of the warehouse which took Hong Kong sea freight. The suggestion that I should make a finding that Mr Churcher would not take the load off without particular information is an optimistic one given UNL's decision not to make this potential witness available for cross-examination.

Mr Lancashire attributes his error in taking the goods to UNL instead of to Robins to Mr Royan having mentioned Wythenshawe in a context where he had delivered Matrix goods to the UNL warehouse there before. The Judge commented that this was a possible explanation for what had happened. It is clear that Birkart did not receive the commercial invoice countersigned by Mr Churcher. The copy of that invoice was it seems retained by UNL until handed over by Mr Hensher of UNL to the investigators after the burglary.

The UNL warehouse at Manchester is the ultimate responsibility of the Managing Director Mr Liddell who gave evidence but he is based at Tilbury. In 2003 the warehouse had as the Office Manager (sometimes called General Manager) Mr Peter Hensher. The warehouse itself however was managed by Mr Phillip Challis who gave evidence. Mr Challis has worked at that warehouse for nineteen years. The next most senior employee was Mr Harry Ashworth, the Supervisor, who also gave evidence. Mr Churcher, the warehouseman, was junior to both Mr Challis and Mr Ashworth neither of whose statements for this trial, as opposed apparently to those given to the police and others, dealt with what happened when the goods were delivered. The reason for this was apparently because UNL took the view that I was bound by what they contended was a factual finding by the Judge on this point.

Paragraph 24 of the November 2008 Judgment records that UNL admits in its pleadings that it was not expecting the goods and had no record of the intended delivery of the goods but pleads that it was not unusual for it to receive unexpected deliveries. The paragraph records that UNL did not deal with the goods as air freight and then says this: "Mr Liddell's unchallenged evidence was that "the goods were accepted on the misapprehension that they were Group 99 goods and the paperwork was stapled together by Anthony Churcher and placed in the sea freight tray"."

Mr Bacon submitted that I was bound by the words in quotation marks in the second phrase of that sentence to accept what they say as being what happened. At an early stage I made it clear to Mr Bacon that given the context of the words and the fact that they were within quotation marks and given the care with which the Judge made it clear that he was deciding no facts relevant to the main claim that I would be likely to reject that submission.

Mr Bacon maintains that submission in his closing argument. He relies upon what he contends to be a finding that Mr Churcher stapled the papers together and placed them in the sea freight tray to resist criticisms by Matrix of the way in which UNL dealt with the goods. As I see it this is an inappropriate submission given what Mr Challis and Mr Ashworth said in cross-examination. The Judge was simply not concerned with what happened to documents after the goods came into the warehouse.

When goods are processed they are put in trays and pigeon holes. Within the warehouse there were four trays near the door; two for other customers, one for the Birkart representatives on site and another one for business for Birkart London. The only evidence about this issue, given that UNL refused Matrix's request that Mr Churcher be called to give evidence at trial, is that of Mr Challis and Mr Ashworth that no documents were put in any tray either by Mr Churcher or by anyone else. The only document either man saw was an invoice taken off the pallet. No documents were put in or found in the tray. Furthermore, Mr Challis was quite clear that Mr Churcher should not have taken in the goods without knowing who they were from and without proper documents. He rebuked Mr Churcher for doing this and told him that he "should have known better". Mr Challis said that if he had known he would have put a note in the Birkart tray within the warehouse to bring it to their attention. Indeed if he had known it was air freight he would not only have put out a note but also telephoned the Birkart representatives upstairs within the building. Mrs Kennedy said that if there had been paperwork in the Birkart trays the company would have been aware of it through the two staff who regularly checked the trays particularly on a Friday when there were many deliveries. She also said that if Birkart had been notified by UNL about the goods they would have made immediate and urgent arrangements for them to be collected and taken to Robins at the airport before the end of Friday, given that the goods were to take a flight on Sunday, 12 January.

Mr Ashworth said that if he had found out that the goods were air freight goods he would have made sure that they left on Friday to go to the airport. Mr Challis claims to have called Exel to check whether the goods were part of a Group 99 shipment but, if he did, no further checks were made.

Thus it is abundantly clear that the evidence of Mr Liddell as recorded by the Judge was wrong. The real issue perhaps is not the effect of that statement when recorded in the judgment but why it was made given the clear and undisputed evidence to the contrary of the UNL people at the warehouse. Quite apart from the application of legal principle, which does not assist Mr Bacon's submission, it seems to me wholly inappropriate for it to be submitted that I should accept as fact what all the evidence, including that of Mr Bacon's own clients, shows to be false.

Mrs Kennedy was not aware of the loss until Monday 13 January. She learned the details from Mr Challis after which someone in her own office said that a call had been received from Robins at the airport who had been expecting the pallet on Friday and wanted to know what had happened to it. She took the matter up with Mr Challis as she could not believe that UNL had accepted the pallet without knowing who it was from. Mr Challis mentioned the call he had made to Exel the previous Friday. She told him and the court that if she had known where the goods were she would have redirected them to the airport that day.

The evidence of the witnesses, supported for the most part by the witness statements, the documents and the natural course of events to be expected presents a clear and uncontradicted picture which is why I do not need to evaluate the individual recollections of those giving live and written evidence.

