England and Wales High Court (Commercial Court) Decisions

IN THE HIGH COURT OF JUSTICE
COMMERCIAL COURT
QUEEN'S BENCH DIVISION

		Royal Courts of Justice Strand, London, WC2A 2LL
		05/09/2012

Mr Justice Popplewell :

Introduction

1. This is the hearing of an application by the Claimant ("FG Wilson") for summary judgment in respect of the whole of its claim; and the trial of a preliminary issue as to whether a clause contained in FG Wilson's standard terms and conditions, satisfies the test of reasonableness under the Unfair Contract Terms Act 1977. The relevant clause provided "Buyer shall not apply any set-off to the price of Seller's products without prior written agreement by the Seller" ("the no set-off clause").
2. FG Wilson is a Northern Irish company carrying on business as a manufacturer and seller of generator sets and spare parts worldwide, together with associated services. It is a wholly owned subsidiary of an American company, Caterpillar Inc. The Defendant ("Holt Liverpool") is an English company, whose business consists predominantly of purchasing generators and spare parts from FG Wilson for export to Nigeria. The sales in Nigeria are made by Holt Liverpool's majority owned subsidiary, John Holt plc ("Holt Nigeria"), a company incorporated in Nigeria. I shall refer to Holt Liverpool and Holt Nigeria collectively as Holt, save where it is necessary to distinguish between the two.
3. The claim is for approximately US$ 12 million as the sum allegedly due in respect of generators and spare parts supplied by FG Wilson to Holt Liverpool, together with associated services and licences. There is also a claim for contractual interest for late payment of invoices.
4. In a separate Commercial Court action, Holt claims in excess of US$ 53 million from FG Wilson as damages for alleged breaches of a distributor agreement relating to the import of generators into Nigeria. The trial of that action is listed to commence in April 2013. The essence of the claim in those proceedings ("the Holt 1 Claim") is that by supplying generators to others within Nigeria over a period going back a number of years, FG Wilson was in breach of exclusivity obligations owed to Holt.
5. The preliminary issue falls to be dealt with at the same time as the summary judgment application because it is FG Wilson's case that the no set-off clause is a complete answer to the defences advanced by Holt Liverpool. As Lord Donaldson of Lymington MR observed in Stewart Gill Ltd v Horatio Myer & Co Ltd [1992] QB 600, 604G-H, if a no set-off clause is to be effective at all, its enforceability must be determined at an early stage of the litigation, either upon an application for summary judgment or upon the hearing of a preliminary issue. Accordingly, on 30 March 2012, Deputy Judge Stephen Males QC ordered the trial of a preliminary issue as to whether the no set-off clause satisfies the requirement of reasonableness for the purposes of the Unfair Contract Terms Act 1977.

The Claims

6. The generators supplied by FG Wilson to Holt Liverpool which form the subject matter of the claim were in one or other of two forms. Some were fully assembled generators which were delivered at FG Wilson's factory in Larne, Northern Ireland, as finished products, requiring only commissioning after transport to Nigeria. These were known as "Completely Built Up" generators and referred to as "CBUs". Other generators were sold in unassembled kit form, again delivered at FG Wilson's factory in Larne, which were then to be assembled by Holt Nigeria after arrival in Nigeria. These were known as "Completely Knocked Down" generators and referred to as "CKDs". As well as complete generators, Holt Liverpool purchased spare parts from FG Wilson, because it was part of Holt Nigeria's business to service and repair generators for their customers. In relation to the CKDs, FG Wilson provided and charged for training services to enable Holt Nigeria personnel to be able to assemble the kits, and granted software licences for electronic tools used for servicing the generators.
7. Although the sales by FG Wilson to Holt Liverpool were on terms ex works Larne, on some occasions FG Wilson made arrangements for the haulage from the factory to the port of shipment. On such occasions, FG Wilson paid the freight for the road transport and recharged Holt Liverpool.
8. FG Wilson's claim is for:

(1) US$ 9,874,117.97 in respect of CKDs;

(2) US$ 1,223,936.40 in respect of CBUs;

(3) US$ 605,945.95 in respect of spare parts for CKDs and CBUs;

(4) US$ 25,670.61 in respect of haulage charges;

(5) US$ 5,807.62 in respect of training services;

(6) US$ 2,861.67 in respect of software licences;

(7) US$ 448,115.41 in respect of late payment charges on 276 invoices; these invoices related to the sale of CBUs, CKDs and spare parts, haulage charges, training services and software licences, which were paid by Holt Liverpool, but paid late; the sum allegedly due and owing is calculated at the rate of 6.25%, being US prime + 3% which is the late payment interest rate provided for in FG Wilson's standard terms and conditions;

(8) contractual interest at the rate of 6.25% on the above sums which form the subject matter of its claim.

The nature of the dispute

9. The trading terms agreed between FG Wilson and Holt Liverpool allowed Holt Liverpool extended credit. The originally agreed payment terms were that the invoiced sums were to be paid on the 25^th day of the fourth month after the month in which the invoice was dated. There is a dispute, to which I shall return below, as to whether this was extended to the 25^th day of the fifth month after invoice or some subsequent date.
10. On 7 December 2009 FG Wilson emailed Holt Liverpool to say that invoices totalling about US$ 1.3m were overdue for payment. These were invoices issued in June 2009 which would have fallen due for payment on 25 November 2009 in accordance with terms for payment on the 25^th day of the fifth month after invoicing. The email asked for confirmation that payment had been organised, or for a reason for non-payment. The response from Holt Liverpool was that the consistent practice had been to settle the account on 180-day net monthly account terms, with agreement to pay interest on the excess period beyond the standard terms of the 25^th day of the fourth month after invoice. The invoices were therefore said to be intended to be paid as part of the December settlement.
11. What subsequently happened was that invoices which were due in January 2010, on any view of the relevant credit terms, were not paid. Accordingly, on 1 February 2010, following a meeting of FG Wilson's Credit Committee, FG Wilson notified Holt Liverpool by email that the latter's account had been placed on hold. This meant that no further orders would be accepted, and existing orders would not be shipped. The email asked for a repayment schedule by return, in order to bring the account back within the agreed trading terms.
12. There followed exchanges and discussions between the parties as a result of which trading was resumed at about the end of April or early May, on the basis of a repayment plan which would have brought Holt Liverpool back "into terms" in relation to outstanding and subsequent orders by December 2010. It is Holt Liverpool's contention that these discussions resulted in a binding agreement, which it refers to as the "Repayment Agreement", under which FG Wilson was bound to supply identified minimum quantities of product month by month.
13. By August 2010, however, Holt Liverpool was unable to meet these repayment terms. There followed subsequent negotiations for a further repayment plan, which ultimately foundered.
14. On 19 January 2011 FG Wilson sent an email purporting to exercise its rights under a retention of title clause in its standard terms and conditions. Holt Liverpool responded by email on the following day to the effect that all the goods had been delivered to Holt Nigeria, who had become the legal owner of the goods and paid Nigerian VAT.
15. On 11 March 2011 solicitors for FG Wilson wrote a letter before action in relation to the debt, amounting to US$ 12,628,428.73, and threatening proceedings if it was not paid within 7 days. A response from DLA Piper, solicitors acting for Holt Liverpool, was sent on 18 March 2011. It stated that, prior to receipt of the 11 March letter, DLA Piper had been instructed in relation to various issues arising out of the trading relationship. The letter of 18 March set out at some length Holt Liverpool's complaints which form the subject matter of the dispute in the Holt 1 Claim. Having done so, the letter continued under the heading "Your letter of 11 March 2011", stating:

"Our client accepts that monies are owed to FGW but until it has been able to review all of the individual invoices claimed shown in the schedule attached to your letter, no admissions are made as to whether the sum of $12,628,428.73 is accurate."

The Issues

16. FG Wilson submits that the invoices on which it claims fall to be paid as the contractually agreed price for goods and (in more minor respects) services. Holt Liverpool submits as follows:

(1) It has an arguable defence by way of set-off of:

(a) the Holt 1 Claim; and/or

(b) a claim for damages for breach of the Repayment Agreement.

(2) The no set-off clause does not prevent reliance on either of these defences for one or more of the following reasons:

(a) it was not incorporated into the relevant contracts of sale or contracts for services;

(b) alternatively, if originally incorporated, it ceased to be applicable by reason of the Repayment Agreement;

(c) upon its true construction it does not apply to transactional set-offs of the type comprised by the Holt 1 Claim or Repayment Agreement claim;

(d) it applies only in relation to claims for the price, and FG Wilson has no claim for the price under section 49 of the Sale of Goods Act 1979 or otherwise; FG Wilson might have a claim for damages for non acceptance, but that is not the claim advanced in these proceedings and would not trigger the application of the no set-off clause;

(e) it does not satisfy the test of reasonableness under the Unfair Contract Terms Act 1977.

17. FG Wilson relies upon the no set-off clause. It accepts that the Holt 1 Claim is to be treated for the purposes of the present application as arguable; and that, if valid, it would afford a defence to FG Wilson's claim in these proceedings, by way of set-off, unless the no set-off clause were effective to preclude it from having that effect. FG Wilson disputes the existence of the "Repayment Agreement" or any claim thereunder. It disputes each of the arguments advanced by Holt Liverpool for the ineffectiveness of the no-set-off clause, recognising that it bears the burden of proof on the questions of incorporation, and reasonableness. It accepts that the clause only applies to a claim for the price, and that the claim as advanced in these proceedings is only framed as a claim for the price, contending that it has a valid claim for the price either under section 49 of the Sale of Goods Act 1979 or alternatively irrespective of the Act. In addition it contends that the claims for haulage charges can not defeated by a set-off, irrespective of the no set-off clause, under the principle applicable to freight claims recognised in Aries Tanker Corp. v Total Transport Ltd [1977] 1 Lloyd's Rep 334.
18. There is also a dispute as to whether the due date for payment of invoices was in the fourth or fifth month after invoice. This affects only the quantum of the claims for interest.
19. The issues which arise can conveniently be addressed in the following order:

(1) Does FG Wilson have a claim for the price? ("The Action for the Price Issue")

(2) Does Holt Liverpool have an arguable claim for damages for breach of the Repayment Agreement? ("The Repayment Agreement Issue")

(3) Was the no set-off clause incorporated into the contracts sued upon, and if so, did it survive the Repayment Agreement (if established)? ("The Incorporation Issue")

(4) Does the no set-off clause apply to the Holt 1 Claim and/or the Repayment Agreement claim as a matter of construction? ("The Construction Issue")

(5) Does the no set-off clause satisfy the requirement of reasonableness under the Unfair Contract Terms Act 1977? ("The UCTA Issue")

(6) Is FG Wilson entitled to judgment for the haulage charges? ("The Haulage Charges Issue")

(7) What was the due date for payment of invoices under the agreed credit terms? ("The Credit Terms Issue")

20. In addressing these issues I bear in mind the well established principles governing applications for summary judgment. Under CPR 24.2 FG Wilson must show that Holt Liverpool have no real prospect of successfully defending the claim and that there is no other compelling reason why the case or issue should be disposed of at trial. The applicable principles were summarised (in the context of a defendant's application) by Lewison J in EasyAir Ltd v Opal Telecom Ltd [2009] EWHC Ch at [15], in a formulation approved by the Court of Appeal in A.C. Ward Ltd v Catlin Fire Ltd [2009] EWCA Civ 1098, [2010] Lloyd's (I&R) Rep 301 at [24]. Adapting that summary for a claimant's application:

(1) The court must consider whether the defendant has a "realistic" as opposed to a "fanciful" prospect of success: Swain v Hillman [2001] 2 All ER 91.

(2) A "realistic" defence is one that carries some degree of conviction. This means a defence that is more than merely arguable: ED & F Man Liquid Products v Patel [2003] EWCA Civ 472 at [8].

(3) In reaching its conclusion the court must not conduct a "mini-trial": Swain v Hillman.

(4) This does not mean that the court must take at face value and without analysis everything that a defendant says in his statements before the court. In some cases it may be clear that there is no real substance in factual assertions made, particularly if contradicted by contemporaneous documents: ED & F Man Liquid Products v Patel at [10].

(5) However, in reaching its conclusion the court must take into account not only the evidence actually placed before it on the application for summary judgment, but also the evidence that can reasonably be expected to be available at trial: Royal Brompton Hospital NHS Trust v Hammond (No 5) [2001] EWCA Civ 550.

(6) Although a case may turn out at trial not to be really complicated, it does not follow that it should be decided without the fuller investigation into the facts at trial than is possible or permissible on summary judgment. Thus the court should hesitate about making a final decision without a trial, even where there is no obvious conflict of fact at the time of the application, where reasonable grounds exist for believing that a fuller investigation into the facts of the case would add to or alter the evidence available to a trial judge and so affect the outcome of the case: Doncaster Pharmaceuticals Group Ltd v Bolton Pharmaceutical Co 100 Ltd [2007] FSR 63.

(7) On the other hand it is not uncommon for an application under Part 24 to give rise to a short point of law or construction and, if the court is satisfied that it has before it all the evidence necessary for the proper determination of the question and that the parties have had an adequate opportunity to address it in argument, it should grasp the nettle and decide it. The reason is quite simple: if the respondent's case is bad in law, he will in truth have no real prospect of succeeding on his claim or successfully defending the claim against him, as the case may be. Similarly, if the applicant's case is bad in law, the sooner that is determined, the better. If it is possible to show by evidence that although material in the form of documents or oral evidence that would put the documents in another light is not currently before the court, such material is likely to exist and can be expected to be available at trial, it would be wrong to give summary judgment because there would be a real, as opposed to a fanciful, prospect of success. However, it is not enough simply to argue that the case should be allowed to go to trial because something may turn up which would have a bearing on the question of construction: ICI Chemicals & Polymers Ltd v TTE Training Ltd [2007] EWCA Civ 725.

21. Before dealing with each issue in turn, it is convenient to set out the history of the trading relationship between the parties, and the relevant parts of FG Wilson's standard terms and conditions.

The trading relationship

22. The parties had been trading with each other since 1998. By a Distributor Agreement between FG Wilson and Holt Liverpool's parent company, John Holt Group Ltd, dated 16 July 1998 ("the Distributor Agreement"), John Holt Group Ltd, and its subsidiaries from time to time, including Holt Nigeria, were appointed as exclusive distributors of FG Wilson's branded products in Nigeria. Clause 5.5 provided:

"Subject to availability the supply to the Distributor in the Territory [of] the Products in accordance with orders received from the Distributor shall be:

5.5.1 at prices notified to the Distributor by [FG Wilson]

………..

5.5.3 in accordance with the usual business terms of [FG Wilson] from time to time in force."

23. The Distributor Agreement was an annual agreement terminable thereafter on 180 days notice on either side. It was governed by English law. It contained terms which expressly reserved to FG Wilson the entitlement to decline to accept any order from the Holt companies.
24. Following a management buyout and company reorganisation, the Distributor Agreement was novated to Holt Liverpool by a Novation Agreement dated 27 February 2001.
25. In or about late 2006, FG Wilson and Holt Liverpool started to discuss the possibility of working together to ship the products in CKD form and to have Holt Nigeria assemble the kits in Nigeria. Following initial suggestions of doing so via a joint venture company, negotiations progressed on the basis that Holt Liverpool would set up an assembly facility in Nigeria in conjunction with Holt Nigeria, and that a fee would be paid by FG Wilson for each CKD assembled. As a result, and after protracted negotiations, on 27 January 2010 FG Wilson and Holt Liverpool entered into a Licence and Technical Assistance Agreement ("LTA") and into a Logistics Agreement. Under these agreements Holt Liverpool was granted a licence to assemble the CKDs in Nigeria (with a right to sub licence to Holt Nigeria). The Logistics Agreement essentially provided for Holt Nigeria to undertake the assembly work itself and for Holt Liverpool to invoice FG Wilson for that work on the basis of a scale of charges based on the particular model of generator concerned.
26. By Clause 6.2 of the Logistics Agreement, FG Wilson was required to pay each invoice for assembly fees if properly due and submitted to it by Holt within 30 days of receipt. In practice, FG Wilson issued credit notes to Holt Liverpool in respect of invoices for assembly fees and credited these against Holt Liverpool's trading account.
27. Clause 10 of the LTA provided as follows:

"10.1 [FG Wilson] undertakes to supply the [CKDs] to [Holt Liverpool] under the terms and conditions herein.

10.2 The [CKDs] to be supplied by [FG Wilson] will be supplied under [FG Wilson's] standard conditions of sale, including [FG Wilson's] warranty as published from time to time and notified to [Holt Liverpool] by [FG Wilson]."

28. The LTA was governed by the law of Northern Ireland. The parties asked me to assume for the purposes of the present claim and applications that there is no material difference between the law of Northern Ireland and English law.
29. Holt Liverpool's turnover for the years 2004 to 2009 varied between about £11 million and £26 million per annum. For the year ending 30 September 2010 its turnover was almost £19 million. Holt Liverpool employs about 10 people in Liverpool, and its sole business is conducted through its majority owned subsidiary, Holt Nigeria. Between 2004 and 2009, FG Wilson manufactured generators or spares for shipment to Holt with a total value varying between about US$ 8 million and about US$ 17 million per annum. The trading in FG Wilson branded generators in Nigeria represented the majority of Holt Liverpool's business. The only written supplier agreements held by Holt were those with FG Wilson (which FG Wilson has purported to terminate as a result of the current dispute) and an agreement with Yamaha for whom Holt distribute outboard engines, motorbikes and small portable generators in Nigeria (smaller generators than those available from FG Wilson). Between 2007 and 2010, the proportion of total shipments made by Holt Liverpool to Holt Nigeria represented by FG Wilson branded products varied between 56% and 70%.
30. FG Wilson is a much larger concern. Its turnover for the year ending 31 December 2010 was some £654 million. Over the relevant period Holt was one of its top ten customers.
31. There has been continuity in the senior management of Holt Liverpool and Holt Nigeria in relation to the relevant business since 2001. In particular, Mr Parmley, who gave evidence to me, has been the Finance Director of Holt Liverpool and the Executive Deputy Chairman of Holt Nigeria since May 2001. Mr Prescott, the commercial director of Holt Liverpool, has been a director of Holt Liverpool and Holt Nigeria since 2001. Mr Newns was part of the management buy out and has remained a director of Holt Liverpool, and a non executive director of Holt Nigeria since 2001.
32. Mr Starks, a director of FG Wilson whose responsibilities are those of finance director, gave evidence which was not challenged about how prices were agreed between FG Wilson and Holt Liverpool. Generally the prices which FG Wilson charged varied from customer to customer and were subject to negotiation. According to Mr Malcolmson, the relevant sales director at FG Wilson who had a close business relationship with Holt from 2001 onwards, Holt was able to negotiate favourable pricing arrangements which were agreed through robust negotiation between Holt and FG Wilson due to the substantial volume of business which Holt transacted with FG Wilson. The prices were not unilaterally dictated to Holt by FG Wilson. The trading terms agreed between FG Wilson and Holt Liverpool allowed Holt Liverpool extended credit of over 4 months (at least).
33. The system for ordering the generators and other parts and services from FG Wilson was as follows:

(1) CBUs. Holt Liverpool placed orders for CBUs with FG Wilson by using a secure online ordering service via a web portal called "Gensets Online". Holt Liverpool placed orders for CBUs by logging on to Gensets Online, which it was only able to do by virtue of being a customer who had been given a code and password for that purpose. Each order placed online was received by FG Wilson who would confirm its acceptance (or not). The CBUs were manufactured, or supplied from stock held in Larne, in response to the order placed. This was the practice for placing orders for CBUs from October 2003. The Gensets Online website contained a notice, immediately below where the customer filled in the order, providing that "all sales are made subject to the FG Wilson (Engineering) Ltd Terms". The page contained a hyperlink, which if clicked then displayed a copy of the FG Wilson standard terms and conditions in force at the time the order was placed. All invoices rendered for CBUs stated at their foot "All Sales made by FG Wilson are made strictly in accordance with and under the FG Wilson Standard Terms and Conditions of Sale available both upon request and on our webpage at www.FGWilson.com".

(2) CKDs. The same system was used for ordering CKDs as that for orders for CBUs, using the web portal Gensets Online. All the invoices for CKDs contained the same reference to FG Wilson's Standard Terms and Conditions of Sale as the invoices for CBUs.

(3) Spare Parts. Holt Liverpool placed orders for spare parts by using a different secure online web portal provided by FG Wilson for its customers called "e-go". Once orders were placed online, and accepted, goods were sourced from stock. The e-go website did not contain on the face of the screen a specific notice of FG Wilson's terms and conditions applying. It did, however, have as one of the links at the top of the screen a heading "Terms And Conditions" (along with Contact Us, Help and FAQ). Clicking on this heading brought up FG Wilson's standard terms and conditions. All the invoices contained the same reference to FG Wilson's Standard Terms and Conditions of Sale as the invoices for CBUs.