Facts - 11 January

UNL's building is a modern office and warehouse structure made from brick and steel panels. The yard is protected by steel palisade style fencing and two padlocked gates. The building is on an industrial estate in Wythenshawe next to a housing estate in an area known to have quite high criminal activity. The site has CCTV cameras placed at various points shown on the plan produced at trial. The warehouse has an intruder alarm system installed which met then current requirements. When the alarm was activated a control centre ("ARC"), run by Keyways the alarm company, would then call the police and one of the key holders. As criticisms of the security of the warehouse are only about aspects of the alarm system it is unnecessary for me to say more about the detailed layout of the building.

At 1425 on 11 January the system was activated and the ARC called the police. There is a dispute about when the police were called and how long it took them to arrive but it seems clear that the activation was caused by criminals to test the response. At about 1445 Mr Sweetman of Blue Lamp, the mobile guard patrol company engaged by UNL and other businesses on the estate, noticed a police van outside the warehouse. Mr Sweetman had the keys to the rear yard of the warehouse. He stopped, inspected the outside area with the police but found no sign of entry. None of the three keyholders, Mr Challis, Mr Ashworth or Mr Latham, the Regional Client Relationship Manager for Uniserve, came to the warehouse in response to the activation.

Some time later that afternoon and before 1818 the criminals broke into the warehouse and stole the goods. At 1818 Mr Sweetman noticed that a section of fencing around the warehouse was missing and that a roller shutter door at the back of the warehouse had a section cut away. Blue Lamp called the police. Mr Sweetman's record of the incidents noted that "both named keyholders are uncontactable". After picking up a phone message from Blue Lamp (not it seems from the Keyways ARC), Mr Ashworth arrived at 2100 and put in the alarm code. An alarm engineer arrived at 2325 and reset the alarm and the remote link to the ARC. The alarm could not be reset so that the remote link operated unless a keyholder entered a code into the alarm system. That is why the ARC was not aware of the second incident and did not contact anyone. The ARC did not have Blue Lamp's details.

The only goods stolen from the warehouse were the Blue Tooth adaptors which are the subject of this case. This and the fact that very few people would have known where the pallet containing these goods had been stored led Mr Liddell and Mr Challis and in time others, including both experts in this case, to conclude that the burglary was an "inside job".

11 January 2003 - Evidence

Mr Liddell dealt with the alleged inadequacies of UNL's security system in his witness statement. He rejects a claim that UNL "suffered three burglaries in the three years prior to the theft" stating "Uniserve did not own the premises for the three years prior to the theft". This was a disingenuous observation although correct. Mr Liddlell personally owns the premises and the company had previously been named Inter Maritime Freight. It seems reasonably clear from Mr Challis' evidence that there had been some minor burglaries before 11 January. Mr Liddell said that his company does not ask its keyholders to make sure that they are on call at the weekend as they are not paid extra for this and have their own lives to lead. In cross-examination Mr Liddell said that this was in the context of all members of staff being on call 24 hours a day seven days a week if necessary. Mr Liddell pointed out that UNL has Enhanced Remote Transit Shed status with HM Revenue and Customs and as such complies with a condition to keep the facility "maintained, secure and in good repair to the satisfaction of local Customs and Excise".

Mr Challis, Mr Ashworth and Mr Latham gave evidence about why they did not go to the warehouse after the alarm was activated at about 1430. The ARC's "Event History Report For U" records for the first keyholder "wrong number", for the second "home left mess on ans mach" and "moby 1 switched off" and "moby 2 left mess on ans mach" and for keyholder 3 "dealing". Mr Challis and Mr Ashworth accepted that they did not get calls from the ARC because they had left their phones at home, Mr Challis having travelled to Wales and Mr Ashworth to Yorkshire. Mr Challis said that he would not have been able to return promptly from Wales because he had had a drink and would not have been in a position to drive. Mr Latham could not recall whether he got a call or not, Mr Hensher had told investigators in 2003 that Mr Latham had been contacted but was unable to attend. In Mr Latham's case the call would have achieved little because he was under the impression that all he had to do was to call the ARC back twenty minutes later to check if the alarm activation was genuine. Mr Latham's understanding was that if the police had attended and there was no sign of a break in he would not have needed to turn up at the warehouse. Mr Ashworth's evidence in his statement and in cross-examination that he had picked up a message that evening on his mobile phone from Blue Lamp is consistent with the ARC record of having the wrong mobile number for him. Mr Challis confirmed Mr Liddell's recollection that UNL did not ask its keyholders to be on call at the weekend or to have their mobile with them at all times. Mr Challis and Mr Latham did not recall receiving any training or instructions about their role as keyholders but Mr Ashworth said that he had been given a verbal briefing to check the premises and the alarm key pad and to call Keyways when necessary. Blue Lamp also had out of date information including the number of an accountant who had left UNL a year or so before the burglary. Mr Liddell's view was that it was for ARC and Blue Lamp also to ensure that keyholders' contact numbers were up to date.

Mr Challis was aware of the need to reset the alarm after an activation but did not know that the remote link to the ARC would no longer work after the alarm went off. Mr Latham appeared to have no knowledge of this aspect. However, Mr Ashworth was aware that the remote link was disabled after an activation and remained so until a keyholder attended to reset the code.

Mr Liddell's appreciation of how the system worked and the link with ARC was clearly not accurate, understandably given his senior position. He appeared to be of the view that the ARC would form a view of its own about whether an alarm was false and also telephone the keyholders before the police. Mr Liddell, as in other areas of his evidence, mingled advocacy for his company's position with recollection of facts within his own knowledge. One would not expect a Managing Director based in Tilbury to have a detailed knowledge of how the alarm system on one of several sites functioned. Mr Liddell thought that it would have been unnecessary to telephone Blue Lamp Security because they were not paid for call outs. This was a misunderstanding because Mr Budgett gave evidence that Blue Lamp did not charge a fee to be notified of alarm activations and to attend at call outs.