(4) Haulage. When Holt wanted FG Wilson to arrange transport of goods from the factory at Larne to the port of shipment, haulage was agreed on an ad hoc basis by exchange of emails. The emails in relation to the haulage services in dispute in the current action do not contain any reference to standard terms and conditions. However, each invoice for these and prior haulage services contained the same rubric as the invoices for CBUs with its reference to the FG Wilson Standard Terms and Conditions of Sale.

(5) Training Services. The claim is for two unpaid invoices relating to training services. Each of the invoices for these and prior training services also contained the same rubric as the invoices for CBUs, referring to the FG Wilson Standard Terms and Conditions of Sale. In one case the training services were booked by completion of an online booking form on a different web portal run by FG Wilson, called "Powerup2". This web portal contained no reference to standard terms and conditions.

(6) Software licences. In order to carry out servicing on the Perkins Engines used in larger FG Wilson generator sets, a software programme called "Electronic Service Tool" is required. Licences to use this software were purchased on the Powerup2 online portal. They were the subject matter of invoices containing the same rubric as the other invoices referred to above.

The Terms and Conditions

34. During the relevant period there were two versions of FG Wilson's standard terms and conditions, which are not materially different ("the Terms and Conditions"). They provided in material part as follows:

FG WILSON BRAND GENERATOR SETS

PARTS AND SERVICE

Terms and Conditions of Sale

In these terms and conditions "Seller" means FG Wilson (Engineering) Ltd., a Northern Ireland corporation located in the United Kingdom with principal offices in Larne, Northern Ireland ("Seller") and "Buyer" means the person, firm or company who buys or agrees to buy goods from the Seller.

AGREEMENT OF SALE: Acceptance of any order of Buyer is conditional on Buyer's acceptance of the terms and conditions contained herein, on any pages attached hereto, and in the Seller's quotation or in the Seller's acknowledgement of Buyer's order, if any…………………….

PRODUCTS COVERED BY AGREEMENT: This Agreement concerns the purchase and sale of the parts, products and/or services shown in Sellers acknowledgement of order.

PRICES AND PAYMENTS: Prices shall be Seller's list price for the goods less any discount as notified in writing by Seller, plus Seller's charges for Delivery, insurance, consular fees, banking charges, etc., all as in effect on the date of shipment of the goods and any costs resulting from Buyer-caused delays. Seller may invoice Buyer on or at any time after delivery for any amounts still due (see Delivery) and Buyer shall pay within thirty (30) days of the date of invoice. Buyer shall not apply any set-off to the price of Seller's products without prior written agreement by the Seller. Buyer shall pay to Seller, on demand, a late payment charge equal to the lesser of Seller's then-current standard late payment charge (Prime Interest Rate + 3%/annum plus expenses) or the highest charge allowed by law on any amount unpaid on the due date.

TAXES: Seller's prices do not include any sales, use, excise or other taxes which Seller may be required to pay in connection with filling any of Buyer's orders. Buyer shall pay the amount of any applicable present or future tax as an additional charge…

………………………………………………..

WARRANTY: Products sold by Seller are warranted as provided in Seller's applicable standard Warranty World certificate in effect on the date of Delivery and available upon request for a period of 1 year from commissioning or 18 months from delivery by Seller, whichever is sooner. Buyer agrees that if the products are purchased for resale, Buyer shall make available to its customer at the time of resale a copy of such warranty and agrees to impose a similar obligation on customers purchasing such products for resale. …………….

TITLE AND RISK OF LOSS: Unless Seller specifically agrees otherwise in writing, delivery of products sold by Seller shall be Ex-Works (EXW), Seller's designated facility and risk of loss and damage to such products shall pass to Buyer at such EXW place, ……….. All delivery terms referred to are INCOTERMS 2000………….. Notwithstanding delivery and the passing of risk in the products, title shall not pass to Buyer until Seller has received payment in full for the products and all other goods or services agreed to be sold by Seller to Buyer for which payment is then due. Until such time as title passes, Buyer shall hold the products as Seller's fiduciary agent and shall keep them separate from Buyer's other goods. Prior to title passing Buyer shall be entitled to resell or use the products in the ordinary course of business and shall account to the Seller for the proceeds of sale. If the Buyer fails to comply with a demand from the Seller to return products to which title has not passed, Seller may forthwith enter any premises where the products are stored and repossess them.

……………………………………………………

DELIVERY: Delivery dates are approximate. Delivery of products under an order accepted by Seller shall be subject to the approval by Seller of Buyer's financial condition at the time of Delivery. Whether or not credit terms are specified elsewhere, Seller may, at its option, condition Delivery under any order accepted by Seller upon receipt of satisfactory security or of cash before Delivery. If, at Buyer's request, Delivery of products on an order accepted by Seller is delayed beyond the date products are ready for Delivery, Seller may require immediate payment in full and/or assess additional charges for storage and other expenses incident to such delay.

…………………………………………………..

GOVERNING LAW: These terms and conditions shall be governed by and construed under the laws of Northern Ireland under the jurisdiction of the United Kingdom. No remedy herein provided shall be deemed exclusive of any other remedy allowed by law or equity.

……………………………………………………

RELATIONSHIP OF THE PARTIES: Nothing herein contained shall be deemed to create an agency, joint venture, partnership or fiduciary relationship between the parties hereto ..........................."

The Action for the Price Issue

35. This issue affects the bulk of FG Wilson's claim but is not relevant to its claims in respect of haulage charges, training services, software licences or interest on late payments.
36. Section 49 of the Sale of Goods Act 1979 provides:

"49. Action for Price

(1) Where, under a contract of sale, the property in the goods has passed to the buyer and he wrongfully neglects or refuses to pay for the goods according to the terms of the contract, the seller may maintain an action against him for the price of the goods.

(2) Where, under a contract of sale, the price is payable on a day certain irrespective of delivery and the buyer wrongfully neglects or refuses to pay such price, the seller may maintain an action for the price, although the property in the goods has not passed and the goods have not been appropriated to the contract.

(3) ……….."

37. Mr Hollander QC on behalf of FG Wilson submitted that section 49 was permissive, not exclusive. It does not preclude an action for the price in circumstances outside those covered by subsections (1) and (2). He submitted that an action for the price can be maintained by the seller whenever the amount which the buyer has agreed to pay for the goods has fallen due in accordance with the terms of the contract of sale. In the alternative, he submitted that the claims fell within s. 49(1) because property had passed. Mr Cogley QC, on behalf of Holt Liverpool, disputed both propositions.

Is s. 49 exclusive ?

38. There is an important distinction to be drawn between when a duty to pay the price arises, and when an action may be maintained for the price. The former identifies when the buyer's obligation to pay falls due, and therefore when he is in breach of his obligation if he fails to pay. The latter is concerned with the remedy afforded for such breach of obligation. The obligation in question is to pay a sum of money, and the remedy in question is akin to specific performance. The law does not provide that the remedy of specific performance is available in all circumstances where there is breach of obligation. As Professor Treitel put it in the last edition of The Law of Contract which he edited (11^th ed.) at p1014:

"The action for the price is not available merely because the duty to pay the price has arisen. The contract specifies the duties of the parties, but the law determines their remedies. This is generally recognised when specific performance is sought and it is also true of the action for the agreed sum.

The distinction appears clearly in the Sale of Goods Act 1979. The duty to pay the price arises when the seller is ready and willing to deliver the goods (unless, of course, the sale is on credit or stipulates for an advance payment). But s. 49 of the Act provides that the action for the price is available to the seller if either the property in the goods has passed to the buyer or the price is payable "on a day certain irrespective of delivery".

(emphasis in original)

39. Section 49 of the Sale of Goods Act 1979 falls within Part VI of the Act which is entitled "Actions for breach of the contract" and under a sub heading entitled "Seller's remedies". Section 49 re-enacts in identical terms s. 49 of the Sale of Goods Act 1893. The 1893 Act was a codifying statute, enacted to reflect the common law. If Mr. Hollander QC were correct in his argument that an action for the price could be maintained whenever the obligation to pay the price had arisen, s. 49 would be largely otiose. Instead of defining two circumstances in which an action for the price could be maintained, one would have expected a codifying statute simply to state that an action for the price could be maintained when the price had fallen due for payment in accordance with the terms of the contract. These considerations strongly suggest that s. 49 identifies the only circumstances in which the seller may maintain an action for the price.
40. The remedy of an action on the price is confined to circumstances in which property has passed (in the absence of express agreement as envisaged by s. 49(2)) because generally in contracts for the sale of goods the obligation to pay the price is dependent on performance of the obligation to transfer title, not merely the promise of performance of that obligation. Save in the circumstances identified in s. 49(2), an action for the price may only be maintained when property has been transferred. The distinction between a right to payment which is dependent on performance, and one which is supported only by the other party's promise to perform was expressed by Dixon J. in the Australian case of Automatic Fire Sprinklers Proprietary Ltd v. Watson (1946) 72 CLR 435 at 464 as follows:

"In certain forms of executory contract, where the promise of one party is to pay the other money in consideration of his transferring property, of his doing work, of his serving the former as his master, and, perhaps, of his providing other tangible things or definite services, the money to be paid is regarded as the price of, or reward for, the property or service when and so often as the transfer of the one or the performance of the other affords an executed consideration. In these contracts the promise to pay the price or reward is not construed as a simple obligation to pay a sum or sums at a future date supported solely by a consideration consisting in the corresponding promise to transfer the property, do the work, serve, or provide the things or services by the other party, so that a mere readiness and willingness on the one side of the latter to perform his part is enough to entitle him to the payments, notwithstanding that, whether owing to the fault of the former, or without fault on either side, the property is not transferred, the work is not done, the relation of master and servant ceased, or the things or services are not provided. The most familiar example is that of the sale of goods. There the common understanding of an agreement to sell is that it is the goods and not the promises to deliver that are to be paid for. The result is that, if the seller tenders goods in accordance with his contract but the buyer rejects them in breach of his contract, the seller cannot sue for the price; his remedy is for unliquidated damages for non-acceptance: Cp. Plaimar Ltd v Waters Trading Co Ltd.

It is nothing to the point that the seller remains ready and willing to deliver the goods and refuses to treat the rejection as discharging the contract but, on the contrary, "keeps it open." Even so the price is not payable, for the reason that it is for the goods that the price is to be paid and until they are accepted there is no indebtedness. It is, of course, open to contracting parties to make what agreement they like about the matter. They may, if they choose, contract for payment of a sum certain at a time certain and make it clear that the payment is independent of the transfer of the goods. But that is not how an agreement to sell is ordinarily understood."