Mr Hensher has left UNL and did not give evidence but at the time he sent both a handwritten note and an e-mail about the incident to Mr Liddell. The first states that he has ascertained that Blue Lamp are not contacted by the ARC and that they became aware of both alarm calls during routine patrols. There is a record within Blue Lamp which suggests that Mr Hensher would be speaking to the ARC about them not calling Blue Lamp.

Mr Darren Sweetman (who as I have said gave a witness statement but did not attend as a witness) works in a computer shop but was a security guard with Blue Lamp for three years. He worked on the Roundthorn Industrial Estate where a number of companies had joined together to form a business watch scheme. The scheme provided one guard 7.00pm to 7.00am Monday to Friday and 24 hours at weekends. His job was to make random visits throughout his shift. When on foot in Claverton Road at about 2.40pm he noticed a police vehicle and saw that at UNL the warning light above the alarm box was flashing but there was no audible alarm. He notified Blue Lamp control who responded that they had not been informed of any alarm activation. He asked Blue Lamp control to try and contact a UNL keyholder but the centre's efforts were not successful. About 6.15 he called at UNL again to make the final visit of his shift and noticed that the alarm box had stopped flashing but the alarm was not sounding. He then noticed the burglary. He later made a report before leaving work. His statement says that he could have reached Uniserve premises from the furthest point away on his area patrol within two minutes. (On this subject Mr Budgett said "most properties in the Roundthorn business watch are situated close together … and you could go to one in a matter of seconds … I patrolled the route myself. I had to do so to understand it as I set it up.")

Mr Bacon correctly points out that there is no evidence that the ARC and Keyways may have been responsible for wrong numbers or failing to call.

11 January 2003 – Expert Evidence

Matrix obtained a report from Mr Graham Dow, an experienced expert witness. Mr Dow has thirty years' experience in the security industry. He spent thirteen years as a control panel manufacturer, seventeen years as a security consultant and has been a forensic investigator and expert witness for twelve years. He has worked with several alarm receiving centres ("ARCs"), with ACPO and is a contributor to the main security industry journals. ACPO is the well known association of chief police officers. If alarm owners do not follow ACPO Guidelines they may find it difficult to secure prompt police attendance when these devices go off.

Mr Dow considered that the system was generally suitable and sufficient for its purpose and had been professionally installed in line with applicable standards. There was also a Redcare single path monitoring and an effective Master Blaster sounder. Keyways failed to take sensible steps to preserve data following the loss. Wythenshawe is known to be a high crime area and there had been, as Mr Dow understood it, previous entries. The burglary was a professionally executed inside job.

Despite the system itself being satisfactory there were what Mr Dow described as "management issues". Keyholder lists should have been kept up to date by UNL. Staff should have been educated about the importance of attending within twenty minutes of activation. Mr Dow was critical of UNL's policy of not having trained keyholders to attend following all activations "this is a corporate policy the like of which I have never seen in thirty years in the security industry and which in my view is irresponsible". He believed that if the police had been aware of this policy that their response service would have been withdrawn. In Mr Dow's view the losses were preventable and foreseeable. Remote transmission of CCTV images or an alarm reset by UNL staff and the use of Blue Lamp for response to activations would have presented significant obstacles to intruders.

In cross-examination Mr Dow accepted that there could be a number of reasons including those at the ARC's end for why keyholders were not contacted. Mr Dow also accepted that if Mr Sweetman had been on foot patrol it is unlikely that he would have been able to fulfil his claim to be able to reach anywhere on the estate within two minutes. He accepted that the CCTV footage was not complete.

UNL called Mr Hugh Ferridge who is Managing Director of EEL Consulting Limited, his own company which has been trading for three years. He is an independent security risk consultant with twenty three years experience including ten years service with the Royal Air Force. Mr Ferridge had senior roles with companies such as Forte, Whitbread and Superdrug, moving up from Chief Security Officer to Head of Loss Prevention. Mr Ferridge had not given expert evidence before (and of course there has to be a first time for every expert) and conceded frankly that Mr Dow's experience of alarm systems was much greater than his own. In his view UNL had been diligent and had taken appropriate and reasonable measures to protect the warehouse and its contents. There was a three metre palisade fence well secured, a comprehensive CCTV system to approved standards, and a comprehensive burglar alarm designed and installed to the correct NACOS standards enhanced by Redcare signalling technology and impact detectors. UNL had three keyholders when the ACPO minimum was two. By Mr Ferridge's calculation the burglars would have been nine minutes away by the time the police arrived even if the alarm activation had been relayed to the ARC at the time of the burglary. One had to assume that the burglars expected the alarm to reset to the ARC and thus were operating on the police response time taken from the activation earlier in the day. Like Mr Dow Mr Ferridge saw this as an inside job.

Mr Ferridge's lack of previous experience emerged in cross-examination. He accepted that his observation that ACPO standards were exceeded because UNL had three keyholders rather than two had to be seen in the light of the fact that almost all companies would be asked by their alarm company to give three names. He accepted that two of UNL's keyholders, Mr Latham and Mr Challis, probably failed ACPO requirements that they live within twenty minutes' journey of the premises. There was a lack of clarity about what material had been provided to Mr Ferridge. He appears to have had interviews with fact witnesses but does not refer to these in his report. Mr Budgett had only been called to give evidence because Mr Ferridge's conclusions, following his joint meeting with Mr Dow, included the following: "Blue Lamp was a small local firm with little reputation in an industry that has the perception of being poorly staffed with dubious connections". He observed that he would have been loath to entrust the warehouse keys to such an operation. When I asked Mr Ferridge whether he would have expressed his observations differently had he known that Mr Budgett had formed Blue Lamp (as presumably its name indicates) with other senior police officers, he himself having served in the police for many years, finally as a Chief Inspector and, for six years, the Chief Crime Prevention Officer for Greater Manchester, Mr Ferridge replied "possibly".

I was wholly convinced by the evidence of Mr Dow whose experience is very great in this area of security and whose demeanour was moderate and detached. He accepted that the equipment and alarm systems were well up to standard but was very critical of the management, allocation and the training of staff and co-ordination with Blue Lamp. I am wholly convinced by those criticisms. Indeed it does not really need expert testimony to demonstrate that the procedures in place at UNL were defective as the events of 11 January showed. Mr Ferridge acknowledged the existence of some shortcomings, such as the fact that the ARC did not have up to date numbers for all keyholders. I was unconvinced by his efforts to defend, sometimes on the basis that standards have increased since 2003, a system with such obvious flaws.

Bailment and Sub-bailment – The Law

Before turning to the parties' submissions about allocation of responsibility for these events I will summarise briefly the legal position which is largely but not wholly common ground. It is accepted that UNL became a bailee of the goods. As bailee UNL has to prove that it performed its duties with a reasonable degree of care, skill, diligence and judgment. As bailee UNL has to prove that the loss to the goods occurred despite reasonable care being taken by UNL.( See for example,-Chitty on Contracts,30^th Edition,33-032, 048 and 049)

As bailee, UNL has to prove that any failure to take reasonable care did not in any way cause the loss. In order to establish that its failure to take reasonable care did not cause the loss, Mr Priday, for Matrix, submits that Uniserve has to discharge a particular standard of proof – in effect excluding the possibility that their breach of duty was causative of the loss of the goods – for the following reasons, which I take from his skeleton argument:

'It has long been established that a bailee is not entitled to set up as a defence "the bare possibility of a loss, if his wrongful act had never been done" (Davis v Garrett [1824-34] All ER Rep 286 at 288^[1], see also Lilley v Doubleday (1881) QBD Vol. VII 510) in circumstances where the loss occurs whilst his wrongful act was in operation and in force. In Joseph Travers v Cooper [1915] 1 KB 73, goods were loaded into a barge from a ship for delivery and the barge owner's lighterman who was in charge of the barge negligently left her unattended at night. The barge after taking the ground at low tide became submerged as the tide rose and as a result the goods onboard were damaged. The Court of Appeal held that the onus was on the defendant barge owner to show that the negligence of his servant in leaving the barge unattended did not cause the loss. Phillimore LJ (at 96-97) in reaching the conclusion (shared by the other members of the Court) that the defendant had failed to discharge the onus on him, clearly indicated that a bailee would be liable where the evidence showed that if the bailee had taken reasonable care of the goods, the loss might have been prevented:

"It [the lighterman] had been there, it is possible that he, either by himself or with help, might have let in air and taken away the force of suction by the use of a hitcher … put under the barge; or the tug might have been fetched earlier; or possibly some jerk applied to the mooring ropes by him with or without help might have freed the barge from suction.

If the burden was on the defendant of showing that the negligent absence of the lighterman could not have been a cause of the loss, he did not discharge it …

I think that when the bailee of goods has to admit that the goods have been damaged while in his custody and in the absence of the custodian, and it is found that the absence was improper and negligent and that that very absence makes it difficult to determine what was the cause of the damage, and the owner can suggest a probable cause which the presence of the custodian might have prevented, the burden is upon the bailee to show that it was not the negligent absence which was the cause of the damage. As was said by Lord Loreburn, when Lord Chancellor, in Morison Pollexfen & Blair v Walton (not reported), "It is for him to explain the loss himself, and if he cannot satisfy the Court that it occurred from some cause independent of his own wrong-doing he must make that loss good." (emphasis added)

In a more modern context, in Frans Maas v Samsung Electronics (UK) Ltd [2004] 2 Lloyd's Rep 251, Gross J had to consider whether the claimant warehousemen were liable, as bailees, for the theft from the warehouse of mobile phones belonging to the defendants. Gross J found that the theft had been caused by willful default of the bailee's employees for which the bailee was vicariously liable and further that the theft (and hence the loss of the goods) had been caused by the claimant's negligence. In summarizing his finding of negligence, Gross J made it clear at paragraph 120 that the bailee could not rely on the fact that it could not be said with certainty that the loss would not have occurred if the bailee had taken reasonable care of the goods. He stated:

"I am satisfied that … FM's negligence was indeed causative of the theft and, hence SEUK's loss. The short answer is that FM's failures … materially contributed to the theft; it is permissible, in my view to draw the inference that these failures assisted in the commission of the theft. This is especially so when regard is had to them cumulatively, to the culture (or lack of any security culture) which they exemplified …" (emphasis added)