41. Looking at the matter as one of principle, therefore, and apart from authority, the circumstances in which an action for the price may be maintained should be confined to those set out in the codifying provisions of s. 49.
42. Turning to the authorities, I was referred to three cases. None provides an authoritatively conclusive answer to the question in issue. In Colley v Overseas Exporters [1921] 3 KB 302, sellers brought an action for the price of goods sold on terms fob Liverpool. The buyers made five successive nominations of vessels to take delivery of the cargo but in each case the vessel was unable to take the goods for one reason or another. No effective nomination was made, the goods remained at the dock awaiting shipment, and the sellers brought an action for the price. The argument advanced on behalf of the sellers was that because it was the buyers' own fault which had prevented the goods being put on board, the buyers were disabled from saying that the price, which would have been payable if and when the goods had actually been put on board, was not now due to the sellers. McCardie J rejected the argument and gave judgment for the buyers, there being no alternative claim for damages. Having found that s. 49(1) did not apply because property would not pass until the goods were loaded on board under standard fob terms, and that s. 49(2) did not apply because there was no agreement as to payment of the price on a day certain, he held at p. 310 that those findings were fatal to an action on the price because s. 49 was exclusive:

"The existing condition of the law is put in Benjamin on Sale, 6^th ed., p. 946, where it is rightly stated that the old principles "are by implication preserved by s. 49 of the code". And the learned editor adds: "Where property has not passed, the seller's claim must, as a general rule, be damages for non-acceptance." An exception to the general rule is to be found in the cases provided for by s. 49, sub-s. 2, of the code. In my opinion (subject to what I say hereafter as to estoppel), no action will lie for the price of goods until the property has passed, save only in the special cases provided for by s. 49, sub-s. 2. This seems plain both on the code and on common law principle. I have searched in vain for authority to the contrary."

43. Mr Hollander QC correctly submitted that the case can readily be distinguished because the price had not become due in accordance with the terms of the contract: there was no specific agreement as to the time for payment of the price, so that it only fell due if and when the goods were put on board, which never took place. The argument in the present case did not therefore arise and McCardie J's comments were expressed in wider terms than was necessary for the decision.
44. In White and Carter Councils Ltd v McGregor [1962] AC 413 the claim was not made under a contract for the sale of goods, but was one for the price of providing advertising services. The House of Lords, on a Scottish appeal, upheld the claim. The argument was predominantly directed to the issue as to whether it was open to the advertisers to refuse to accept the client's repudiation and maintain an action in accordance with the contract. Of relevance to the present debate are the observations of Lord Keith, who dissented, at p. 437:

" I would refer first to contracts for the sale of goods which were touched on in the course of the debate, for the reason that one of the remedies provided to the seller by the Sale of Goods Act 1893 is an action for the price. This however applies only in two cases. One is where the property in the goods has passed to the buyer…………The only other case is where parties have contracted for payment on a day certain, irrespective of delivery or passing of property. This is a clear case of a contractual debt unconditioned by any question of performance by the other party. A much closer parallel with the present case is an agreement to sell future, or unascertained, goods. In this case there can be no appropriation of, and therefore passing of, property in the goods without the assent of buyer and seller. If therefore the buyer repudiates the contract before appropriation or refuses his consent to appropriation, there can be no passing of property. The seller is then confined to an action for damages for breach of contract. This, of course, is a rule of statute. But the Act is largely declaratory of English law, though not of Scots law…."

45. Mr Hollander QC was able to submit that these comments should carry limited weight in resolving the issue which arises in the present case. They were made in a dissenting speech and in reference to a topic only touched on in the course of the debate. There is no record of the debate in the report of the argument. Crucially, no issue arose in that case as to whether s. 49 provided the exclusive circumstances in which a seller of goods might maintain an action on the price; the point with which I am concerned did not arise for decision, and was not decided.
46. The point did arise for consideration in the High Court of Australia in Minister for Supply & Development v Servicemen's Cooperative Joinery Manufacturers Ltd [1951] HCA 15, (1951) 82 CLR 621, although its resolution was not critical to the outcome of the case. Latham CJ and Williams J expressed the view that an action for the price was maintainable when the price was due, even if not expressed to be due on a day certain (as it was not in that case). By contrast Webb J, whilst concurring in the result, expressed the view that no action for the price could be maintained outside the circumstances set out in s. 49.
47. I was also referred to a number of textbooks in which the editors expressed the view that an action for the price ought not to be confined to the circumstances set out in s. 49: Chitty on Contracts 13^th ed. Vol 2 para 43-396, Benjamin's Sale of Goods 8^th ed. para 16-028, and Goode on Commercial Law 4^th ed. pp. 427-428.
48. There is, however, further authority which provides a more formidable obstacle to Mr Hollander QC's submission. In Stein Forbes v County Tailoring Co (1916) 115 L.T. 215, 86 L.J.K.B. 448, a cif contract for the sale of sheepskins provided for payment in cash against documents on arrival of steamer. The buyers wrongfully refused to pay on tender of the documents by the sellers and therefore property never passed to the buyers, although the price became due. Atkin J rejected the arguments advanced on behalf of the sellers that the contract provided for payment on a day certain under s. 49(2), and that property had passed. He held that in the absence of either, the sellers could not maintain an action for the price but were confined to a claim in damages. The decision is inconsistent with a claim for the price being maintainable outside the circumstances provided for in s. 49. Eminent counsel for the sellers did not argue that it was sufficient that the price had fallen due under the terms of the contract.
49. In Muller MacLean & Co v Leslie & Anderson (1921) 8 Lloyd's Rep 329, sellers brought an action for the price, or for damages in the alternative, under a contract of sale on fob terms providing for payment of the price in cash against documents. The goods were shipped and the documents tendered, but the buyers wrongfully refused to accept the documents or pay for the goods. Roche J held that property had not passed and that the contract did not provide for payment on a day certain, so that no action for the price lay under s. 49(1) or 49(2). Accordingly the claim for the price failed, and the sellers recovered a much lesser sum as damages for non acceptance. The reasoning at pp. 330-331, and the decision itself, assumes that no action for the price could be maintained outside the circumstances provided for in s. 49.
50. The High Court of Australia reached the same conclusion in Plaimar Ltd v Waters Trading Co Ltd [1945] HCA, (1945) 72 CLR 304.
51. In Otis Vehicle Rentals Ltd v Cicely Commercials Ltd [2002] EWCA Civ 1064, the defendant had agreed to buy back a number of tractor units from a customer to whom it supplied them on hire purchase. The defendant wrongfully refused to repurchase the vehicles, and the customer brought an action for the price, with a claim for damages in the alternative. Property in the vehicles had never passed back to the defendant buyer, and indeed by the time of the trial the customer had long since disposed of the vehicles to third parties. The trial judge decided that the claim fell within s. 49(2) and gave judgment for the price. On appeal the decision was reversed and judgment for damages in a lesser sum was substituted. Giving the judgment of the Court, Potter LJ held that there were two reasons why s. 49(2) did not enable the customer to claim the price (paragraph 16). The first was that the price was not payable irrespective of delivery. The second was that even if the claim fell within s. 49(2) the customer was no longer able to deliver the vehicles to the buyer, it being a condition of the seller's entitlement to sue for the price under s. 49(2) that he remains willing and able to deliver the goods to the buyer. Having rejected the customer's ability to bring itself within section 49(2), the decision was that, in the absence of passing of property, the only remedy lay in damages and the trial judge had been in error in giving judgment for the price.
52. The Court of Appeal did not have the benefit of argument on behalf of the customer in that case because it was debarred from appearing on the appeal having failed to comply with an earlier order. But the Court had the benefit of a skeleton argument filed by the customer at an earlier stage and "had no doubt that the submissions of Mr Johnson for the defendants are correct as a matter of basic Sale of Goods law" (paragraph 9). At paragraph 12 of the judgment, Potter LJ recorded that the trial judge had quoted from the speech of Lord Keith in White and Carter Councils Ltd v McGregor [1962] AC 413, 437 "in which he stated in respect of the remedies provided to a seller under the Sale of Goods Act 1893 that (in the absence of express agreement) an action for the price arises only in two cases". He was treating Lord Keith's remarks as an authoritative statement of basic Sale of Goods law to that effect. The Court of Appeal applied that principle in allowing the appeal. The decision is binding on me.
53. Accordingly, both as a matter of principle and authority, I reject Mr Hollander QC's first submission that FG Wilson can maintain an action for the price without bringing itself within s. 49.

Is section 49 (1) fulfilled?

54. It will be recalled that FG Wilson's standard terms and conditions contained a retention of title clause in the following terms:

"Notwithstanding delivery and the passing of risk in the products, title shall not pass to Buyer until Seller has received payment in full for the products and all other goods or services agreed to be sold by Seller to Buyer for which payment is then due. Until such time as title passes, Buyer shall hold the products as Seller's fiduciary agent and shall keep them separate from Buyer's other goods. Prior to title passing Buyer shall be entitled to resell or use the products in the ordinary course of business and shall account to the Seller for the proceeds of sale. If the Buyer fails to comply with a demand from the Seller to return products to which title has not passed, Seller may forthwith enter any premises where the products are stored and repossess them."

55. Mr Hollander QC submitted that property had passed to Holt Liverpool, despite the retention of title clause, when the goods were sold on to Holt Nigeria. Mr Cogley QC confirmed on behalf of Holt that the onsale by Holt Liverpool was on Incoterms and involved no retention of title provision.
56. Mr Cogley QC submitted that property never passed to Holt Liverpool because the terms of the retention of title clause, which he accepted was incorporated into the relevant contracts, provided that Holt Liverpool was to sell as fiduciary agent for FG Wilson and account for the proceeds of sale. He submitted that the effect was twofold:

(1) FG Wilson's sole remedy was for the proceeds of sale by Holt Liverpool to Holt Nigeria, not for the price agreed between FG Wilson and Holt Liverpool ; and

(2) FG Wilson could not bring its claims within s. 49(1) because property had not "passed to the buyer". Property had never passed to Holt Liverpool. It had passed directly from FG Wilson to Holt Nigeria with Holt Liverpool occupying only an agency capacity.