Mr Bacon accepts that this is broadly the legal position but emphasises that the standard of care depends on the circumstances of the particular case. While UNL is a company which regularly stores goods of high value and can be expected to meet relatively high standards it is not an insurance company. Moreover the duty to take "all reasonable care" does not mean "taking every possible precaution". Mr Bacon also contends that "the duty can shift in circumstances in which a bailee can establish a cause of loss". He argues that if a bailee can show that its security systems are good systems with regard to the nature of its business and where it can also show how in fact the goods came to be stolen it is not accepted that the burden lies solely on Uniserve. He says that it would be surprising if a Claimant in such a case can never bear any burden of proof and the court is invited to reject any suggestion to the contrary. In a proper case and in particular where the bailee can point to a reason for the loss which is not clearly related to any negligence on its part, the Claimant is left to prove negligence. He submits that this is an entirely appropriate area of the law for "shifting the burden of proof" and relies upon Brook's Wharf and Bull Wharf Limited v Goodman Brothers [1937] 1 KB 534. He relies in particular on a passage at 539 and 540 which begins with a passage from a dissenting judgment by Lord Dunedin in Ballard v North British Ry [1923] S.C. (HL) 43, 54 as follows:-

"I think this is a case where the circumstances warrant the view that the fact of the accident is relevant to infer negligence. But what is the next step? I think that, if the defenders can show a way in which the accident may have occurred without negligence, the cogency of the fact of the accident by itself disappears, and the pursuer is left as he began, namely, that he has to show negligence. I need scarcely add that the suggestion of how the accident may have occurred must be a reasonable suggestion."

"I think this is merely stating the same rule as that stated by Lord Loreburn and Lord Halsbury from another aspect. If the plaintiffs show that they took all reasonable and proper care of the goods, the mere fact that they were, notwithstanding, stolen is not sufficient any longer to make them liable for negligence. Their explanation is, then, that the thieves must have shown ingenuity and daring against which reasonable precautions could not avail. Hence, I think the plaintiffs discharge the burden of proof upon them if they had taken all reasonable precautions to guard against the danger.

The learned judge has held that they have shown that and I entirely agree with his conclusion. [His Lordship shortly reviewed the facts upon which the learned judge arrived at this conclusion, and continued:] I agree with the learned judge that the system adopted was a reasonable and proper system, and I think that it is impossible to say by what ingenious contrivances the thieves managed to effect their nefarious scheme.

The duty of the plaintiffs cannot be put higher than that they must do what is reasonable. They are not insurers and they have established their defence here by satisfactory evidence that the precautions they took were such as reasonable and prudent care demanded."

(The reference to "plaintiffs" is to the bailees not the bailors.)

Mr Priday submits that this case does not support the proposition that it is for the Claimant to prove negligence where a Defendant shows a way that the goods may have gone missing without negligence. He submits that this is to confuse the legal with the evidential burden. I agree. Mr Bacon's ingenuity does not persuade me that the law is not precisely what it has for so long been taken to be. The bailee bears the burden of establishing that he took all reasonable care of the goods and also that any failure to take reasonable care of the goods did not cause the loss.

Claimant's Submissions – receipt and handling of the goods

Mr Priday for Matrix submits that UNL have failed to discharge their burden of proving that they took reasonable care in accepting and dealing with the goods and the accompanying documents. UNL took in the goods without properly checking if the customer was known. Mr Challis, as Warehouse Manager accepted that this checking was important, that when goods turned up without warning it was important to determine who "the customer was", that it would be odd if the documents did not identify the customer, these documents would include official consignment notes and/or shipping notes. Mr Churcher was rebuked for failing to check. Mr Priday relies also on evidence from Mrs Kennedy, the Birkart General Manager, who said in her statement that in her experience "whilst goods may turn up without warning the forwarder will make suitable enquiries to ensure that they know where the goods have come from and what is to be done with them on receipt". There are similar views expressed by Mr Gupta, Birkart's Quality Manager and from Mr Perkins, the Managing Director. In cross-examination Mr Liddell who had at an earlier point taken a different view accepted that if goods were taken in without his company knowing who the customer was that would be completely wrong in principle. Matrix also relies on the fact that neither Mr Challis nor Mr Ashworth knew, as they accepted in cross-examination, until the Monday that the goods belonged to Birkart. Mr Liddell accepted that if that were the case (as it also appears to be from Mr Hensher's e-mail of 14 January 2003 and Mrs Kennedy's recollection of her discussions with Mr Challis on the Monday) it was wrong. The difficulty arose from Mr Churcher's failure to inform his supervisors that this was a Birkart job. The goods were placed in the Hong Kong sea freight bay by Mr Churcher and remained there because it did not occur to anyone within UNL that this might be air freight Mr Priday submits that it was negligent for the company not to have contacted Birkart when Mr Churcher had known all along that the goods were intended for that company.

Mr Bacon submits that there was nothing wrong in UNL accepting goods without having received advanced notice of the arrival. That may well be right but the criticism relates to Mr Churcher taking in the goods without information about them or the customer. Mr Bacon submits that UNL took the goods in and reasonably treated them as possibly Group 99 sea freight given that the incident took place when relations between Birkart and Uniserve at the warehouse were at an early stage and the Group 99 arrangements had not really been put into effect. Mr Bacon relies on the fact that UNL was under the impression that these were Group 99 goods. He submits that I should accept Mr Challis' evidence that he called Mr Jones at Exel who was responsible for the Hong Kong sea freight dealings. The reply was that Exel had not got anything booked in as yet but that did not mean that they would not be on Monday or Tuesday. Exel was the master loader through whom Group 99 goods were conveyed. He submits that the UNL employees had no way of knowing that these were high value goods, the only document referred to "375000" without reference to a currency and, as Mr Challis and Mr Ashworth said in evidence, this could have been a reference to pence or to lira.

10 January 2003 - Conclusions

It follows from the facts that I have found that Mr Churcher failed to check the identity of the goods and the customer before unloading them. When he had unloaded the pallet on which the goods were placed he understood that they were for Birkart but placed them in the Hong Kong sea freight bay. He failed to place any documents in the Birkart tray. If he had done so they would have come to Birkart's notice that day and rapid arrangements would have been made to send the goods to the airport. If Mr Churcher had informed Mr Challis, as he should have done, that these were Birkart goods, documents would have been placed in the tray or other steps taken to draw the matter to Birkart's attention. In fact, as UNL should have appreciated the goods were air freight. If they had been recognised to be air freight then not only would papers have been placed in the Birkart tray but Mr Challis or possibly Mr Ashworth would have called Birkart to alert them of that fact. In that event Birkart would have taken steps to send the goods that day to the airport so that they would be on board a flight to Hong Kong on the Sunday. Mr Challis wrongly assumed that these were Group 99 goods and he may have made a call to Exel about them. Mr Challis' evidence is understandably defensive at that point and his call to Exel was probably a less vigorous and searching one than he described. But if Mr Challis had appreciated that these were air freight he would have known that they had nothing to do with Exel or Group 99. He should have realised this before calling the wrong place. It is perfectly clear that if fairly basic checks had been made that UNL would have known what the goods were and that they were intended to be sent air freight. If, as it should have done, UNL had appreciated the position on the Friday and drawn the matter to Birkart's attention I have no doubt the goods would have left the warehouse that day and been delivered by Birkart to the airport. UNL cannot begin to show that they exercised reasonable care towards these goods in taking them in and keeping them on 10 January.

11 January – Submissions of Matrix

Mr Priday submits that it is obvious that UNL failed to take reasonable care in implementing the arrangements for security of the premises. After activation of the alarm, a common preliminary step in a burglary, the link to the ARC was broken and could not have been reset without a keyholder coming to the warehouse. No one turned up and the warehouse was inadequately protected, as Mr Ferridge accepted in cross-examination, from about 1430 onwards. This was a result of errors by UNL, of the kind identified by Mr Dow, over the organisation and training of keyholders. Further the keyholders as well as being inaccessible lacked a proper understanding of the alarm system. Moreover Mr Challis and Mr Latham were unacceptable because they lived too far away to be just twenty minutes from the warehouse. UNL failed to take the obvious step of getting the ARC to notify Blue Lamp in the event of an alarm activation. Blue Lamp would have responded without charge had they been so notified. It seems likely, given Mr Sweetman's evidence, that there was no audible alarm sounding when the burglary itself took place and of course no alert to the ARC was triggered.

A useful test for deciding the causative effect of precautions is whether they might have had a deterrent effect on the commission of the crime. Mr Priday cites British Road Services v Arthur Crutchley [1968] 1 All ER 811. If the keyholders had turned up after the first activation the alarm code would have been reset and the remote link restored thus enabling the police (and Blue Lamp) to be notified when the second incident occurred. This would have given at least an opportunity for the criminals to be apprehended or the commission of the theft or recovery of the goods prevented or deterred. The arrival of the keyholders at the warehouse might have been a deterrent in and of itself if the thieves had been watching. If Blue Lamp had been added to the list of those to be notified by the ARC Mr Sweetman might have arrived within two minutes. Mr Priday says that this is not a submission that the Defendant should have adopted novel measures to make a difference but simply a complaint that it failed to operate its existing arrangements competently or to ensure that Blue Lamp be contacted on activation or be a keyholder. Attendance of keyholders and links to the ARC are arrangements that UNL itself thought desirable as did Mr Ferridge. Any acts or omissions of the ARC or Blue Lamp which would emerge if UNL's version of events was found to be correct would not assist them to discharge their obligation of reasonable care since the law does not permit them to avoid liability by delegating duties to others. The fact that this was almost certainly an inside job adds to the problems for UNL in seeking to discharge its burden of proof.

Mr Bacon submits that any difficulties in obtaining the keyholders may well have been the fault of Keyways not that of the individuals or of UNL. Mr Dow's expert evidence is undermined by his reliance on the contradictory evidence of Mr Sweetman since his first report indicates that the alarm was sounding but his statement claims that it was not. It is improbable that Mr Sweetman would have been able to reach anywhere on the estate within two minutes. Mr Ferridge's view that the thieves would probably have assumed that Mr Sweetman was a keyholder and seen him and believed that he had reactivated the link should be accepted. Mr Bacon suggests in his final submissions, I believe for the first time, that notwithstanding the views of the experts and the evidence of Mr Ashworth and Mr Challis, the link may well have been reset. He bases this submission on what he described as "confusion" introduced by a reference to Mr Hensher's notes. (I find that submission hard to take seriously in circumstances where Mr Hensher has not given evidence and the notes which are now said to have caused confusion have been available for years.) Criminals broke through the fence at about 1645, it would take about two minutes to get through the shutters with an angle grinder of the kind which it seems clear was used. The thieves would have been inside for about four minutes and been away from the estate by about 1653. The police could not have arrived, Mr Bacon submits, for more than fifteen minutes after that. In the real world Blue Lamp would not have arrived until well afterwards either. Without the police Mr Sweetman would have been able to do nothing. The active link would not have prevented the theft and the court needs to apply commonsense and reality. If there was a failure in any respect by UNL it is abundantly clear that the loss would have occurred anyway. There is no causative link between any failure to show reasonable care and the loss.