57. I am unable to accept either of these submissions. As to the first, the governing law clause in FG Wilson's standard terms and conditions provides "No remedy herein provided shall be deemed exclusive of any other remedy allowed by law or equity". The entitlement to the proceeds of sale is a remedy which is expressly one provided in addition to the entitlement to the price, not in substitution for it. This would in any event be the normal effect of a retention of title clause. In the absence of express contrary agreement, a retention of title clause is not to be taken as providing for an exclusive remedy in substitution for an entitlement to the price. It is a provision intended to enable the seller to recover the goods themselves or their proceeds of sale as a kind of security, not in the strict sense of allowing him only to retain the value equivalent to the price, but in the sense of conferring proprietary rights apart from the personal contractual right to the price: see Armour v Thyssen Edelstahlwerke A.G. [1991] 2 A.C. 339, 353. Were it otherwise, remarkable commercial consequences would follow. The seller would be renouncing his entitlement to an agreed price in favour of an entitlement merely to (a) the goods themselves, in whatever deteriorated state they might be and whatever diminished value they might hold, or (b) whatever price his defaulting buyer chose to obtain from third parties, however little.
58. As to Mr Cogley QC's second submission, if one puts to one side the retention of title clause, the intention of the parties as to the passing of property, assessed in accordance with ss. 17-19 of the 1979 Act, was clearly that property to the products should pass to Holt Liverpool when delivered ex works Larne, or at the latest when sold on to Holt Nigeria if that were later. The trading history between FG Wilson and Holt Liverpool meant that it was the expectation of both parties that the products would be immediately resold by Holt Liverpool to Holt Nigeria, and thereafter supplied to customers in Nigeria. The products were specifically supplied for resale, with the intention that title would pass down the chain to the Nigerian customers when they bought the products.
59. I do not accept that the effect of the retention of title clause is to treat Holt Liverpool as FG Wilson's agent in reselling the products. It does not state that the buyer is to sell as agent. On the contrary, it provides that the buyer is to be entitled to resell the products in the ordinary course of business. Reselling in the ordinary course of business may import selling as principal; in my view it would certainly do so in relation to the sales by FG Wilson to Holt Liverpool given the trading history and relationship between the parties. The retention of title clause provides that whilst the buyer retains the products, it is to hold them as fiduciary agent; by contrast it does not state that that is the capacity in which the buyer resells the goods. The inclusion in the clause of an express obligation on the buyer to account for the proceeds of sale is at best neutral as to the capacity in which he sells. It is consistent with his selling as principal.
60. It would in my judgment require clear words to constitute Holt Liverpool as agent for FG Wilson in making those resales, because it would render FG Wilson liable to Holt Nigeria on such contracts, the terms of which would be wholly outside its knowledge and control. The retention of title clause in its application to the trading between these parties does not so provide. The extended credit terms between the parties meant that all sales by Holt Liverpool to Holt Nigeria would be governed by the clause. If Mr Cogley QC's submissions were correct, it would render the entire trading relationship between FG Wilson and Holt Liverpool as one of principal and agent, with FG Wilson's true counterparty being Holt Nigeria. That was not the basis on which the parties dealt with each other in over a decade of trading, and the retention of title clause does not have to be construed in a manner which subverts the commercial intentions and expectations of the parties.
61. Were I wrong in this interpretation, I would nevertheless reject Mr Cogley QC's submission on the further basis that s. 49(1) is fulfilled where property passes to a "sub buyer" through the agency of the buyer. A number of considerations point to that conclusion.
62. The rationale for s. 49(1) is that an action for the price will lie when the seller has delivered the goods to the buyer and conferred on him the ability freely to deal with the goods as his own. Whilst the goods remain in the hands of the buyer, to whom property has not yet passed by reason of a retention of title clause, an action for the price will not lie because the buyer's freedom to deal with the goods as his own is constrained: the seller is free to retake possession of the goods in which he retains property. But once the goods are sold on, with the consent of the seller conferred by the retention of title clause, the seller has done all that is necessary for the buyer to have dealt with the goods as his own and transfer property in the goods to the third parties. The rationale of s. 49(1) is fulfilled.
63. The position is illustrated by s. 25 of the Sale of Goods Act 1979 which enables a buyer in possession of goods with the consent of the seller to confer good title in the goods to a bona fide purchaser without notice. The section provides that the mechanism by which the purchaser acquires title is by treating the buyer in possession (who has no title) as agent for the seller. It is therefore akin to the position created by the retention of title clause in this case. It would in my view be remarkable if, in a case governed by s. 25, the seller were unable to sue the buyer for the price.
64. Were it otherwise, the effect would be to treat the retention of title clause as providing an exclusive remedy where (1) the contract provides otherwise and (2) the uncommercial consequences identified above would follow.
65. For these reasons, I conclude that FG Wilson can maintain an action for the price by reason of s. 49(1) of the 1979 Act.
66. I should mention two further points advanced by Mr Hollander QC. I was pressed with an argument that if no action could be maintained for the price, FG Wilson would be left without a remedy, because s. 50 provides the exclusive remedy in damages and that section only allows a damages claim where a buyer has not only refused to pay for the goods but also refused to accept them, an argument which he supported by reference to s.50 (3) and s.35. I was not attracted by the argument, but it is unnecessary for me to express a concluded view upon it in the light of my conclusions.
67. Mr Hollander QC also argued that if the retention of title clause prevented title passing to Holt Liverpool, FG Wilson had validly waived reliance upon it by commencing an action for the price. This seems to me to confuse two aspects of the clause. One aspect is that it confers the additional remedy of enabling the seller to sue for the proceeds of sale, which is a provision which is solely for the benefit of FG Wilson and capable of waiver. The other aspect is that it regulates the position as to the passing of property and the circumstances and capacity in which the buyer may deal with and dispose of the products. That aspect of the provisions is not solely for the benefit of FG Wilson: it defines the parties' intentions as to the passing of property and their rights and obligations in relation to the products. That aspect is not capable of unilateral waiver by FG Wilson.

The Repayment Agreement Issue

68. The Repayment Agreement contended for by Holt Liverpool is identified in a draft Reamended Defence and Counterclaim served shortly before the hearing. It is alleged that it was agreed in "late April/May 2010" that:

(1) FG Wilson would supply a minimum volume of Product each month between February and December 2010 (inclusive) in the quantities set out in Schedule 2, which is said to be based on those set out in an email of 13 May 2010.

(2) Holt Liverpool would make minimum monthly payments as follows:

April	$2,090,000
May	$2,000,000
June	$2,500,000
July	$2,500,000
August	$2,500,000
September	$2,500,000
October	$ 998,000
November	$2,000,000

(3) Credit terms on new and existing orders would be 25^th day of the fourth month after invoice;

(4) All existing debts would be replaced by the new repayment schedule.

69. The evidence of Mr Prescott, Holt Liverpool's commercial director, was that Holt Liverpool paid the required minimum amounts in April, May and June, but FG Wilson only shipped 62 units in April (against 74 required), 12 units in May (against 36 required) and 113 units in June (against 161 required). He says that it was as a result of this shortage of supply that Holt Liverpool was unable to make the minimum payments required in July and August.
70. The Repayment Agreement was allegedly made in a series of email exchanges between 15 February 2010 and 17 May 2010 during which there was also a meeting in Belfast on 12 March 2010 and a telephone conference call on 26 April 2010, of each of which there is a note. It is not necessary to set out the lengthy exchanges, or the notes of the meeting/conference call, nor what is said about them in Holt Liverpool's witness statements. I have considered them carefully. In my judgment they clearly do not create or evidence an agreement in which FG Wilson agreed to provide the minimum quantities alleged or any minimum quantities, and there is no real prospect of Holt Liverpool establishing such an agreement. They amounted to no more than FG Wilson agreeing to take Holt off hold, and to resume supplying it on credit terms, with discussions about minimum payments of outstanding debt from Holt if it was to continue to be allowed to buy on credit. Discussions about how much product Holt wanted to order were no more than that. FG Wilson gave no commitment, contractual or otherwise, to supply any minimum quantity of product, or to continue to supply product if Holt Liverpool failed to discharge the outstanding debt as promised.
71. I am reinforced in this conclusion by the following striking aspects of Holt Liverpool's case on the alleged Repayment Agreement:

(1) At no time prior to service of the Defence in these proceedings did Holt Liverpool assert that there had been a binding agreement to ship minimum quantities, or that FG Wilson was in breach of any obligation in failing to supply product. It did not do so throughout the extensive correspondence between the parties in 2010. An internal email exchange of 11 August 2010, and email exchanges between the parties of 12-15 August 2010 are inconsistent with any such agreement.

(2) Indeed there was no suggestion of such an agreement or breach of it in the lengthy response to the letter before action. On the contrary, in DLA Piper's letter of 18 March 2010, they responded that "Our client accepts that monies are owed to FGW but until it has been able to review all of the individual invoices claimed shown in the schedule attached to your letter, no admissions are made as to whether the sum of $12,628,428.73 is accurate." Mr Hollander QC relied upon this as an admission and relied upon the apposite remarks of Potter LJ in ED&F Man Liquid Products v Patel [2003] EWCA Civ 472, at [11] and [53]:

"where there is a claim or judgment for monies due and issues of fact are raised by a defendant for the first time which, standing alone would demonstrate a triable issue, if it is apparent that, with full knowledge of the facts raised, the defendant has previously admitted the debt and/or made payments on account of it, a judge will be justified in taking such acknowledgments into account as an indication of the likely substance of the issues raised and the ultimate success of the defence belatedly advanced.

... in a case where, with knowledge of the material facts, clear admissions in writing are unambiguously made by a sophisticated businessman who has ample opportunity to advance his defence prior to when judgment is signed, a judge is in my view entitled to look at a case "in the round", in the sense that, if satisfied of the genuineness of the admissions, issues of fact which might otherwise require to be resolved at trial may fall away. …"

(3) The agreement now alleged in the draft Reamended Defence and Counterclaim is significantly different from that put forward in the Amended Defence and Counterclaim. The latter bears a statement of truth signed by Mr Parmley as Holt Liverpool's Finance Director. There are differences in five of the alleged monthly minimum payment amounts said to have been agreed as those which were to replace the existing debt obligations. There are differences in every single one of the alleged minimum monthly shipment requirements for the months from May 2010 to December 2010 inclusive. There are substantial differences in when the agreement was said to have been made. There are substantial differences in the correspondence and communications by which the agreement is said to have been made. These are not minor discrepancies. They reflect the difficulty in identifying the nature, timing and terms of any binding agreement. Even in the draft Reamended Defence and Counterclaim, there is no precision in identifying exactly when and how the agreement is said to have been concluded. Mr Cogley QC did not seek to provide such identification in argument before me.

(4) The agreement alleged is incoherent in a number of respects:

(a) It is not alleged that it was concluded until 13 May 2010, yet it is alleged to have required minimum quantities to be shipped in February and March 2010, when, as the parties knew, no product had been shipped because Holt had been put on hold.

(b) The figures are said to be those set out in an email from Christine Richards of Holt Liverpool to Mark Ferguson of FG Wilson of 13 May 2010. But:

(i) The email only has figures for May to August, whereas the Repayment Agreement alleged in Schedule 2 includes 200 units per month for September to December; and

(ii) Mr Ferguson's immediate response to the 13 May email was an email of 17 May stating that the quantity requested for July would not be available in that month.