Conclusions about 11 January

As I have already concluded I am convinced by the evidence in general and, in particular that of Mr Dow, that UNL failed to show the requisite standard of care and cannot begin to discharge the onus of proof placed upon them. Mr Bacon has skilfully identified minor inconsistencies in some of the material relied upon by Mr Dow, such as the statement of Mr Sweetman, but these do not in my view in any way undermine the force or cogency of the conclusions. Essentially for the reasons given by Mr Dow UNL has failed to show reasonable care.

The question of causation is more difficult in that I accept that it could not be said with certainty that the loss would not have occurred if UNL had taken reasonable care of the goods. But that observation requires two qualifications. First, if UNL had taken reasonable care of the goods on 10 January they would not have been in the warehouse to be stolen on 11 January. Secondly, in my judgment the test for causation is that set out in Joseph Travers v Cooper to which I have referred above and in Frans Maas v Samsung Electronics (UK) Ltd, a more modern decision of Mr Justice Gross in 2004. I have no doubt that the failures which resulted in the warehouse being significantly unprotected from about 1430 onwards on the Saturday assisted in the commission of the theft. The failures made the theft much easier to commit and made it more difficult for the police or for others to prevent it, interfere with it during its commission or retrieve the goods once in the possession of the thieves.

Overall it is abundantly clear to me that UNL has failed to show that it performed its duties as bailee with a reasonable degree of skill and care.

Sub-Bailment on Terms

UNL contends that if it is held to have failed to exercise reasonable care of the goods so as to cause loss then it is entitled to limit its liability as against Matrix. UNL contends that it is (pursuant to the BIFA terms) entitled to recover from Birkart the entirety of (or, at the least, the unlimited part of) any liability which UNL was found to owe to Matrix. UNL alleges a breach by Birkart of the warranty of authority in Clause 3 of the BIFA terms and/or an alleged right to indemnity under Clause 20(A) and/or (B) and/or (C) of the BIFA terms. Essentially, UNL contends that, as regards Matrix, it is protected by Clause 27 of the BIFA terms which limits its liability to 2 Special Drawing Rights per kilo, while, as regards Birkart, it is entitled to damages or an indemnity in respect of any liability (or at least any liability beyond the limit to which Clause 27 refers) which it is found to owe to Matrix. This of course requires UNL to show first that there was a contract between UNL and Birkart, secondly that it was on BIFA terms and, as regards Matrix, that Matrix consented expressly impliedly or ostensibly to a sub-bailment on BIFA terms. The first considerable problem is to ascertain what UNL'S case is.

UNL'S approach to questions of contract and sub-bailment

UNL's approach to this aspect of its case has been chaotic. The skeleton argument of Mr Phillips for Birkart for trial contains an analysis over 23 pages which show the twists and turns which UNL's case has taken involving nine pleaded attempts to set out the case against Birkart. That analysis appears to be a fair and accurate exposition of the position although, when I first read it before the trial, I had assumed that it must have contained some advocate's hyperbole.

The process culminated, before the trial, in a letter from UNL's Solicitors Clyde & Co., dated 16 December 2008, the relevant parts of which read as follows:-

"The apparent concern is that, it is alleged that the Re-re-amendment Part 20 Particulars of Claim "do not shed any meaningful light whatsoever on the nature of Universe's case to the effect that the BIFA terms applied even to unintended/mistaken/erroneous deliveries". You have asked that we "explain in plain terms on what basis they contend that those terms applied to such a delivery"?

Uniserve says that BIFA terms applied on the following basis. Where appropriate, we have referred to any relevant parts of our client's pleadings to date:

(1) As part of the agreement by which Universe agreed to provide services to Group 99 to give business efficacy to the agreement and/or because such represents the obvious but unexpressed intention of the parties) that BIFA terms would apply:

(a) In circumstances in which Universe unloaded and stored goods from Birkart (as another BIFA member within Group 99) believing those goods to be seafreight.

(b) In circumstances in which Uniserve in good faith took in and stored goods under the control of another BIFA member. For the avoidance of doubt, when using the term "in food faith", Uniserve accepts that it would be required to have a proper basis for taking in the goods and/or to act reasonably in taking in the goods.

(2) Because BIFA terms are standard industry terms in relation to any dealings between BIFA Members save where other terms are required to apply. For the avoidance of doubt, the alleged reasons for precluding such an argument formulated at paragraph 6, 8, 9, 12 and 19 of the Re-Amended Defence are not accepted.

(3) By reason of the prior course of dealing set out at paragraph 23 of the Re-Amended Particulars of Claim and Answer 249 to the Further information provided on 9 October 2008.

(4) On the basis that Universe will invite the Court to make a finding or to draw an inference that Mr Lancashire was given instructions to take the goods by Wythenshaw when he (Mr Lancashire) attended at Matrix's premises to collect the goods. In that event, those instructions overrode the earlier (alleged) instructions to take the goods to Robins. If Mr Lancashire was so instructed, he received instructions from the owner to take the goods to Uniserve and he received and activated those instructions as agent for Birkart. When he delivered the goods, he did so acting as agent for Birkart and did so on usual BIFA terms."

At the start of the trial I agreed to treat that letter as being in effect part of the Pleadings. Following exchanges between Counsel I made it clear that if UNL sought to make any changes to the position as set out in that letter these would have to be the subject of an application to amend the Pleadings which I could then consider on its merits. There was no such application.

At paragraph 55 of his skeleton argument for trial Mr Bacon said this:-

"The nature of the Pleadings and that the voluminous papers making up the various formulations of the preliminary issues, and the skeleton arguments relating to that and to the preliminary issue is such that Uniserve does not propose to dissect those documents and believes that the court (particularly at the stage of opening) would prefer to concentrate on [the Clyde letter] as setting out the case advanced."