72. Mr Cogley QC submitted that if the Repayment Agreement were not established, nevertheless there was an estoppel by convention which had the same effect. The classic modern statement of the doctrine is to be found in the speech of Lord Steyn in Republic of India v India Steamship Co Ltd (The Indian Endurance and The Indian Grace) (No 2) [1998] AC 878 913-914, and further analysis of the necessary ingredients is to be found in the judgment of Carnwath LJ in ING Bank NV v Ros Roca [2012] 1 WLR 472, 487-491.
73. Applying those principles, the plea fails on the facts in this case. There was no relevant communicated assumption which was shared by FG Wilson and Holt Liverpool, or in which FG Wilson acquiesced. Mr Cogley QC identified the relevant assumption as being that "[Holt Liverpool] will pay [FG Wilson] a minimum sum of X and [FG Wilson] will facilitate the means for [Holt Liverpool] to do that by providing [Holt Liverpool] with a minimum supply of product" and/or that "there is a binding agreement in the terms of the repayment plan". In relation to each suggested assumption, the evidence is quite inconsistent with Holt Liverpool having made such an assumption; or with Holt Liverpool having communicated to FG Wilson that it was making such an assumption; or with FG Wilson having shared or acquiesced in such assumption. Each is fatal to the plea of estoppel by convention.
74. I have not lost sight of the fact that the current application is one for summary judgment, not a trial on the evidence. But even taking Holt Liverpool's evidence at its highest, there is no realistic prospect of establishing the facts necessary for the estoppel contended for.

The Incorporation Issue

75. Where a party seeks to incorporate standard terms and conditions into a contract by reference, they will be incorporated if that party has taken such steps as are sufficient to give reasonable notice of the terms: Circle Freight International Ltd v Medeast Gulf Exports Ltd [1988] 2 Lloyd's Rep 427. What is reasonable depends upon the circumstances of each case and the term or condition which is relied upon. Generally the more unusual or onerous the term, the greater the notice that must be given of it: Benjamin's Sale of Goods 8^th ed. para 2-012 and the cases there cited.
76. FG Wilson relies upon the following:

(1) The Distributor Agreement provided by clause 5.5.3 that the supply of products would be in accordance with the usual business terms of FG Wilson from time to time in force. This applied to all FG Wilson manufactured and branded generator sets and ancillary products. In evidence Mr Parmley said that he regarded it as the usual sort of clause one would find in an agreement of this nature and that having read it, he knew the products would be supplied in accordance with FG Wilson's usual business terms.

(2) Clause 10 of the LTA provided that CKDs would be supplied under FG Wilson's standard conditions of sale, including FG Wilson's warranty as published from time to time and notified to Holt Liverpool by FG Wilson.

(3) The Gensets Online website, through which Holt Liverpool ordered all CBUs, CKDs and spare parts, contained a notice, immediately below where the customer filled in the order, providing that "all sales are made subject to the FG Wilson (Engineering) Ltd Terms". The page contained a hyperlink, which if clicked then displayed a copy of the FG Wilson Terms and Conditions in force at the time the order was placed.

(4) The "e-go" website, through which Holt Liverpool ordered all spare parts had as one of the links at the top of the screen a heading "Terms And Conditions" which when clicked on brought up FG Wilson's Standard Terms and Conditions.

(5) All invoices rendered by FG Wilson to Holt Liverpool over the previous decade or so of their trading history for all products and services, including CBUs, CKDs, spare parts, training services, software licences and haulage charges, stated at their foot "All Sales made by FG Wilson are made strictly in accordance with and under the FG Wilson Standard Terms and Conditions of Sale available both upon request and on our webpage at www.FGWilson.com". Mr Parmley confirmed that he was aware from the invoices which he had seen on numerous occasions that FG Wilson had terms and conditions of sale.

77. In my judgment, as between two substantial commercial trading concerns, this amply constituted reasonable notice of the Terms and Conditions. Businessmen in the position of the senior management of Holt Liverpool would expect manufacturers in FG Wilson's position, supplying generators and ancillary products and services to a distributor in Holt Liverpool's position, to trade on standard terms and conditions. Mr Parmley accepted that such would be usual. They could therefore be expected to ensure that they obtained a copy of them, read them and raised objections if there were any terms upon which they were not prepared to do business.
78. The evidence discloses that Holt Liverpool did have a copy of the Terms and Conditions. Mr. Harris, Holt Nigeria's General Manager for Business Development, attached the Terms and Conditions, which he had downloaded from FG Wilson's website, to an email of 19 March 2009 and sent them to, amongst others, Mr Prescott. The email suggested that Mr Parmley might also require a copy for his records. In evidence Mr Parmley said he could not remember if he had been given a copy. Mr Prescott did not give oral evidence for the purposes of the preliminary issue, but a witness statement from him was relied upon for the purposes of the summary judgment application. He did not say that he had not received the Terms and Conditions. He did not say that he had not read them.
79. The relevant question is not whether reasonable notice of the Terms and Conditions in general was given, but whether reasonable notice of the no set-off clause was given. Mr Cogley QC submitted that it was so onerous that it would require to be specifically and separately drawn to the attention of Holt Liverpool. I disagree. No set-off clauses are not unusual in standard terms and conditions. As Moore-Bick LJ observed in Rohlig (UK) Ltd v Rock Unique Ltd at [14]: "The judge could also have found from his own experience that clauses requiring payment of invoices without set-off are common in commercial contracts of many different kinds." That is my experience. FG Wilson's competitors also had no set-off clauses in their standard terms and conditions when they supplied goods on credit. Mr Starks' evidence, which I accept, was that Cummins West Africa Ltd, Lister Petter Ltd, SDMO Energy Ltd and Aksa International (UK) Ltd were the competitors in the Nigeria region against which FG Wilson benchmarked itself, with Cummins being FG Wilson's primary competitor. Of these, the first three had a no set-off clause in their standard terms and conditions. These were the three who supplied goods on credit terms. Aksa, by contrast, required settlement in cleared funds before delivery and therefore had no need of such a provision.
80. FG Wilson's no set-off clause is not particularly unusual or onerous. It is confined in its application to the payment of the price for the goods and services supplied; as such it seeks to protect FG Wilson's cash-flow. By reason of the extended credit terms agreed between the parties, it would not bite until many months after delivery of the goods, and after the point at which Holt Liverpool had had the opportunity to be paid by Holt Nigeria (and in at least some if not all cases, Holt Nigeria to be paid by its customers). There is nothing particularly onerous about a clause which provides that a buyer must pay in full for goods it has received four or more months previously, and that if it has a disputed cross claim in relation to other supplies, it must litigate that in due course, not use it as a ground to withhold payment. If Holt Liverpool were not aware of the clause (on which its evidence is silent), it ought reasonably to have been aware of it. It is contained in a document headed Terms and Conditions of Sale which comprises about 15 clauses set out in clear and readily legible form with headings in capitals. It is contained in the clause headed "Prices and Payments", which is the clause where one would expect to find it. A clause headed "Prices and Payments" is a clause which one would expect to be amongst the first to be read by a counterparty doing business. The subject matter of the no set-off clause is not obscure: it uses the word "set-off".
81. I find that the no set-off clause was incorporated into all of the contracts pursuant to which FG Wilson pursues its claims on this application.

The Construction Issue

82. For ease of exposition, I have numbered the sentences in the Prices and Payments clause as follows:

PRICES AND PAYMENTS: [1] Prices shall be Seller's list price for the goods less any discount as notified in writing by Seller, plus Seller's charges for Delivery, insurance, consular fees, banking charges, etc., all as in effect on the date of shipment of the goods and any costs resulting from Buyer-caused delays. [2] Seller may invoice Buyer on or at any time after delivery for any amounts still due (see Delivery) and Buyer shall pay within thirty (30) days of the date of invoice. [3] Buyer shall not apply any set-off to the price of Seller's products without prior written agreement by the Seller. [4] Buyer shall pay to Seller, on demand, a late payment charge equal to the lesser of Seller's then-current standard late payment charge (Prime Interest Rate + 3%/annum plus expenses) or the highest charge allowed by law on any amount unpaid on the due date.