At paragraph 60 however Mr Bacon throws in this unpleaded observation "Uniserve also contends that this might be one of those unusual cases where it is appropriate to imply a contract".

I accepted submissions from Mr Priday and from Mr Phillips, for Birkart, that Mr Bacon's trial skeleton failed to set out concisely the propositions of law and submissions as to the facts upon which UNL relied. This is a requirement of all skeleton arguments lodged in the Commercial Court and applies all the more so in the more streamlined process which the Mercantile court applies trying to save costs when dealing with smaller or more routine business claims. Mr Bacon accepted that his skeleton did not comply with the requirement but appeared to contend that issues of law were best ventilated once the facts were known. Mr Bacon kindly produced a supplemental skeleton argument on behalf of UNL, which introduced an argument that there was a sub-bailment on terms in the absence of a contract (at paragraph 28(3)).

Despite Clyde & Co's letter the supplementary skeleton argument also suggested that as between UNL and Birkart there was a contract which was either "an express agreement as explained" or "by an implied term into such agreement and/or into the agreement relating to Group 99" adding that there was also a taking in of the goods in circumstances entitling Uniserve to establish that there was a "bailment which should be subject to those usual terms".

When I asked Mr Bacon what this express agreement was and for some indication as to the individuals who made it, when they did so and in what form, I was referred either to an accumulation of information of various kinds or, in broad terms, to conversations involving Mrs Kennedy. In his closing submissions Mr Bacon developed the point and urged the court to find that there was an express agreement to the effect that all dealings at the Wythenshaw depot would be governed by BIFA terms that agreement being "by reference to the words "documents, utterances and conduct of the parties as set out above". Mr Bacon submitted that the express agreement was "that all services including Group 99 and other dealings would be subject to BIFA terms" referring to paragraphs 18(1) and 20 of the Particulars of Claim. But that was misleading because paragraph 18(1) does not say "all services including Group 99" it says "all Group 99 Services". It is common ground that the goods which are the subject of this action were not "all Group 99 services".

This was one of several inaccurate citations which caused me to invite Mr Bacon to resubmit after the trial a version of his written closing skeleton argument reflecting any changes he wished to make once he had more time to review a document which had no doubt been prepared under pressure towards the end of the trial.

As I see it given the deplorable history of this action it would be quite wrong for the court to permit UNL to raise further unpleaded arguments at such a late stage. I therefore proceed on the basis that the court is to decide the pleaded issues refined by the Clyde & Co letter of December 2008. I reject Mr Bacon's submission that he is free to enlarge the case as set out in that letter because of the footnoted referencing to paragraphs in the pleadings. That would make the purpose of the letter pointless as it would reopen and exploit the ambiguities it had been written to remove. Furthermore Mr Bacon's acknowledgement that the letter "is not worded as well as it might be" is not a reason to permit the other parties to be taken in effect by surprise.

It is against that background that I turn to the arguments but first set out the most relevant facts and evidence.

Facts Agreed or not much in dispute

Group 99 is a consortium of forwarders which had entered into an agreement to consolidate freight for various destinations to improve on economy of scale for clients. The original members were Exel, Hardrodt and Birkart. Uniserve Limited (as opposed to UNL) became a member of the consortium following discussions between Mr Liddell and Birkart's managing director, Mr Perkins in late 2002. These had started with negotiations over Birkart's proposed tenancy at the UNL warehouse in Wythenshaw which is owned by Mr Liddell but also involved an agreement to record how UNL were to deal with work from Birkart.

Group 99 had certain trade lanes and agreed a procedure that all bookings received from clients would be notified to the appropriate Master Loader, which was Exel. Exel having been notified of the transaction would be provided with a copy of the members booking confirmation and a copy of the standard shipping note. That note would show the destination as "Group 99, Manchester transit terminal… at the Wythenshaw warehouse". A Group 99 transaction would be a contract between the member and the master loader, Exel, who would invoice for the job. If UNL incurred charges at the warehouse these would be the responsibility of Exel, not of Birkart or the other relevant group member. This is borne out by a Memorandum of Understanding produced by Mr Bulfield, the Birkart Director responsible for Group 99.

It is unnecessary to evaluate the evidence about negotiations for the operational agreement since its terms are clear although it was not entered into until 3 April 2003.

By Clause 2 UNL "confirm herewith that coverage of the following liability insurance policies is in place and that all premiums have been paid in accordance with the insurers and/or their agents' request for the current financial year or beyond:-

"a CMR

b RHA

c NAOWK"

UNL then "agree to CMR terms and conditions… applied for all UK domestic transports, which are in extension of the international journey.."

At the bottom of the note paper used by Birkart for this agreement and also the end of most of it's e-mails appears the following or similar wording "all business is handled in accordance with our standard trading conditions including limitations of liability, as documented under BIFA 2000 (copies available on request) except in so far as these conflict with any conditions notified to clients as applying to certain services".

The culmination of discussions about the terms upon which Uniserve Limited ( as opposed to UNL) would be a member of Group 99 is the Memorandum of Understanding, an unsigned document which was to take effect from 6 January 2003 for an initial period of 12 months.

Messages from Birkart to UNL, for example that sent by Mr Perkins to Mr Liddell on 2 October 2002, state "all business of the Company is transacted under the Standard Trading Conditions of the British International Freight Association (BIFASTC), a current edition of which is available on request".