83. A right of set-off may be excluded by agreement of the parties. If set-off is to be excluded by contract, clear and unambiguous language is required: Modern Engineering (Bristol) Ltd v Gilbert-Ash (Northern) Ltd [1974] A.C. 689, 717, 722-3; Connaught Ltd v Indoor Leisure Ltd [1994] 1 W.L.R. 501; Esso Petroleum Co Ltd v Milton [1997] 1 WLR 938; BOC Group plc v Centeon LLC [1999] 1 All ER (Comm) 970. But no more than that is required. In particular such a term is not to be treated in the same way as an exclusion clause: Continental Illinois National Bank & Trust Company of Chicago v Papanicolaou (The Fedora) [1986] 2 Lloyd's Rep 441, WRM Group Ltd v Wood [1998] C.L.C. 189.
84. Mr Cogley QC submitted that the language of the clause was not apt to prevent set-off of the Holt 1 Claim. His argument was that set-off operated as a defence which prevented a sum from becoming due. If a provision is to be sufficiently clear to exclude the defence of set-off, it must be part of the language of the contract which defines the payment obligation, so that the obligation to pay is expressed to be one which applies without reference to that defence. The no set-off language in FG Wilson's standard terms and conditions (sentence [3]) was not part of the payment obligation (sentences [2] and [4]). Accordingly it could not be effective to exclude any legal or equitable set-off which operated by way of defence.
85. I cannot accept that the construction of the clause is to be approached in this mechanistic way. The draftsman's intention must be ascertained from the totality of the language which has been used. Whether the set-off would operate as a substantive defence or as a remedy, what matters in each case is whether there has been clearly expressed an intention that the payment is to be made without reference to the claim which would otherwise be set-off. Where the language used does not mention set-off, it may be difficult for a party to satisfy the requirement of clarity if the clause relied on does not in terms qualify the payment obligation. Conversely where the provision does expressly qualify the payment obligation, it may readily be construed as sufficiently clear to be effective (as in Coca-Cola Financial Corp. v Finsat Ltd [1998] Q.B.43 WRM v Wood and Rohlig (UK) Ltd v Rock Unique Ltd [2011] EWCA Civ 18). But there is no principle of construction that a no set-off clause can not be effective unless it is expressed in terms to qualify the payment obligation.
86. Sentence [3] refers expressly to set-off. It imposes a prohibition on applying a set-off to the price. Reference to the price can only sensibly mean payment of the price or a claim for payment of the price. It is addressing the circumstances in which a cross claim may be applied to withhold payment of the price. It can only be directed to that payment obligation. It immediately follows the sentence containing the main payment obligation, sentence [2]. So far as the price is concerned, it qualifies the payment obligation.
87. Mr Cogley QC also advanced a submission that sentence [3] only purported to prohibit set-offs against "the price"; but, so the argument went, if there were a valid set-off, the price would not be due and there was nothing on which the provision could bite. This seems to me entirely circular, and is open to the objection that it renders the sentence meaningless and superfluous. One thing that is clear from the language of the sentence is that the draftsman is seeking to prevent set-offs. The presumption against superfluity in such bespoke language is a strong one. Mr Cogley QC's response was that the clause just involved bad drafting so that it did not achieve what the draftsman intended. But the draftsman's intention is to be gleaned from the language of the sentence, which is plainly addressed to precluding some set-off being deployed against payment of the price.
88. The question remains, therefore, whether sentence [3] is sufficiently clearly expressed to prohibit transactional set-offs of the type comprised by the Holt 1 Claim. Sentence [3] purports to exclude "any" set-off. This is wide enough to cover all set-offs. It is not confined to any particular types. Even if there were some warrant for limiting it to only some kinds of set-off, the cross-claim comprised by the Holt 1 Claim, arising out of a series of other sales and raising complex factual disputes which are susceptible to a lengthy period before determination, is exactly the sort of cross claim which would most naturally fall to be excluded from hindering payment of the price of other goods. Payment of the price of such goods produces the cash-flow which forms the "life-blood of the business", to use the expression adopted by Moore-Bick LJ at paragraph 8 of Rohlig v Rock.
89. I pressed Mr Cogley QC to identify what content the clause had, if, contrary to his primary submission, it was not simply ineffective. His primary position was that it was not for Holt to identify what set-offs might be caught by the clause; it was sufficient for his argument that the clause was not clear enough to prevent reliance on transactional set-offs of the type represented by the Holt 1 Claim. Whilst it is correct that the question is whether the clause is sufficiently clear to exclude reliance by Holt Liverpool on its Holt 1 Claim as a set-off, an inability on the part of Mr. Cogley QC to suggest any content for the clause would suggest that his construction is flawed. Recognising this, he submitted in the alternative that it was confined to preventing the buyer from setting off warranty claims. I can see no basis for so limiting it, either as a matter of language or for any sound commercial reason. The language used is "any" set-off. There seems no commercial rationale for preventing set-off of warranty claims but allowing set-off of claims of the type comprised by the Holt 1 Claim. Such an interpretation would mean that where the very goods in respect of which FG Wilson was seeking payment of the price were defective, that would not prevent the right to payment in full; yet a complex and disputed cross claim in relation to other goods supplied would.
90. At an earlier stage of his argument, Mr Cogley QC also submitted that the clause excluded legal set-offs but not equitable set-offs. This would be an equally strange construction: where there were mutual debts, or where the very goods for which payment was being sought were alleged to be defective (abatement), there would be no entitlement to withhold payment; but where other goods supplied were allegedly defective (equitable set-off), there would. Later in his argument he referred to this as an "unlikely" interpretation. I can see no basis for construing the words "any set-off" in this way.
91. There is one further point which arises on the construction of the clause. It only precludes set-off against claims for the price of products or services. The invoices upon which FG Wilson sues include VAT. Holt Liverpool accepts that it is obliged to pay VAT on sums otherwise due, but submits that this element of the claim is not a claim for the price under the Prices and Payments clause but a separate claim for tax which arises under the Taxes clause; and so does not attract the operation of the no set-off clause. I reject that submission. "price" in the no set-off clause means the invoiced price of the products or services, inclusive of VAT. The Taxes clause merely identifies that VAT is chargeable as part of the price unless the buyer is exempt.
92. I conclude, therefore, that as a matter of construction, the clause prevents Holt Liverpool from relying upon the Holt 1 Claim as a defence to FG Wilson's claims in these proceedings.

The UCTA Issue

93. A no set-off clause falls within s. 3(2) of the Unfair Contract Terms Act 1977 ("UCTA") with the result that FG Wilson cannot rely on the no set-off clause except in so far as it satisfies the requirement of reasonableness contained in s. 11 UCTA: Stewart Gill Ltd. v. Horatio Myer & Co. Ltd. [1992] Q.B. 600. The test in s.11(1) is that it should be a fair and reasonable term to have been included having regard to the circumstances which were, or ought reasonably have been, known to or in the contemplation of the parties when the contract was made. Although Holt Liverpool contends that the no set-off clause is unreasonable, under section 11(2) of UCTA it is for FG Wilson to show that the clause satisfies the requirement of reasonableness.
94. Schedule 2 to UCTA contains guidelines for the application of the reasonableness test. They are not made applicable to the present contracts by the statute because they are directed to sections other than s. 3, but they identify matters that are likely to be of relevance when determining whether the term is reasonable for the purposes of s. 3 and should be taken into account for that purpose: Stewart Gill v Meyer at p.608, Schenkers Ltd v Overland Shoes Ltd [1998] 1 Lloyd's Rep 498, 505. Those guidelines include the following:

(a) the strength of the bargaining positions of the parties relative to each other, taking into account (among other things) alternative means by which the customer's requirements could have been met;

(b) whether the customer received an inducement to agree to the term, or in accepting it had the opportunity of entering into a similar contract with other persons, but without having to accept a similar term;

(c) whether the customer knew or ought reasonably to have known of the existence and extent of the term (having regard, among other things, to any custom of the trade and any previous course of dealing between the parties).

95. In Stewart Gill v. Myer the Court of Appeal held that the reasonableness of the term had to be established by reference to the term as a whole, not merely the part relied upon; and by reference to all facts which were within the contemplation of the parties when the contract was made, even if such facts are not those which have arisen in the instant case. The result is that even if a clause is reasonable in its application to the dispute which has arisen between the parties, it may be struck down as unreasonable by reference to a hypothetical set of facts which have not arisen and have nothing to do with the case. Lord Mance has expressed reservations about the correctness of this approach, as Mance J in Skipskredittforeningen v Emperor Navigation [1998] 1 Lloyd's Rep 66, 75 and as Mance LJ in Bacardi v THP [2002] 2 Lloyd's Rep 379 at [26], in the light of the words "except insofar as" in section 3. It is, however, the approach which this court is bound by authority to take.
96. The corollary of this approach is that the court should take account of hypothetical facts only to the extent that they would have been contemplated by the parties at the time of contracting as realistic and not unlikely. The test is whether the term was a fair and reasonable one to have been included at the time of contracting, and what was fair and reasonable at that time should be judged by reference to factual circumstances which might realistically be foreseen as arising in the future. The court should not be too ready to focus on remote possibilities or to accept arguments that a clause fails the test by reference to relatively uncommon or unlikely situations, as Mance J (as he then was) observed in Skipskredittforeningen v Emperor Navigation.
97. The point is of relevance in the present context because amongst Mr Cogley QC's submissions were arguments that the clause would operate unreasonably to preclude set-off of a number of hypothetical claims, including (a) claims based on fraud or intentional wrongdoing committed by FG Wilson and (b) admitted credits in Holt Liverpool's favour, which fell to be taken into account as a "contra" in the trading account between FG Wilson and Holt Liverpool. These are very different from the Holt 1 Claim, which is what is relied on by Holt to resist FG Wilson's claims in these proceedings. I will address the argument below.
98. In relation to the preliminary issue, I heard oral evidence from Mr Starks on behalf of FG Wilson and from Mr Parmley on behalf of Holt Liverpool. Both were cross examined. I accept the evidence of each within the confines of their own personal knowledge.
99. The following factors support the reasonableness of the clause.

(1) The length of the credit terms, and high value of the goods supplied, meant that FG Wilson would have made a large cash outlay in order to supply the CBUs and CKDs and would need the cashflow from its customers such as Holt Liverpool to be paid promptly and without deduction in order to manufacture further generators and parts for supply on credit terms. This was Mr Starks' evidence, which I accept. Holt Liverpool was consistently one of FG Wilson's top ten customers between 2001 and 2010. This is a case in which it can fairly be said that the cashflow to be derived from payment of the price of products delivered to Holt Liverpool was a significant aspect of the cashflow forming the life blood of FG Wilson's business. It is reasonable and legitimate for FG Wilson to seek to protect that cashflow with a no set-off clause.

(2) The no set-off clause is not unusual. No set-off clauses protecting a supplier's entitlement to the price of goods or services without deduction are common in many commercial contexts. In this particular trade, involving the supply of generators to the Nigerian market, three of FG Wilson's competitors, who sold on credit terms, also protected their cash flow with no set-off clauses.

(3) The no set-off clause is not particularly onerous in its scope. It is confined in its application to the payment of the price for the goods and services supplied; as such it seeks to protect FG Wilson's cash-flow. By reason of the extended credit terms agreed between the parties, it would not bite until many months after delivery of the goods, and after the point at which Holt Liverpool had had the opportunity to be paid by Holt Nigeria (and in at least some if not all cases, Holt Nigeria to be paid by its customers). I do not see anything essentially unfair or unreasonable in a seller in these circumstances requiring the buyer to pay in full, leaving any disputed cross claim to be resolved by subsequent negotiation or determination rather than being used as a ground to withhold payment of the undisputed price of goods which the buyer has received many months previously.

(4) Holt Liverpool is a substantial and sophisticated commercial concern. Its annual turnover is in excess of £10 million and it has about 10 employees in Liverpool. The senior management running the company since 2001 have been Mr Parmley, Mr Prescott and Mr Newns, the latter having been part of the management completing a management buy out from Lonrho in February 2001. Holt Liverpool is the majority shareholder of Holt Nigeria, a public company whose shares are traded on the Nigerian stock exchange. The management expertise was such that Holt Liverpool negotiated and drafted the LTA and LA in 2010 without the assistance of lawyers.

(5) Although FG Wilson was a much larger concern, the relative size in corporate terms of FG Wilson and Holt is not a significant factor: (see Röhlig v. Rock at [16]). What is of potentially greater significance is the relative bargaining position of the parties. Mr Cogley QC submitted that all the bargaining power lay with FG Wilson because it had no obligation to supply product, and Holt Liverpool's business was heavily dependent on the supply of FG Wilson's generators because this was the brand upon which it had built its business and reputation in Nigeria amongst Holt Nigeria's customers. Whilst it is true that Holt's business was in this sense dependent upon FG Wilson, the weight to be attributed to it in deciding the question of reasonableness is limited. The position of the parties in 2010 was such that it was in the interest of both parties to continue trading. FG Wilson had an interest in Holt continuing to purchase product for supply into the territory, both in order to maintain the goodwill of the brand in the territory and in order to enhance Holt Liverpool's financial ability to discharge the substantial outstanding debt. The relationship was in this sense symbiotic. Holt Liverpool had been able by a process of commercial negotiation to secure price discounts and extended credit terms, and successfully negotiated a resumption of supply on credit notwithstanding a significant overdue debt measured in millions of pounds. I do not regard the bargaining position of the parties as having been unequal.

(6) The fact that Holt Liverpool had not bargained for any continuity of supply meant that FG Wilson could simply have insisted on cash with order if they had so wished. Such would not have been an unreasonable stance towards a customer in Holt Liverpool's position owing large sums and having uncertain financial capacity and prospects to be able to pay for further orders. At least one of FG Wilson's competitors in the Nigerian market insisted upon such terms.

(7) Holt Liverpool ought to have been aware that FG Wilson contracted on the standard terms and conditions, which contain the no set-off clause, since 2004 at the latest. Amongst Holt Liverpool's senior management, Mr Prescott, at least, had the terms specifically drawn to his attention by Holt Nigeria and had a copy of them. The senior management ought to have read the terms (if indeed they did not) and had they done so they would have been aware of the no set-off clause. FG Wilson had taken reasonable steps to bring the clause to the attention of Holt Liverpool. At no stage in the trading history between the parties did Holt Liverpool object to the trading relationship being conducted on these terms. In some respects it did negotiate a departure from the standard terms, most notably in relation to extended credit terms. No attempt was made to negotiate or object to the no set-off clause.

(8) FG Wilson had trade credit insurance with Chartis, who were supplied with a copy of the standard terms and conditions. The terms of FG Wilson's credit insurance from Chartis were such that it was of importance that it supplied products on terms that included a no set-off clause because the policy did not provide cover in respect of any amount which a customer asserted it was entitled to set off against FG Wilson's invoices. In the absence of the no set-off clause, therefore, there was no insurance for unpaid debts where a cross claim was asserted.

100. Mr Cogley QC relied on a number of factors as militating against the reasonableness of the clause. First he argued that the clause was unreasonably wide because it would preclude set-off of admitted credits in Holt Liverpool's favour, which fell to be taken into account as a "contra" in the trading account between FG Wilson and Holt Liverpool. Equally it would exclude set-off of admitted overpayments.
101. I do not think such hypothetical facts should be taken into account in testing the reasonableness of the clause. If the credits or overpayments were indeed admitted, they are of a kind which neither party at the moment of contracting would have regarded as likely to attract the operation of the clause: both parties would have assumed that if there were admitted sums due from FG Wilson to Holt Liverpool, as a result of admitted overpayments or for other undisputed reasons, FG Wilson would indeed give credit for them against sums due the other way. This was in fact what had happened during the previous trading history between the parties, as explained by Mr Starks in his witness statement and averred in paragraph 2(d) of Holt Liverpool's Statement of Case filed pursuant to the Order of Stephen Males QC (sitting as a Deputy High Court Judge) dated 30 March 2012. The possibility of the clause being invoked to prevent set-off of admitted credits would have been regarded by the parties at the time of contracting as unrealistically remote. Such unrealistic hypothetical facts can not be deployed to strike down the clause as unreasonable.
102. Moreover, even if the clause were invoked in such circumstances, FG Wilson would not in practice be in a position to enforce payment without giving credit: a summary judgment application would be met by a summary judgment application for the credits, and the Court would not allow enforcement by FG Wilson of more than the net sum due after taking account of the credits. I would for this reason also treat the potential applicability of the clause to admitted credits or overpayments as irrelevant to the question of its reasonableness.
103. I have reached this conclusion notwithstanding the weight which was given to the exclusion of set-off of admitted credits in finding terms unreasonable in Stewart Gill Ltd. v. Horatio Myer & Co. Ltd per Lord Donalsdson at 606F-G and Stuart Smith LJ at 608C, and in Esso Petroleum Co v Milton [1997] 1 WLR 938 per Simon Brown LJ at 949F and Sir John Balcombe at 954F. This may also have been the point Rix LJ had in mind in his reference to Stewart Gill v Meyer in Axa Sun Life Services plc v Campbell Martin Ltd [2011] 1 CLC 312 at [108]. Stewart Gill v Meyer, Esso Petroleum v Milton and Axa v Campbell Martin were cases on very different facts involving clauses in very different terms. Where a term expressly refers to credits (as in Stewart Gill and Axa Sun Life Services plc) it can not readily be said that the parties' contemplation was other than that the clause should apply to them if they arose. It is clear from Rohlig v Rock that the fact that a no set-off clause is wide enough to cover admitted credits is not of itself a bar to a finding of reasonableness: the clause which was upheld by the Court of Appeal in that case would have precluded admitted credits, and Moore-Bick LJ at [10] regarded Stewart Gill v Meyer as of no assistance to the issue in that case. So too would the clause upheld as reasonable by the Court of Appeal in Schenkers v Overland Shoes.
104. Mr Cogley QC further argued that the clause was unreasonably wide in that it excluded set-off of claims based on deliberate wrongdoing or intentional breach by FG Wilson and/or claims based on fraud committed by FG Wilson. I think that the parties at the time of contracting would have contemplated as remote the possibility that either would act fraudulently towards the other, or would deliberately and knowingly commit breaches of contract or other wrongs. But however that may be, it is not in my view unfair or unreasonable to require Holt Liverpool to pay the price for products in full without any deduction for what is at that stage a mere claim, however arguable, even if for fraud or intentional wrongdoing. In these respects I find myself in agreement with the reasoning of Morritt LJ in WRM Group Ltd v Wood [1998] C.L.C 189 at 196 and Mance J in Skipskredittforeningen v Emperor Navigation [1997] C.L.C 1151 at 1165.
105. Mr Cogley QC argued that all the bargaining power lay with FG Wilson. I have explained why I regard the bargaining power of the parties as having been equal. If it was tipped in favour of FG Wilson, I do not regard that as a significant factor in the light of the other considerations which I have identified.
106. Mr Cogley QC argued that the no set-off provision was non negotiable, basing himself on the evidence of Mr Starks who admitted that he was personally unaware of any occasion on which a customer had negotiated its disapplication. But Mr Starks did not purport to be in a position to have personal knowledge of the trading relationships with customers in which any such negotiation would have occurred if it had occurred. The highest it could be put, therefore, was that FG Wilson had not adduced evidence that it had ever agreed to disapplication of the clause as a result of negotiation with a customer. I do not regard this as indicative of the unreasonableness of the clause.
107. Mr Cogley QC argued that Holt Liverpool was given no inducement to agree the clause. This is true but of little weight. In one sense it could be said that the clause was the quid pro quo for Holt Liverpool being granted extended credit terms.
108. Mr Cogley QC relied on the fact that the clause was not specifically drawn to the attention of Holt Liverpool. Again I regard this as of little weight. The clause was one of which the senior management of Holt Liverpool ought reasonably to have been aware (if indeed it was not actually aware of it, as to which its evidence is silent).
109. Taking all these matters into consideration, I have little hesitation in concluding that the no set-off clause in this case satisfies the requirement of reasonableness.

The Haulage Charges Issue

110. I understood Mr Cogley QC to concede that the rule preventing set-off against freight was applicable to the FG Wilson invoices in this case for haulage charges. I am myself doubtful whether set-off would be precluded in the absence of the no set-off clause. I did not understand from the evidence that on the relevant occasions FG Wilson were undertaking the responsibilities of a haulier and subcontracting the haulage. The invoices are not for freight in the sense of the charge made by FG Wilson for the latter transporting the goods. They are in effect freight forwarding charges by FG Wilson for arranging the transport, the freight charges made by the haulier being recharged to Holt Liverpool at cost. I doubt that freight forwarding charges attract application of the rule against set-off against freight (see for example Rohlig v Rock). However since the point does not arise, as a result of my findings on the no set-off clause, and was not argued, I express no concluded view on it.

The Credit Terms Issue

111. FG Wilson's claims are calculated, so far as concerns interest, on the footing that the credit terms were for payment on the 25^th day of the fourth month after invoice. It appears from an email of 26 October 2009 that these were the agreed credit terms in force prior to that date. Mr Cogley QC submitted that the terms were varied to become payment on the 25^th day of the fifth month after invoice.
112. By an email of 26 October 2009, from Mr McMinn of FG Wilson to Mr Parmley of Holt Liverpool, the former stated "as per the agreement with Pat Malcolmson we are offering our maximum extended terms for credit insured dealers being "L160 – payment due 25^th of the 5^th month following month of invoice (average 160 day terms)". We plan to raise our invoice for the extended terms at the beginning of the month following each payment, with payment of this invoice being due at the end of that month."
113. By email of 7 December 2009, Mr McMinn sent a list of invoices said to be overdue for payment (i.e. having fallen due on 25 November); these were all invoices dated in June 2009, and accordingly the email assumed that the credit terms were for payment in the fifth month after invoice. Mr Parmley's response by email of 17 December 2009 (to a prompt by Mr McMinn for an update on the overdue "November invoices") was that "We have consistently settled our accounts on 180 day net monthly account terms and it is on this basis that Pat has frequently referred to Holts as Wilsons best payer. We have agreed to pay interest on the excess period beyond your standard terms (25^th of fourth month)." A further email exchange between Mr Malcolmson of FG Wilson and Mr Parmley on 6 January 2010 did nothing to clarify any agreement on credit terms.
114. Mr Parmley's oral evidence was that it had been Holt Liverpool's practice, with the apparent agreement of FG Wilson, to pay approximately 180 days from invoice. This would be consistent with Mr McMinn's email of 26 October 2009 which, as I understand it, envisages a further invoice for payment of outstanding invoices being issued at the beginning of the month after the 25^th of the fifth month after original invoices, and being paid at the end of that (sixth) month.
115. Mr Prescott states, at paragraph 63 of his witness statement, that the statements of account attached to the original Claim Form and Particulars of Claim were calculated on the basis of fifth month after invoice, not fourth month after invoice. If these are the account statements issued by FG Wilson on 9 November 2011, they are indeed prepared on the basis that the due date is the 25^th day of the fifth month after invoice.
116. In these circumstances, Holt Liverpool have at the lowest an arguable case that the relevant credit terms were fifth month after invoice and FG Wilson are not entitled to summary judgment save to the extent that its claims for interest and late payment are calculated on that basis.

Conclusion

117. The question posed by the preliminary issue will be answered in the affirmative.
118. FG Wilson is entitled to summary judgment on its claims, recalculated on the basis that the agreed credit terms were for payment on the 25^th day of the fifth month after invoice.